The second week of September was a wild week. The grains started the week off mixed, with wheat starting the week lower while corn and soybeans surged higher.
The market reacted to USDA’s September Crop Production report. For the rest of the week wheat traded mixed while corn and soybeans lost ground. By the end of the week, Minneapolis wheat was posting 6 to 10 cent gains, Chicago wheat was down 9 cents, Kansas City wheat up 4 to 6 cents, corn 6 to 8 cents lower, and soybeans cut their gains in half ending the week with 36 to 37 cent gains.
So, what changed so much from Monday to Friday? Wheat found support from talk of improving demand due to a rice shortage in Asia. Support also came from adverse weather conditions in the U.S., as rain is expected to slow down spring wheat harvest while hot dry conditions will help advance winter wheat planting progress, but it won’t help the crop emerge. Hedge selling pressure pushed the corn and soybean contracts lower. Although early yields have been disappointing, seasonally corn and soybeans retreat this time of year.
On the positive side, USDA finally released the export sales report Thursday. Wheat sales continued to be lackluster at best, coming in below expectations. Corn sales for the past month were as expected and soybean sales were above expectations.
The grains had another potential black swan in the making in the form of a potential railroad strike. The strike had the capacity to cripple the U.S. as over 30% of our products are moved by rail. Late in the week, a deal was hammered out, but it still has to be approved by the rank and file. That vote will come in late September.
The grains seem to be in decision mode. Corn and soybeans rallied to recent highs. December corn traded close to $7 and November soybeans close to $15. Technical selling and harvest pressure have stepped into pressure both markets.
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Wheat continued to be on an island by itself. It was the only grain holding gains going into the close of the week as concerns mount that Russia is not going to renew Ukraine’s export program. The need to buy acreage added support. U.S. wheat stocks and world wheat stocks are tight and the U.S. needs to convince producers to plant more winter wheat. The base price for crop insurance is certainly going to encourage more acres. The early estimate for soft red winter wheat’s crop insurance base price is $8.40 versus $7.14 last year, a 31% increase. For hard red winter wheat, the estimated base price is estimated at $8.79 versus $7.08 last year, also an increase of 31%.
To add to the week’s news, Stats Canada’s production estimates were negative wheat, but friendly canola. The report put all wheat production at 34.7 million metric tons versus expectations of 34.5 million metric tons and versus 34.57 million metric tons in August. Spring wheat production was estimated at 26.01 million metric tons versus 25.57 million metric tons in July. Canola production was estimated at 19.1 million metric tons, which was in line with expectations but lower than August estimate of 19.5 million metric tons.
On a negative note, Russia's Vladimir Putin and China's Xi Jinping met recently and have agree to increase cooperation and trade with each other. This could result in Russia supplying China with all of the wheat and corn they need.
The U.S. Drought Monitor Map is showing an expanding drought as Montana, North Dakota, Nebraska, and Kansas saw sharp increases in dry conditions while Texas saw improving conditions.
The third week of September started with the grains putting in a mixed performance on Monday. Wheat took a beating while corn managed to recover to end steady as soybeans rallied higher. Wheat was under pressure from the stronger U.S. dollar. Selling pressure increased from news Russian officials once again increased their wheat production estimate, this time by 2 million metric tons to 99 million metric tons. USDA is at 91 million metric tons. Reports of an uptick in shipments out of Ukraine added pressure as it appears boats are running a little faster now as most anticipate the program will end at the end of the month due to Russia’s concerns.
Corn traded in a back-and-forth fashion Sept. 19, stuck in a tug of war between the lower wheat complex and higher soybeans. Soybeans won this battle as corn bounced higher into the close, but not by much. Early selling pressure came from wheat, with hedge selling pressure adding to the losses. Harvest has started, but according to USDA’s Crop Production report, running slower than expected.
We are at the end of the growing season, and crop ratings are becoming less important as harvest has started, but Monday’s crop rating was of interest. It seems the crop rating was not in line with the individual states as Illinois dropped 1%, Indiana was steady, Nebraska dropped 5%, Ohio fell 3%, and South Dakota was down 4%. But the national crop rating only slipped 1%.
Soybeans were the bright spot in the grains Monday, pushing higher off of export news. China was in and bought 136,000 metric tons of U.S. soybeans overnight. A slower than expected harvest pace added support. Harvest pressure did pull the soybeans off their highs Monday, but the expectations of more China demand and lower than expected early yield reports helped support soybeans. A stronger soybean meal market added support.
South America continues to be on the dry side, and that is adding support to the soybean market. Rains have not come to Brazil as expected, which has slowed down soybean planting progress. Rains are expected by next week, and, if realized, planting progress will advance rapidly.
Just as was the case in corn, soybean’s crop condition rating seemed a bit higher when considering the ratings of the individual states. Illinois was unchanged, Indiana fell 2%, Iowa was unchanged, Minnesota dropped 2%, Nebraska was down 3%, Ohio fell 2%, and South Dakota dropped 9%. North Dakota bucked the trend and was up 5%. The national crop rating only dropped 1%.
Traders, along with the rest of the world, are a bit nervous from reports of Russian troops firing missiles toward the nuclear power plant in northern Ukraine. Once again, Monday night Russian forces were firing missiles close to the plant, the plant was not damaged but infrastructure around the plant was.
In addition, Putin is now looking to annex the four regions of Ukraine Russia currently has control of. The amount of ground Russia has control of amounts to about 15% of Ukraine. It is likely any attempt to annex parts of Ukraine will result in an escalation in the war. This was supportive wheat as traders are now expecting very little wheat will get planted in Ukraine, and it is likely the export agreement to move grain out of Ukraine ports will expire.
Cattle lost ground the second week of September with most of the selling tied to economic concerns as well as from a disappointing cash trade. Cattle were trading a little better the third week of the month. Support came from position squaring ahead of Sept. 23 Cattle on Feed report, which was due to come in after the deadline for this column. Early estimates are: On Feed: 100%, Placed: 99%, and Marketed: 106%. The Federal Reserve increased interest rates 0.75%, which was as expected.
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