Grain and livestock futures were mostly lower early Thursday.
Grain markets were lower on Wednesday and again Thursday as the market positions ahead of the October WASDE.
However, Cory Bratland with AgMarket.Net says weekly exports may have also added to the negativity.
Exports Disappoint
Weekly exports came in on corn at 30.3 million bu., soybeans sales at 20.2 million bu. and wheat at 16.6 million bu.
Bratland says, “Corn and beans both were at the lower ends again. So this is a couple of weeks in a row that export sales have been a little bit disappointing on corn and soybeans. Now, with that said, China is just getting off their Golden Week holiday. So I would. expect China to be back in this market buying some soybeans out of the U.S. here later this week, maybe into early next week.”
However total corn exports for the marketing year are down 34% from last year and Bratland says the market is digging itself a bit of a hole on export pace.
“I think the current pace that we’re going to need now from each marketing week going here forward is around 52 million bu. just to achieve USDA’s numbers. So, you know, we had the blister and hot start to exports last year. Now they’re struggling a little bit,” he adds.
Outside Market Influence
Money flow and outside markets are also influencing the grain markets.
Crude oil was sharply higher as well as the U.S. dollar index, while the stock market was seeing a considerable selloff with concerns about the prolonged Iran war and continued tensions in the Middle East.
“At the end of September into the first few days October the barrels of crude oil going through the Strait of Hormuz was back up to nearly 18 million barrels a day. However, a report this morning showed that on Tuesday of this week they were down to only 4 million,” he explains.
So crude oil is back up nearly 4% or close to $4 a barrel which Bratland says weighs on the whole economy. “And I think that’s kind of spilling over into commodities as a whole.”
Hurricane Impact
Plus, refineries in the storm path of the next hurricane may be hit also limiting refining capacity and a handful of refineries shut down.
Three renewable diesel plants are also in the path of the storm and so soybean oil also took a hit on price on Wednesday and Thursday.
“We’ve had a nice little run up in the soy complex with crude oil back over $90. But the soybean oil, yeah, I think they’re bracing for this. You know, you just never know. how long they’re going to be shut down. Nowadays, it seems like we can get those plants built back up and open pretty fast. So keep our fingers crossed and we’ll have them back running here operational,” he says.
The path of that storm is also expected to hit cotton areas in the south as well as the southern Corn Belt which could disrupt harvest due to rain.
Farmer Selling and Harvest Pressure
The markets may also be seeing some harvest pressure and farmer selling after the rally on Tuesday. Plus, combines are finally rolling in much of the western Corn Belt with the drier weather.
Bratland says, “This should be one of our biggest, if not the biggest, harvest week kind of across the entire Corn Belt. I think everybody is going hard on soybeans. I’ve talked to several clients across the Midwest that if they have three, four, five good days, they could be on the downhill slide of this harvest. And typically, when we get towards the end of harvest, and what I’ve been
hearing, some pretty good yields out there.”
Farmers with offers of $12.50 to $13 on cash beans, are electing to take that versus put them in on commercial storage. That’s because farmers are having to pay 20, 30 cents a bushel just to get them to the first of the year.
“So I think guys are electing to just take the cash, keep themselves in a good cash position and move on to the corn harvest. But this should be our biggest week of the year. So yes, I think harvest pressure is definitely, I think, weighing on this market.”
Basis Levels?
Basis levels on soybeans were narrow to inverted to the futures the last couple of weeks in the western Corn Belt with soybean processors struggling to find bushels with the harvest delayed.
However, the basis is starting to widened out which is typical at harvest.
“If we get into areas where the yield is better, yeah, they’ve got to widen that out because they’ve got a lot of beans coming at them at one time,” he says.
However, deferred bids after the first of the year narrow back up.
Quality Issues and Discounts?
The market is also dealing with the quality issues on corn and soybeans that farmers in areas of the western Corn Belt are seeing in the fields tied to excessive moisture.
Bratland says it is a regional issue. “We’ve got some folks across Iowa that are seeing it, even in Nebraska I am hearing of a few facilities that are adjusting their discount schedules a little bit, dealing with the foreign material, maybe limiting the amount that producers can have. So I think on the whole, though, it’s a regional issue. It’s something that they’re going to have to deal with locally. It may affect their basis a little bit.”
WASDE Positioning
The grain markets are also gearing up for the USDA reports on Friday and the focus is on yield.
The average trade guess on soybean yield is 52.9 bu. per acre, which would be a .1 bu. increase from September.
Bratland says the market is in pretty good agreement on yield and soybeans have a tendency in the October report to have a bigger change in yield because there is more harvest done than on corn. “When we look at USDA’s crop condition scores throughout September, they were pretty flat. They dropped a little bit here this week, I think 1%.”
Ending stocks estimates show very little change from the 310 million bu. in the September WASDE, with only minor adjustments in crush or exports.
Reuters average trade estimate on corn yield is 177.8 bu. per acre, down just .7 bu. from September. However, that modest decline may not offset the 173 million bu. of corn stocks USDA found in the quarterly stocks report.
Bratland says that may be accounted for with demand adjustments, most notably with lower feed and residual and that could carry over into the new crop goals.
Cattle Under Pressure
Cattle futures were under pressure Wednesday and again Thursday seeing some profit taking after running into chart resistance.
However, Bratland says it is tied to the sell off in the stock market the last two days and the rise in energy prices due to the possibility of the U.S. ramping up attacks in Iran.
“Crude oil, jumping back up and we haven’t seen that gas price come down a lot. Now the stock market, the S&P and the NASDAQ made some new highs earlier this week. They’re backed off a little bit.”
Technically the market is still holding in a range and consolidating.
“We had that big surge up there on the cattle on Tuesday. We’ve traded inside that day yesterday and so far today. I haven’t heard anything for cash trade yet on the cattle. The indications I’ve been hearing is steady to maybe a touch higher. So we’ll see. I know box beef prices are creeping lower here that’s definitely weighing on this cattle market a little bit,” he adds.
Hogs Also See Red
Lean hog futures have been unable to build on the key weekly reversal as cash and cutouts are making new lows for the year as slaughter numbers creep up to 495,000 head a day.
“We’re just putting too many hogs out on the market here right now as well, too. Just got a big, big supply.”
