Howdy market watchers. This Sept. 11, we remember those who lost their lives 20 years ago in the attacks on our country. It is a time to be thankful for our freedom, friends and family as uncertainty in the world around us continues to elude predictability.
There was a crisis avoided, for now at least, in the grain markets as the USDA released the September WASDE and Crop Production reports. While yields and ending stocks were raised for both corn and beans, they were largely in line with expectations at a time when crop ratings are at historic lows for this time of the year.
Corn yields were increased by 1.7 bpa, with the second-highest ear count in the database, over USDA’s estimates last month, while acres were increased 590,000 acres, which was at the lower end of expectations, with the highest guess above 2.6 million acres additional. U.S. corn exports and feed usage were both increased 75 million bushels for a total demand increase of 150 million bushels. While average farm prices were reduced by 30 cents to $5.45, the futures market traded both sides after the report before pushing higher to close the week at $5.17½. The key level on December corn was the $5.00-$5.04 area coinciding with the 200-day moving average. Friday’s low punctured this level slightly to $4.97½, but managed to consolidate making a high at $5.24. A gap on the chart remains unfilled down at $4.77½.
While corn and soybeans closed positive on the day, we are just ahead of seasonal weakness ahead of harvest. The Mississippi River route and Gulf Export facilities remain out of commission, but the situation is improving day-by-day. Friday’s numbers did not include potential crop damage from Hurricane Ida, so we may see adjustments in those states.
The USDA reduced soybean acres by 284,000, which was more than average trade guesses. Soybean yields were revised upward by 0.6 bpa versus average guesses for a 0.4 bpa increase with pod counts the second lowest in the last four years. Average farm prices for soybeans were reduced by 80 cents to $12.70. U.S. soybean exports were increased but nearly offset by declines in crush.
Last year’s soybean imports by China were increased by 2.0 million tons, while new crop imports remain unchanged. This week, China announced weakening demand for feed ingredients as hog prices remain under pressure. We will see how that plays out or just a way to signal weaker demand ahead to aid buying at lower levels.
The largest increase was in sorghum at 800,000 acres, which was no surprise given basis levels late last year and earlier this year. These basis levels have come off dramatically and continue to slip as Chinese demand remains absent from the market. Milo harvest in Oklahoma is underway with good quality and test weight seen at our elevator location. Aflatoxin has been under 5 ppb in our loads and is welcome news by the hog industry. However, due to higher basis levels, feed producers have switched away from milo, so will have to reintegrate into rations now that basis as well as futures levels have eased.
Brazilian corn production was reduced 1.0 million tons, while Argentina corn was increased by 1.5 million tons.
Recent weakness in wheat prices stemmed from reports that Canadian wheat, as well as canola production and stock levels, would be increased from earlier forecast. There were some interesting developments ahead of Friday’s highly anticipated reports. Program acres reported by farmers to the Farm Service Agency of USDA were to be released on Friday at 1 p.m. However, these figures were “unintentionally” uploaded to the agency’s site on Wednesday and then immediately removed. Once this cat was out of the bag, the FSA then decided to go ahead and repost the data to level the playing field. Not sure what to believe, but those figures of increased planted acres were factored into the market ahead of Friday.
It is common that planted acres increase given that farmers are late getting around to reporting what they ended up planting to the FSA. For corn, planted acres increased by 1% to 91.2 million acres. For beans, it was a 1.1% increase to 86.2 million acres, both of which were in line with the 10-year average increase from August to September. Wheat acres were up 0.5 million to 49.3 million acres with very little else changed in Friday’s numbers.
Ending stocks were lower but right in line with average expectations. While it is dry in the Southern Plains ahead of wheat planting, Russia has received rains recently that improve planting prospects. Rain here will add pressure to the wheat market as more producers get excited about planting once conditions improve. Factoring in the average difference between September FSA acres and the final suggests planted corn acres could reach 94.7 million and 87.7 million for soybeans.
With expectations of a larger crop and questionable demand globally, the shortened trading week after Labor Day had plenty of movement in markets, most of which was lower. The Fed’s Beige book release brought more caution to light and there was an overall risk off attitude that dominated most of the week.
Energy markets, particularly crude and natural gas, did manage to buck that trend with both markets closing higher on the week. Tighter stock levels are part and parcel of the firmer prices with crude oil stocks decreasing from last week, gasoline significantly lower while demand increased and distillate stocks heavily falling from a week earlier.
And finally, the cattle market. This week was nothing short of a disaster in cattle futures, feeders and fats. Brazil’s BSE cases confirmed last weekend resulted in the China market cutting off access, but didn’t really seem to be a major deal given that nothing got into the supply chain and it was an atypical case. However, it was a week of liquidation with cattle contracts following corn lower. Corn’s rebound Friday was not followed by cattle futures that closed lower yet again. Markets slowed the downtrend on Thursday, but couldn’t hold it together to finish the week. September feeders had lower closes in 11 of the last 12 trading sessions breaking through the 50-, 100- and finally the 200-day moving averages on Friday. The same was true for December fats, although yet to reach the 200-day moving average. These contracts are very overdone on the downside, but still looks weak. There remains a gap below on the feeder cattle chart that once filled should see this market consolidate and recover.
If you’re ready to trade commodity markets, give me a call at (580) 232-2272 or stop by my office to get your account set up and discuss risk management and marketing solutions to pursue your objectives. Self-trading accounts are also available. It is never too late to start and there is no operation too small to get a risk management and marketing plan in place.
Come see me every Thursday sale day at the Enid Livestock Market and let’s talk markets. Wishing everyone a successful trading week.