This is the SFN Market Report with Brooks Schaffer of Palmetto Grain. Reach him at [email protected] or 843-540-4540.
Late August is often called the doldrums in the grain market. The bulk of the growing season is now behind us, so weather forecasts are not as closely watched — but it will still be a while before combines roll across the Midwest.
The USDA has updated its trend yield, but not using actual measured ear sizes or harvest data yet. We’ll get the first glimpse of that in the Sept. 12 report.
The South American growing season is coming up soon, but not here yet to trade that weather market either. Some planting will begin in September in Brazil and as we approach those plant dates, the market will being paying closer attention to weather.
We have first notice day on the September contracts today, which means anyone who had September basis contracts had to either priced or rolled before today. Trade volumes plummeted late week as we head into the Labor Day weekend in the U.S. The grain markets will be closed Monday for the holiday.
Corn has struggled to hold the positive momentum this week as selling pressure associated with first notice day weighed on the market, and also weakness in wheat and soybeans did not help the bull’s case.
Soybeans closed last week with strength from biofuel rumors. Without much help on the biofuel front, beans gave back some of that strength this week. China has still not bought any beans from us for fall delivery.
U.S. beans are most competitive from our harvest until in January, when Brazil starts harvesting their first acres, depending on when they were planted. There was news the Chinese government was preparing to release soybeans from state reserves — theoretically they could release enough to buy time until the South American beans are available and not buy any from us.
The administration has said we are close to a deal and they are putting pressure on China to buy beans from us, but so far, there has been none purchased. The Chinese trade representative is in the U.S. this week, but is not been loudly announced by either side. Seems that dialogue is still open, but if something unexpected does not happen soon, any deal will be too late to take advantage of U.S. soybean harvest.
Soybeans are still at a fork in the road. USDA tightened up the balance sheet by reducing acres, and we are increasing domestic demand from biofuels. But, we still need some exports. If we export some to China, the bean carryout could be tight. If we do not export any, we are going to have too many.
China seems to be gearing up for the long run, which is concerning. But, they want to negotiate from a position of strength. So, even if they were going to make a deal tomorrow, they would want to appear to be gearing up for the long run. That was a lot of words for me to say we still do not know how the bean balance sheet is going to look, and the market is struggling to price that in. We can say with certainty — that if there is a weather scare in Brazil this fall, the market is going to have to react dramatically.
Wheat does not seem worried at all about U.S. acres this fall. World wheat carryout remains relatively tight, but you would not guess that by looking at the market. Russia and Ukraine keep offering wheat cheaper and cheaper to get it sold. They both desperately need to sell all the wheat they can.
We are almost at the end of the growing season in the US. Weather is forecast to be cooler than normal, and dry in the east where they are already dry and some showers in the western belt where they do not need them. Does not look like the strong finish across the growing region we needed to reach USDA’s lofty 188.8-bushel corn yield. The market has already started to discount that.  We’ll be looking forward to the Sept. 12 supply and demand report from USDA.