Grain markets turning on weather expectations, realities

Grain & Oilseeds Report

Corn: Weather continues to be front and center for this market, which makes it worth looking back at rain fallen as well as forward to the forecast. Weekend rains were likely seen as disappointing for areas to the west such as IA, MN, ND, SD, NE and western IL, while rains for southern IL, all of IN and OH were just as expected if not better. As a whole this forecast would have to be considered slightly bullish. What allowed for the best bounce during the day was that the noon maps for the one- to 10-day outlook reduced rainfall slightly on Monday.

After all that, why was corn lower then? This likely has more to do with the temperature forecast. Trade will be expecting the prime pollination time period to be July 24 to July 30 this year. During that time, most areas will be seeing temperatures in the high 70s to low 80s. This translates into no heat stress for the key pollination time period. Given that 50% of yield is determined during pollination it is tough to find a market rally given such positive conditions. Let’s also consider that while IA rainfall has been very poor for the month of July, both IN and OH have seen very solid rains during that same time period.

On the demand side, we can expect speculators to continue buying corn down near 490, looking for heavy Chinese demand to be found on any new corn lows. At this time, both the technicals suggest corn is stuck in a range between 490 and the low 500s with fundamental factors suggesting the same. With the key pollination time coming soon, let’s look for trade to watch temperatures the most right now with rainfall secondary…Ryan Ettner

Soybeans: The bean market began the week on a bullish note as the squeeze in the old crop continues to drive the market higher and disappointing rains in portions of the Midwest added to the positive tone. The old crop continues to build premium into the August bean contract as the market attempts to pull what beans left in producers hands to the market. The old crop meal continues to rally as it attempts to ration demand as it looks like we don’t have enough meal to meet the near-term needs.

With weekend rainfall being deemed disappointing, the trade is concerned that the new crop supplies are getting smaller, not bigger at this time. Rain in August will have a bigger impact on yields than this past weekend’s rains but after the heat the crop has been through there is no doubt that the crop could definitely use a drink.

With the old crop demand remaining as strong as it is, we believe the USDA will eventually have to adjust the old crop carryout lower. They may eventually have to drop it below the 100 million bushel level. The lower carryout will result in a smaller carry-in, which makes the size of the new crop that much more important. With the amount of beans planted (both new crop and full season) still being debated and the critical stage for when beans are made or broke still ahead of us, it should keep the market very choppy. Crop ratings released after the close show that 64% of the crop is now rated good to excellent. This is down 1% from last week’s number and at the high end of the trade estimated 1% to 3% drop…..Jim McCormick

Wheat:

  • There are some light to moderate rains expected for South Dakota tomorrow and Sunday. NE thru ND will some rain mid next week. Additional crop stress is expected.
  • Weekly wheat export inspections of 23.1 million bushels were bullish.
  • The Spring Wheat Tour is expecting to see some prevent plant in ND but otherwise late-planted acres are catching up nicely and quality is expected to be good. The tour starts tomorrow.
  • Egypt’s new Minister of Supplies states that halting wheat imports was one of deposed President Mursi’s biggest mistakes. He was given guesses as to Egypt’s wheat stocks instead of accurate data. Current stocks show enough wheat to last until Nov. 25th with more deliveries due soon that would carry them thru until the end of the year.
  • Iraq purchased 50,000 tonnes of Australian wheat today for August delivery.
  • September Chicago wheat finished lower today and settled only 7 cents above the contract low…Greg McBride
About the Author

Ryan Ettner is a registered commodities broker and grains analyst at Allendale, Inc. Steve Georgy is a Sr. Broker/Manager at Allendale, Inc. Jim McCormick is Senior Broker/Manager at Allendale, Inc. Allendale is registered with the CFTC and NFA and is a member of the NIBA. www.allendale-inc.com

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