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The bull isn't getting fed, but tight stocks keep lack of information from taking markets too low

"We have said it before — the bull needs to be fed every day to stay alive and right now all there has been a rehashing of the old stale news. This has pushed the grains into a trading range."

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Some harvest pressure has begun to impact the corn market.
Mikkel Pates / Agweek file photo
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Editor's note: Catch Randy Martinson every Friday after markets close on the Agweek Market Wrap at agweek.com.

The grains closed out the third week of October officially mixed with Minneapolis wheat and soybeans posting gains while both winter wheat contracts and corn slipped lower. The first three sessions of the week saw the grains ending steady to lower while the last two sessions had the grains digging themselves out of a hole.

The lackluster trade continued in the grains as the market looks for direction. We have said it before — the bull needs to be fed every day to stay alive and right now all there has been a rehashing of the old stale news. This has pushed the grains into a trading range. The market seems to be reluctant to push the grains to new lows as that would only result in increased demand and that is something that the market is not willing to see occur due to the tight stocks of grains across the world.

December Minneapolis wheat’s trading range seems to be $9.30 to $10.15, December Chicago wheat $8.20 to $9.50, December Kansas City wheat $9.25 to $10.35, December corn $6.50 to $7.05, and November soybeans $13.50 to $14.50.

An escalation in the Russian/Ukraine conflict helped to give wheat and corn support midweek. But those gains were trimmed due to reports Russia would consider renewing Ukraine’s safe passage corridor if certain concessions were met and previous ones are honored. It appears that Russia wants to have more sanctions lifted.

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Corn and soybeans continue to see harvest pressure. Soybean yields have improved as the harvest has progressed. But now that soybeans are on the back half of harvest, harvest pressure and hedge selling should start to fade. Corn harvest is starting to increase, which will likely result in a bit of harvest pressure and hedge selling for corn. Like soybeans, the early harvest results are extremely variable.

Soybean oil has been the biggest supporting factor for the soybeans this week. The recent attack on sunflower facilities in Ukraine is starting to cause concern of potential tight world supplies of vegetable oil.

Early week pressure on the grains was also due to a change in the weather forecast. Although ideal harvest conditions are expected to remain through the end of October, rain has started to enter into the forecasts. The U.S. southern Plains are expected to see rain late weekend and into last week of October, but the updated forecast is less confident on coverage and amounts. At this point, the rain is not expected to help with the low water levels in the Mississippi River, which is reporting the lowest water levels in history.

But the rain is not only forecasted for the U.S. Southern Brazil and Argentina are expected to get a soaking the last weekend of October, which will help alleviate a majority of the dry concerns in South America. This forecast is gaining confidence, so it very likely Argentina will see much needed rains within the next 10 days.

The market continues to watch USDA Drought Monitor Map with interest. The map shows 70% of the nation’s winter wheat crop is in some stage of drought (up 4% from last week) while over 82% of the entire continental U.S. is in some stage of drought (a record). Without decent rain this fall or in early spring, 2023 could be an interesting year. At this point the dry conditions are going to delay fall tillage and fall fertilizer applications, which could result in another year of undecided planting intentions.

Soybean demand continues to help the market push higher. A much stronger than expected export sales report on Oct. 20 combined with reports of two more sales helped soybeans push back to the upper end of its range. U.S.’s export pace continues to struggle, but it’s not just the U.S. that is suffering. When looking at China, you see most markets are showing slower paces. Year to date, wheat exports to China are down 13%, corn is down 26%, barley is down 49%, pork is down 61%, and soybeans are down 7%. Sorghum was the only export seeing gains as its exports are up 21%.

The grains started the last week of October on the defense with technical selling the main driving factor. As has been the case the past week, wheat was able to start the week higher while corn and soybeans slipped lower.

Wheat was supported by production concerns due to disappointing weekend rains. Although Texas, Oklahoma, and Kansas reported rain over the weekend, southwest Kansas and Nebraska saw little relief. The lack of new news on the war front added to the selling as well. A stronger U.S. dollar and spill over pressure from the other grains added to wheat’s pressure.

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Other factors weighing on the market this week are tied to recession concerns. Traders are expecting to see the Federal Reserve increase interest rates another 0.75% in early November due to rising inflation and low unemployment numbers.

Soybean export sales have started to see a slight increase in the U.S. this past two weeks, as China has returned to the U.S. to cover needs. But sales are running a little behind average as China is also continuing to get their needs met from Brazil. So far in October, China has split their soybean imports evenly between the U.S. and Brazil, when traditionally all of the needs at this time of year would be U.S.-sourced.

Soybean oil had a strong weekly performance due to concerns of tight world vegetable oil supplies. Not only has the missile attacks in Ukraine taken out some sunflower facilities, but rain in the major palm oil growing regions continues to decrease production potential.

In the latest news on a possible railroad strike, its potential for taking place increased again as the railroad rejected all of the union demands in the latest offering. This increases the potential chance for a strike mid-November.

USDA’s Weekly Crop Progress report was negative. U.S. winter wheat planting progress was estimated at 79% complete versus 69% last week and 78% average. This was 2% below expectations. Emergence was at 49% complete versus 38% last week and 56% average. As of Oct 23, 61% of the nation’s corn was in the bin versus 45% the week before and 52% average. But the pace was 1% lower than expected. Corn could struggle for another week due to hedge selling pressure. Soybean’s harvest pressure should be coming to an end as 80% of the crop is now in the bin versus 63% last week and 67% average. This was 3% above expectations.

Late October rains did help replenish parts of the Mississippi River, but the recent dredging has helped open the river back up as by the middle of the last week of October there are no closures on the Mississippi River. However, there are still size restrictions that continues to slow down grain movement.

Cattle closed out the third week of October posting gains. Live cattle found support from a much stronger than expected cash trade, with most cash bids jumping $3 from the previous week. USDA’s October Cattle on Feed report was a nonevent coming in as expected. Estimates are: On Feed: 99%, Placed: 96%, and Marketed: 104%.

Most of the live cattle contracts have been able to push to new contract highs in each session for the past week. This has caused cattle to become overbought. But so far cattle are not showing signs of weakness. The market did stumble after the release of a negative Cold Storage report, but quickly found its footing and returned to the plus side. The August estimate for beef in storage came in at 522.9 million pounds, up 2% from last month, 19% from last year, and 10% above the five-year average. Cattle are showing some solid returns and now might be a good time to take risk off the table.

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