The grains finished out the last full week of August posting solid gains with old crop soybeans leading the charge. Strong export demand continues to help the soybean market push higher. But it did seem odd that the front month September had most of the strength, especially ahead of First Notice Day. This is a signal that end users were caught short of product and had to come to the market to get some short-term needs met.
The market seemed to go into transition to close out August and start September. The market is slowing starting to migrate away from the Crop Progress report and more towards harvest activity. This was evident last week as the market appeared to be all about the rolling of positions ahead of First Notice Day as well as position squaring ahead of month end. Now that September is in delivery, December becomes the month to watch in wheat and corn while November takes top step in soybeans.
The Aug. 30 Crop Progress report was in line with expectations. Corn and soybean conditions were left unchanged as expected. If there were any surprises in the Crop Progress report, it was the fact that with all of the rains the Northern Plains and western Corn Belt saw last week, the crops in that region did not show much improvement. This tells us that the Crop Progress report is starting to lose its influence on the market, which is normal in September.
As of Aug. 29, spring wheat harvest was 88% complete versus 77% last week and 71% average. North Dakota’s durum harvest was at 74% complete versus 57% last week and 49% average. The last of the crop is starting to show decreases in quality due to lower falling numbers and lower test weights due to the recent rain events.
According to the Crop Progress report, corn in dough stage was at 91% versus 85% last week and 89% average. Dented was estimated at 59% versus 41% last week and 55% average. Mature was estimated at 9% versus 4% last week and 10% average. Corn’s crop condition rating was unchanged at 60% good/excellent, 26% fair, and 14% poor/very poor (as expected). The major producing states weekly rating change was Illinois, +3%, Indiana, -2%, Iowa, 0%, Minnesota, +2%, Nebraska, 0%, North Dakota, 0%, Ohio, -2%, and South Dakota, -2%.
The Crop Progress report was also as expected for soybeans. The soybean crop condition rating was left unchanged at 56% good/excellent with North Dakota, +3%, and Illinois, +4, the only major states seeing an increase in ratings. Setting pods was at 93% versus 88% last week and 92% average. Soybeans dropping leaves was at 9% versus 3% last week and 7% average.
North Dakota’s canola crop condition rating increased 1% to 17% good/excellent, 29% fair, and 54% poor/very poor. Harvest progress was estimated at 37% complete versus 23% last week and 40% average. North Dakota’s sunflower crop condition rating increased 5% to 20% good/excellent, 39% fair, and 41% poor/very poor.
Stats Canada released their July Crop Production estimate on Aug. 30, and it too had a few surprises for the market. Stats Canada’s July production estimate was slightly negative as production came in above expectations. All wheat production was estimated at 22.9 million metric tons, 35% lower than last year’s 35.2 million metric tons but higher than the average trade estimate of 22.6 million metric tons. USDA is projecting Canada’s all wheat production at 24 million metric tons. Spring wheat production was estimated at 16.1 million metric tons, 38% lower than last year’s 25.8 million metric tons but higher than the average trade estimate of 15.9 million metric tons. Durum production was estimated at 3.99 million metric tons, 39% lower than last year’s 6.6 million metric tons but above the average trade estimate of 4.1 million metric tons. If realized this would be Canada’s smallest wheat crop since 2007.
Stats Canada estimated canola production at 14.749 million metric tons, 24% lower than last year’s 19.485 million metric tons (which was increased in this report from 18.7 million metric tons) but higher than the average trade estimate of 14.1 million metric tons. USDA has the Canadian canola crop estimated at 16 million metric tons. If realized this would be the smallest canola crop in nine years.
Wheat did see some positive news this week. Russian officials once again lowered the potential size of their crop as well as the number of exportable bushels. Russian officials cut their export pace by 3.2 million metric tons, putting it at the lowest levels since 2016. Belarus has also implemented a six-month ban on exports. Russia’s wheat prices have been on a steady incline, increasing for seven weeks in a row.
But the positive news for wheat was more than overshadowed by the negative news in the corn and soybean markets. Early week pressure for the corn and soybean market came from pressure tied to weather reports calling for Hurricane Ida to miss a majority of the Corn Belt as projections had only 3% of the U.S. corn acreage in its path and about 6% of the soybean acreage.
CONAB released their latest production estimates for Brazil. Their corn production estimate is at 116 million metric tons versus USDA’s projection of 118 million metric tons. CONAB’s soybean production estimate remains at 141.3 million metric tons versus USDA’s projection of 144 million metric tons. There are lingering concerns that La Nina could result in drought conditions for South America.
Export sales have slowed down this week with USDA reporting only one sale so far this week, a sale of 256,000 metric tons of soybeans to China. It appears that a lot of the southern ports have been closed due to Hurricane Ida and some have experienced significant damage from the storm. Reports estimate most facilities will remain closed for the next two weeks for repairs. This is adding to the selling pressure in the grains and encouraging fund selling. Position squaring ahead of month end added to the selling pressure. And with the long weekend fast approaching, it does not look like those traders will be looking to step back in until after the long three-day weekend.
So, it appears that the grains are going to be comfortable trading in a back-and-forth fashion until combines start to roll. At this point weather has turned to be slightly negative, but then again weather is starting to lose its appeal to the market was well. The grains are approaching harvest so condition ratings and weather will become less important unless the rain starts to delay harvest.
The next big USDA report will be out on Sept. 10 with the release of September Crop Production estimates. On Sept. 30 USDA will release their Quarterly Grain Stocks estimate and Small Grains Summary.
The stock market seemed comfortable with Chairman Jerome Powell’s speech on Aug. 27 as both the Nasdaq and S&P 500 put in another round of new highs on Aug. 30. The strength in the stock market is certainly something the grains are seeing pressure from as the consistency in the stock market is pulling money out of the grains.
The strength in the stock market should be helping the cattle markets, but after trading to new contract highs followed up by a key reversal lower formation early last week, cattle have struggled. It does not help that boxed beef prices have started to decline. Traders are concerned that beef demand will falter after the Labor Day holiday, which was also their concern around Memorial Day. That did not materialize, and with tight supplies and the likelihood supplies will only get tighter, its likely cattle have not topped as of yet.
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