The grains wrapped up the fourth week of September on a positive note, which was impressive compared to where the grains started the week. The grains closed out the week at levels where the technicals have turned positive. That has the grains in position to break out to the upside of the recent trading range, which would result in the grains trading to their next level of resistance.
The final week of September had the grains seeing follow through buying. The Monday, Sept. 27, session had wheat and soybeans closing with modest gains, but corn was able to post solid double-digit gains. Wheat was supported by reports that Russia increased their wheat price for the eleventh week in a row. Light support also came from weather concerns for the Southern Plains. Conditions have turned dry and at this point the short-term forecasts are not showing much in the way of relief. But the long-term forecasts are showing above normal rainfall for the western regions of the winter wheat belt.
Spring wheat continues to see strength from expectations Canada will continue to decrease the size of its crop (due to drought). Expectations that USDA’s Small Grains Summary and Quarterly Grain Stocks (which came out Thursday) would be friendly wheat also supported the market.
Corn was the bright spot in the grains on Monday. After a flat opening and uneventful overnight session, corn rallied to post solid double-digit gains by the close. Corn started sluggish due to harvest progress but reports of disappointing yields and the expectation that corn yields will not see much of an improvement helped to push corn higher. Expectations that maybe USDA would come with another surprise in the Quarterly Grain Stocks report added to the push.
Soybeans started sluggish the night of Sunday, Sept. 26, rallied to post solid gains early, but faded to end with only half of the session gains. Soybeans still closed with solid gains, but well off their highs. Early pressure came from hedge selling, but once again the inconsistency of yields reports helped soybeans recover once the day session kicked in. Light support came from reports China was in and bought 334,000 metric tons of U.S. soybeans. Soybeans trimmed their gains late in the session with selling tied to long term demand concerns as China seems to be more patient in their soybeans buying habits this year.
Monday’s Crop Progress report was a nonevent as it came in close to expectations. Winer wheat planting progress is rolling forward with 34% planted as of Sept 26. Corn harvest progress came in as expected at 18% and crop conditions were also as expected at 59% good/excellent. Soybean harvest progress came in as expected with harvest progress at 16% and crop condition ratings at 58% good/excellent (unchanged).
Wheat and soybeans started Tuesday’s session with gains but by the time the day session rolled around, all of the grains were on the defense and sinking fast. A turn-around-Tuesday-type attitude seemed to grip most of the grains. Cotton ignored the selling pressure and continued its rally, posting new highs. Cotton has rallied 10% in the past week and is sitting at its highest price in 10 years.
The grains were pressured by the outside markets and strong U.S. dollar, as well as from another round of negative news for the Renewable Fuel Standard. It appears that the numbers that were reported a week or two ago were closer to reality than the government was willing to admit to then. If realized, it would not paint a good picture for biofuels going forward. But hopefully minds can be changed before the proposal gains too much traction.
Ethanol production remains firm, but it has started to see a decline. Ethanol production for the week ending Sept. 24 was estimated at 914,000 barrels per day, a decline of 12,000 barrels from the previous month and the second lowest production estimate in 31 weeks. Stocks were estimated at 20.22 million barrels, an increase of 109,000 barrels from the previous week. On a positive note, gas demand has rebounded to be at the upper end of the five-year average.
Harvest pressure added to the selloff as weather forecasts continue to call for above normal temps and below normal precip. This will keep combines rolling as the recent much above normal temps are quickly drying down the crop.
This week’s market activity was a general build-up to Thursday, which was not only the end of the month, but the end of the third quarter and the day USDA released some very important reports that were expected to move the market. The report, released after deadline for this column, and was expected to reduce all wheat production and make adjustments to spring wheat harvested acreage but was not expected to show anything earth shattering for soybeans or corn.
The next production cycle has started as planting progress is being reported in South America. So far planting activity has been limited due to dry conditions, but rain is in the forecast in the long term forecasts. A third of the major growing regions of South America are reporting drier than normal conditions. As of Sept. 24, Brazil’s corn planting progress was estimated at 29% versus 23% average and soybean’s planting progress was at 1% complete versus 1% average.
In other market news this past week, Minneapolis wheat saw support from thoughts Stats Canada will continue to revise their spring wheat production estimate downward, as drought conditions in Canada were slightly worse than expected. The same reduction is expected for canola as well. China has been aggressively buying Australian wheat, despite the fact that the two countries are in a barley trade dispute. The wheat is going into the feed ration, replacing corn and to some degree, slightly lowering the need for soybean meal due to the higher protein wheat. Russia’s wheat price increased again this week for the 11th week in a row, The price increase has resulted in a decrease in exports of 22% since the start of the new marketing year versus last year.
Corn and soybean shipments are starting to pick up as the Gulf slowly comes back online after Hurricane Ida. Reports have all facilities back online now.
Corn has had a few export sales announced of the past week, which is the first since Columbia was in and bought a month ago. Guatemala was in and bought 138,000 metric tons and Mexico bought 150,000 metric tons of U.S. corn.
Canola was pressured by rapid harvest pace and the stronger Canadian dollar. But canola shook that news off due to Ag Canada’s ending stocks estimates of 500,000 metric tons, which is 200,000 metric tons lower than their prior estimate and far below last year’s 1.77 million metric tons. Manitoba’s canola crop is 94% harvested.
Cattle saw pressure this past week due to a negative Cattle on Feed report which estimated more cattle in feedlots than expected, more cattle placed in the feedlots than expected and slower marketings than expected. Feeder cattle had their losses amplified by pressure from a higher corn market. An increase in slaughter numbers were also seen, as reports have more cows from drought stricken regions coming to slaughter. Cash offers continues to be disappointing as it seems to be stuck at $124.
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