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The grain markets started off the second week of October in a mixed fashion, with wheat leading the charge while corn and soybeans took a back seat. The strength in the wheat exchanges and crude oil came from reports that Hamas staged a sneak attack on Israel. This will likely not mean much for corn and soybeans, but this region is a huge consumer of wheat. And with the potential for the fighting to escalate into a lot more, some countries might look to book and take delivery of wheat needs ahead of schedule.
By midweek traders had forgotten about the war as wheat and corn struggled due to profit taking and position squaring ahead of
, while soybeans pushed higher on forecast calling for more rain delays. That week’s export inspections estimate also showed strong soybeans shipments. The fact that Pacific Northwest soybeans are competitive with Brazil added support.
CONAB is estimating Brazil’s 2024 soybean crop at 162 million metric tons versus 162.4 million metric tons last month and versus 154.6 million metric tons last year. Acreage is expected to increase 2.5% year over year. Corn production is estimated at 119.4 million metric tons versus 119.8 million metric tons last month and versus 131.9 million metric tons last year. The decline is due to expectations that acreage will drop 5% year over year.
Egypt is in private talks with Russia to continue to buy Russian wheat. Egypt’s wheat imports are up 30% this year and so far they have bought 80% of their imports from Russia.
As of Oct. 5, Argentina has 12% of their corn crop planted versus 21% average. Planting is being slowed by drought conditions as Argentina remains very dry.
As of Oct. 6, Brazil had 8% of their soybeans planted versus 8% average. First crop corn planting was estimated at 51% completed versus 41% average.
USDA’s October Crop Production report was friendly corn and soybeans and negative wheat. But wheat was able to brush off the bearish report and end with gains mainly due to spill over support from the other grains as well as from the idea that the increase in production and stocks was already known due to the Small Grains Summary report.
For wheat, USDA made minor changes to the 2022 wheat numbers. Seed demand dropped 1 million bushels and feed demand dropped 1 million bushels. The 2 million bushel drop in demand followed through to increase stocks by the same putting stocks at 582 million bushels.
For 2023’s numbers, USDA decreased planted acreage 200,000 acres, decreased harvested acreage 600,000 acres, but increased yield 2.8 bushels. That resulted in an increase in production of 78 million bushels, putting production at 1.812 billion bushels.
In a surprising move, USDA increased wheat imports 5 million bushels due to an increase of 5 million bushels in hard red
imports and hard red spring wheat imports and a decrease of 5 million bushels in durum imports. Wheat did see an increase in feed demand of 30 million bushels.
The net change was a 55 million bushel increase in ending stocks, now estimated at 670 million bushels, 19 million bushels above expectations. The national average price dropped 20 cents to $7.30.
World wheat stocks were estimated at 258.1 million metric tons, 400,000 metric tons below expectations and 500,000 metric tons below last month. USDA lowered Australia’s production and export pace by the same 1.5 million metric tons but increased Russia’s export pace 1 million metric tons.
The report was friendly to bullish corn as USDA made a lot of changes to corn’s numbers. To start, USDA trimmed old crop harvested acreage 100,000 acres but increased yield 0.1 bushels, which ended up as a 15 million bushel decrease in production. Imports were also trimmed 1 million bushels. On the demand side, USDA increased feed demand a staggering 124 million bushels, decreased food demand 28 million bushels, decreased ethanol demand 18 million bushels, and decreased exports 4 million bushels. The net result was a 91 million bushel decline in ending stocks, now estimated at 1.36 billion bushels.
For new crop corn, yield was lowered by 0.8 bushels to 173 bushels, 0.6 bushels lower than expected. This resulted in a 70 million bushel drop in production, putting production at 15.06 billion bushels, 38 million bushels below expectations.
On the demand side, food demand was trimmed 25 million bushels and exports were cut 25 million bushels. This resulted in ending stocks of 2.1 billion bushels, 110 million bushels below the previous month and 45 million bushels below expectations. The national average price increased 5 cents to $4.95.
World ending stocks were friendly as well coming in at 312.4 million metric tons, 500,000 metric tons below expectations and 1.6 million metric tons below last month.
Soybeans surged higher after USDA’s report came out as both U.S. and world numbers were bullish soybeans.
For old crop US soybeans, USDA cut production by 6 million bushels, cut imports by 5 million bushels, lowered crush 8 million bushels, reduced residual 23 million bushels and increased exports by 2 million bushels. That resulted in an 18 million bushel increase in ending stocks.
For new crop, USDA estimated the soybean yield at 49.6 bushels, 0.5 bushels less than last month and 0.3 bushels lower than the trade expected. That brought production to 4.104 billion bushels, 42 million bushels lower than last month and 40 million bushels less than expected.
USDA also increased crush by 10 million bushels and cut exports by 35 million bushels, bringing new crop ending stocks to 220 million bushels, no change from last month but 16 million bushels lower than the trade expected.
For world numbers, new crop ending stocks were estimated at 119.6 million metric tons, which was a whopping 3.7 million metric tons lower than last month and 4.0 million metric tons lower than expected.
The grains put in a lower performance on Oct. 13 with all of the grains seeing profit taking and position squaring ahead of the weekend. That is except for Chicago wheat which saw solid gains due to spread trading between the classes of wheat. Friday’s selloff cut the weekly gains in half and pushed Kansas City wheat and soybean oil to end the week in the red.
We are now at the midpoint for setting the crop insurance harvest prices for corn, soybeans, and sunflowers. After two weeks corn’s estimated harvest price is at $4.90 versus base price of $5.91 (17% decline), soybeans estimated price is at $12.73 versus base price of $13.76 (8% decline), oil sunflower price is estimated at $28.40 versus base price of $30.50 (decline of 7%) and confection sunflower price estimated at $30.40 versus base price of $32.60 (7% decline).
The Friday sell off was also technical in nature as the grains were flirting with major resistance. Corn seems to be set up in a trading range between $4.90 and $4.99 and was testing the upper range. A break above $4.99 would result in a run to $5.25. Soybeans were testing $13 resistance, as a close about $13 would result in a test of the $13.50 level. Chicago what is flirting with $6, if broken, could result in wheat trading to $6.35.
With the October Crop Production report out of the way, and concerning reports out of Brazil, the grains just might have the chance to make a serious test of its resistance. Northern Brazil and Argentina continuing to be dry and the southern regions of Brazil wet (which is slowing planting). The region is also seeing logistic issues with low river levels which in turn is restricting barge traffic. This might result in Brazil having to halt corn shipments, which would help bring export demand back to the U.S.
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