Grains were mostly higher Thursday morning except winter wheat. Cattle were mostly higher, hogs mixed.
Soybeans Rally on China Business
Soybeans were back higher on Thursday with more confirmed soybean export business as China bought another 10 million bu. and unknown destinations accounted for 8 million bu.
Randy Martinson with Martinson Ag says this is confirmation of the news reports indicating China had bought 1 million metric tons or 15 cargoes of soybeans this week from the U.S. ramping up into the U.S. China Summit.
“That certainly is helping to push that soybean market. I think there’s a lot of excitement starting to build with the Xi Trump meeting that’s going to take place September 24th. So, I think that’s adding a little bit to it,” he says.
He says the trade is also expecting to see more announcements as far as other ag product purchases.
China Running Total
He says so far China has purchased around 13 MMT of the 25 MMT of U.S. soybeans they have committed to and with unknown destinations the number is even higher.
“So they’re well on their way to the 25 million metric tons they have to buy by Dec. 31,” he says.
Framed Purchases or Lower Tariffs?
Will the Summit also produce more framed purchases of ag products or lower tariffs>
Martinson says, “They talked about doing the lowering of tariffs. I mean, dropping that 10% tariff that both countries have on each other. So
that was part of the discussion that they had back in October, they met the first time. So I think that will be part of the discussion. I do think that China will come in and make some more announcements of some more purchases of soybeans while they’re here. And I do think that they will look at some announcements of some of the other grains.”
He would like to see corn be part of the additional $14 billion of prorated purchases.
Soybeans Fueled by Record Diesel Prices
The other factor underpinning the soybean and bean oil markets is record high diesel fuel prices and the rally in crude oil and heating oil.
With EPA’s SRE decision out of the way the bean oil market has rebounded with higher energy markets.
“And I do think the higher diesel fuel prices are helping to push and make it more economical, even for the renewable diesel fuel, because that’s fairly expensive to make. And now it’s starting to compete even with regular diesel fuel,” he adds.
Corn Sees Bounce Pre-WASDE
The corn market is trying to bounce after five down days of profit taking by the funds heading into the WASDE.
The market is waiting for USDA’s corn yield estimate with the average trade guesses coming in around 178.2 to 178.4 bu. per acre.
He says below that number will be bullish but above that will be bearish as the market has been pricing in a 177 to 178 bu. per acre yield already on corn.
“Especially when you look at how the crop ratings have been coming in, they’ve been coming in lower, not just for the Northern Plains and the Western Corn Belt, but also for the rest of the Corn Belt as well. So, you know, we’ve been seeing a crop that has been deteriorating. I would be surprised that USDA didn’t drop down to at least that 178. But if they don’t, that is going to be somewhat negative to the market just because of where conditions have been falling,” he says.
North Dakota a Train Wreck
North Dakota is a good example with 48% of the corn crop rated poor to very poor which will mean lower yields.
“I mean, it’s a train wreck. We’re already starting to hear some guys going out and combining, you know, their corn starting because we’re starting to see ear drop. They’re starting to fall on the ground. We’re starting to see stock integrity where the plants are starting to tip over. I mean, basically the plant has cannibalized itself to try to survive and it’s taking it down so that the integrity of the plant is gone,” he describes.
The soybean crop is not any better with pods that have aborted and seeds that are the size of peas.
Soybean Yield to See Little Change
However, soybean yield is estimated at 52.5 bu. per acre by the trade, down .2 bu. from last month.
Very little change is expected because it is too early yet according to Martinson.
“I think that’ll come more in the next report when U.S. data is a little more surveying. So I would expect that soybeans won’t see much of a change. That’s going to basically fall more off of what happens on the demand numbers.”
Demand Changes
Martinson says there could be some slight demand revisions with old crop exports on corn ending 22 million bu. above expectation.
Harvested Acreage?
Will there will be a change in harvested acres? Will corn come down because of silage cutting, due to drought?
Martinson says he doesn’t think USDA will make that change in this report but instead will wait until October.
Ending Stocks for Corn Down to 1.5 Billion
Even with the 178.4 corn yield it takes ending stocks down to almost 1.5 billion bushels and gets below the key 10% stocks to use ratio.
That should be supportive he says, “At least you’ll keep a base in this market. So, I mean, any kind of a retracement isn’t going to be very large. I think it’s more of what we’re setting ourselves up for. It does mean that we will have to continue to try to ration supply.”
Wheat Trading Headlines
Wheat futures were mixed early Thursday still trading Black Sea headlines.
The war has escalated but any talk of peace send the market lower.
Martinson says, “Last week we dropped hard off of the news that peace was possible or talks were possible. Of course, then over the weekend, Putin said, no, he’s comfortable to keep the war going. Now he’s talking about possibility of sitting down and negotiating again. But in the big picture, you know, wheat is going to be somewhat spurred off of what’s going on in the Black Sea region. If they do get peace, that’s certainly going to be bearish to the wheat market as we are going to then see them get back into the export market.”
Still he stay that will take time considering the amount of damage that has been done and so he hopes the U.S. will eventually attract some business.
“We need to see it soon because if they do go into some peace talks and stop the fighting, it’s three to four months and they’ll be able to be back to semi-normal, which would be pretty bearish to the wheat market.”
Higher Winter Wheat Acres
The other factor that may limit wheat is the expectation for higher winter wheat acres.
Martinson says it is weighing on prices, “I mean, Kansas City has been carrying a premium to the other wheats, and that’s a little – it should carry the premium to the Chicago, not so much to Minneapolis. But it has been, and I think a lot of that is because of the concerns with the headlines. But at this point, it has pushed the prices up enough where it’s going to encourage an increase in acres. And I wouldn’t be surprised to see winter wheat acres increase 7% to 10% because of the higher base price for crop insurance and the fact that the guys in the Southern Plains have little risk in planting that winter wheat.”
That is because they can double crop and even if one crop fails they still have insurance. However, they will need rain soon to even get a winter wheat crop emerged.
