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Afternoon Market Recap for October 20, 2017

Grain markets end the week on a seesaw

Large stocks, strong demand, mixed weather all factor in.

Private exporters reported three more large export sales – two for corn and one for soybeans – on Friday. That’s usually good enough for a modest bump in prices, but too many other supply and demand factors are also in play right now. As a result, small gains early in the day after the large sales were announced gave way to moderate losses for corn, soybeans and wheat as the day progressed and the markets closed.

Most of the Corn Belt should be able to log another day of fieldwork on Friday without precipitation slowing down harvest. This weekend, however, some rain is forecast for the central U.S., with east Texas, western Arkansas, Oklahoma, Missouri, eastern Kansas, Iowa and southern Minnesota in for the greatest rainfall amounts. The Pacific Northwest and wildfire-ravaged northern California could also receive a significant amount of rainfall over the weekend.

On Wall Street, two magic words – “tax cuts” – are helping stocks finish strong this week. Late last night, the Senate passed a budget resolution that sets up its tax-cut proposal for a vote in the near future. The proposal offers massive tax cuts (most of which will benefit the wealthy) and could add around $1.5 trillion to the federal deficit over the next decade. The Dow jumped ahead another 131 points at midday trading, to 23,245. The U.S. Dollar also saw modest strengthening on the news. Energy prices were all up to end the week, too.

Corn prices may have trouble getting out from under the weight of a heavy U.S. crop – a near-record at 171.8 bpa, according to the latest USDA estimates. Prices fell again on Friday, despite the announcement of two large corn export sales. December prices fell 4.5 cents to close at $3.4450, while March 2018 prices went down 4.25 cents to close at $3.5850.

EPA appears to reverse a previous stance on the U.S. Renewable Fuel Standard after receiving pressure from Congress and President Trump. Previously, EPA had been considering reductions in current biofuel requirements, as well as a proposal that would have allowed exported biofuels to count toward domestic quotas. But in a letter dated October 19, EPA Administrator Scott Pruitt said renewable fuel volume mandates will stay at or above current levels next year. Pruitt also says he’s willing to work with Congress over the potential year-round sale of E15 gasoline, which is currently prohibited during summer months.

Private exporters reported two large corn export sales to USDA for Friday, including one for 4.7 million bushels for delivery to Spain, and another for 4.9 million bushels for delivery to unknown destinations. Both sales are for delivery during the 2017/18 marketing year, which began on September 1. There were four large export sales of corn reported in total this week.

Preliminary volume estimates were 253,377 contracts, moderately higher than Thursday’s total of 188,319.

Soybean prices face the same conundrum as corn – despite strong export sales and some South American weather worries, prices are having trouble bucking the narrative of an ample U.S. harvest that’s currently underway. With little rain in the forecast this week, the slower-than-normal harvest might have just caught up significantly, at average expected yields of 49.5 bpa. November futures slumped 7.75 cents to close at $9.7875, while January 2018 prices also fell 7.75 to close at $9.8925.

Private exporters reported to USDA export sales for 7.3 million bushels of soybeans for delivery to China in the 2017/18 marketing year, which began September 1. That was the third large export sale for soybeans reported for the week.

In Brazil, soybean plantings have advanced to 20% complete for the 2017/18 crop, up from 12% a week ago. That roughly matches the five-year average pace of 19% for this time of year. Worries over dry-weather planting delays could be further alleviated, with rainfall expected in the country’s Mato Grosso region on Sunday and Monday.

Preliminary volume estimates of 311,838 contracts were significantly higher than Thursday’s total of 232,919.

Wheat prices continued down its current four-week slide, with December Chicago SRW futures falling another 6.75 cents to close at 4.26, while December Kansas City HRW prices dropped 7 cents to close at $4.2225. MGEX Spring Wheat futures were also down, with December futures falling 4.5 cents to close at $6.0975.

In Pakistan, 2017 wheat production came in at 944.3 million bushels. That’s the second largest on record, and the second consecutive near-record harvest. High domestic wheat prices tends to keep the country’s grain off the international market.

Turkey has issued 15 international tenders, totaling 5.5 million bushels of milling wheat, which close on Thursday, October 26. Despite a food trade dispute with Russia, the tender does not exclude Russian-origin wheat. The grain must be loaded in ports either in the Black Sea, Aegean and/or Mediterranean.

Preliminary volume estimates were for 77,965 CBOT contracts, down moderately from Thursday’s total of 87,455.

More from Farm Futures:

Corn Outlook
Soybean Outlook
Wheat Outlook

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