The grain markets continue to trade in a downward trend for a number of reasons. We are at the beginning of harvest and seasonally the grains falter at harvest. That stands to reason as new crop supplies become available. But this year the yield reports are disappointing more often than better than expected, whether it’s in the Northern Plains or eastern Corn Belt. So, the variability of yields is keeping the market from falling apart and holding basis level at historically higher levels for harvest time.

So, what is it that has the grains on the defense? Outside markets controlled the tempo in the grains to start the week of Sept. 20. It was all about taking risk off the table as many traders felt the pressure from the announcement of the second largest property company in China would likely default on loans. One issue is that many U.S. banks have loaned money to this company, and most will not get paid interest on the note. This, of course, results in concerns as to how strong is China’s economy, or the US economy for that matter. It is expected that the Chinese government will step in and help the company, but China was on holiday so no official news will be released until midweek. Until then, a lot of rumors will fly.

The grains were finally starting to recover from the previous few weeks of selling. The week of Sept. 13 saw the grains put in solid performance. The supported started off once Stats Canada released their September Production estimate. The report was friendly. All wheat production for Canada was estimated at 21.7 million metric tons versus expectations of 21.9 million metric tons and versus 22.95 million metric tons from just two weeks ago. This is a decline of 38% from last year. Canada’s spring wheat crop was estimated at 15.3 million metric tons versus expectations of 15.2 million metric tons. This is a decline of 41% year over year. The production estimate was also friendly canola. The Canadian canola crop is currently estimated at 12.8 million metric tons versus expectations of 13.6 million metric tons. This is a decline of 34% from the previous year.

Wheat was able to post the largest gains for the week of Sept. 13 with most of the support coming from reports of further production cuts for Russia, Canada and Australia. Australia is still looking at harvesting a decent crop, but dry conditions are staring to become a concern. Russia continues to lower production estimates for their crop, which in turn has resulted in cash bids being increased once again, for the 10th week in a row. In addition, officials cut the European Union soft wheat crop 2.4 million metric tons, with that crop now estimated at 129.1 million metric tons and likely to have quality issues.

Gains were kept in check from the idea that winter wheat acreage will see a big increase in the U.S. this fall due to the strong base price for crop insurance. Ukraine’s winter wheat planting is getting started with optimal conditions and expectations acres will be up 10% over last year’s 16.5 million acres. The higher U.S. dollar also limited gains.

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Corn played a follower role to the wheat complex, but gains were kept in check from bearish weather forecasts as the 6-to-10-day forecast is calling for above normal temps and below normal precip for a majority of the major grains growing regions of the US. That will keep frost at bay at least through September. Reports of disappointing yields teamed up with technical buying to help corn push higher.

Light strength was also due to the Sept. 10 ethanol production estimate, which came in at 937,000 barrels per day, up 14,000 barrels from the previous week. Stocks were estimated at 20 million barrels, 380,000 barrels less than the previous week and a 14-week low.

But gains were kept in check from last week’s export sales estimate which was below the range of trade estimates at just 9.7 million bushels versus the same week last year at 63.3 million bushels. In world news, the European Union's corn production estimate was cut 1.4 million metric tons to 64.9 million metric tons versus 63.4 million metric tons last year.

Soybeans did not have a good week though. Rumors that China was going to be cancelling a few soybean purchases were confirmed mid-week. USDA confirmed export sales cancellations of 132,000 metric tons to China and 196,000 metric tons to unknown. But since those cancellations were rumored, the market quickly brushed that off and climbed higher. Spillover support came from the higher corn market as early yields are coming in disappointing. The National Oilseed Processors Association crush numbers for August were supportive as crush was reported at 158.8 million bushels versus the average trade estimate of 154.2 million bushels and July’s 155.1 million bushels. But soybean oil stocks were sharply higher than expected and the highest stocks for August in eight years.

Late in the week, USDA reported a sale of 132,000 metric tons of soybeans to China. There were rumors China also bought four to six cargoes of soybeans from Brazil. That is unusual for this time of year but likely due to delays shipping U.S. beans out of the Gulf after Hurricane Ida.

USDA’s Crop Progress report is starting to become less and less of an influencer as traders are looking at actual yield results to drive the market, but the report still does give us valuable information. Monday’s Crop Progress report estimated corn harvest progress at 10% which was expected by the trade and 1% ahead of average. Soybean harvest was estimated at 6%, also 1% above expectations but equal to the five-year average. But what was interesting in this week’s report was Illinois’s crop condition rating. The past few weeks Illinois’s crop rating has been declining, but this week both the corn and soybean ratings jumped sharply. Was it a true up, or did Illinois already harvest most of their poor acres?

Corn’s crop rating improved 1% to 59% good/excellent, which was 1% above expectations. Of the states showing improvements Illinois led the charge. Illinois’s crop improved 12%, Nebraska’s improved 2%, and Ohio improved 4%. The rest of the major states all saw conditions steady to down 1%. The soybean crop rating was similar to corn. The rating improved 1% to 58% good/excellent with Illinois taking the biggest increase by improving 14%. The only other states to show improvements were Nebraska (+2%) and South Dakota (+1%).

Winter wheat planting progress was estimated at 21% complete versus 18% average. This was 1% less than expected by the trade. Winter wheat acreage is expected to expand rapidly due to the strong base price for crop insurance.

Pasture and rangeland conditions continued to decline, dropping 1% last week to 24% good/excellent. Minnesota’s pastures improved 3% to 12% good/excellent, North Dakota dropped 1% to 3% good, and South Dakota was unchanged at 5% good. This will likely result in northern calves being pulled off pastures and sold earlier than expected.

The grains back and forth trading has not done technical damage to wheat or corn but did hurt the soybean chart. Soybeans are sitting at a pivotal spot as most months broke through their 200-day moving average. It seems this market is just marking time waiting for yield confirmation.

The cattle market continues to struggle. The October live cattle contract has closed lower 15 out of the last 20 sessions and has lost over $10. At this point cattle continue to be oversold and in need of a correction, but no one wants to step in front of the stampede. Besides technical pressure, cattle are also seeing pressure from a larger than expected run of slaughter cattle as another flush of drought stricken cattle start to head to town. Long term supplies are going to be tight, but traders are expecting demand to decrease.

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