The outside source and the progress of the harvest put pressure on the markets
So what is it that has the grains on the defense? Foreign markets controlled the pace of cereals to start the week of September 20. It was about taking the risk off the table as many traders felt the pressure of the announcement of China’s second-largest real estate company would likely default on loans. One problem is that many US banks have loaned money to this company, and most will not receive interest on the note. This, of course, raises concerns about the strength of the Chinese economy, or the US economy for that matter. The Chinese government is expected to step in and help the company, but China was on vacation, so no official news will be released until mid-week. By then, a lot of rumors will fly.
The grains were finally starting to recover from the last few weeks of sales. The week of September 13 saw cereals perform well. Support began after Statistics Canada released its September production estimate. The report was friendly. Total wheat production in Canada was estimated at 21.7 million metric tonnes, up from an expected 21.9 million metric tonnes and up from 22.95 million metric tonnes just two weeks ago. This is a decrease of 38% from last year. Canada’s spring wheat crop was estimated at 15.3 million metric tonnes compared to expectations of 15.2 million metric tonnes. This is a 41% drop year-over-year. The production estimate was also favorable for canola. The Canadian canola crop is currently estimated at 12.8 million metric tonnes compared to expectations of 13.6 million metric tonnes. This is a decrease of 34% from the previous year.
Wheat was able to post the biggest gains for the week of September 13, with most of the support coming from reports of further production cuts for Russia, Canada and Australia. Australia is still looking to harvest a decent crop, but dry conditions are starting to become a concern. Russia continues to lower its production estimates for its crop, which has led to a further increase in cash offers, for the 10th week in a row. In addition, the authorities reduced the European Union soft wheat harvest by 2.4 million metric tonnes, now estimated at 129.1 million metric tonnes and likely to present quality problems.
Gains were restrained against the expectation that winter wheat area will see a big increase in the United States this fall due to the high base price of crop insurance. Planting of winter wheat in Ukraine has started under optimum conditions and the area is expected to increase by 10% from 16.5 million acres last year. The rise in the US dollar also limited gains.
Maize has played a role as a follower of the wheat complex, but gains have been contained from the bearish weather forecast as the 6-10 day forecast calls for above normal and below normal temperatures for the majority of principal cereal regions of the United States. This will keep the frost at bay until at least September. Disappointing yield reports have combined with technical purchases to help maize rise.
The strength of the light was also due to the Sept. 10 ethanol production estimate of 937,000 barrels per day, up 14,000 barrels from the previous week. Inventories were estimated at 20 million barrels, 380,000 barrels lower than the previous week and a 14-week low.
But the gains were contained from last week’s export sales estimate, which was below the range of trade estimates at just 9.7 million bushels from the same week last year. to 63.3 million bushels. In global news, the European Union’s corn production estimate has been reduced from 1.4 million metric tonnes to 64.9 million metric tonnes from 63.4 million metric tonnes last year .
Soy hasn’t had a good week though. Rumors that China would cancel some soybean purchases were confirmed mid-week. The USDA has confirmed export sales cancellations of 132,000 metric tonnes to China and 196,000 metric tonnes to unknown. But since these cancellations became the subject of rumors, the market quickly swept that aside and climbed higher. The fallout came from the rising corn market when early yields were disappointing. The National Oilseed Processors Association’s grinding figures for August were favorable, as grinding was reported at 158.8 million bushels against the average commercial estimate of 154.2 million bushels and the 155.1 million bushels of July. But soybean oil stocks were significantly higher than expected and the highest stocks for August in eight years.
At the end of the week, the USDA reported a sale of 132,000 metric tonnes of soybeans to China. There are rumors that China has also bought four to six shipments of soybeans from Brazil. This is unusual for this time of year, but likely due to delays in shipping American beans out of the Gulf after Hurricane Ida.
The USDA Crop Progress Report is starting to become less and less of an influencer as traders look at actual performance results to drive the market, but the report still gives us valuable insight. Monday’s crop progress report estimated the progress of the maize harvest at 10%, which was expected by the trade and 1% ahead of average. The soybean harvest was estimated at 6%, also 1% above expectations but equal to the five-year average. But what was interesting about this week’s report was the state of Illinois crop assessment. Over the past few weeks, the Illinois crop rating has gone down, but this week corn and soybean ratings have risen sharply. Was that a real hike, or has Illinois already reaped most of its poor acres?
The maize harvest rating improved from 1% to 59% good / excellent, 1% above expectations. Among the states showing improvement, Illinois led the charge. Illinois harvest improved 12%, Nebraska 2% and Ohio 4%. The rest of the major states all saw stable conditions at a 1% drop. The crop grade for soybeans was similar to that for corn. The rating improved from 1% to 58% good / excellent, with Illinois recording the largest increase with an improvement of 14%. The only other states to show improvements were Nebraska (+ 2%) and South Dakota (+ 1%).
The progress of winter wheat sowing was estimated at 21% completion against 18% on average. It was 1% less than the trade expected. Winter wheat area is expected to increase rapidly due to the high base price of crop insurance.
Pasture and range conditions continued to decline, dropping from 1% last week to 24% good / excellent. Pastures in Minnesota improved 3% to 12% good / excellent, North Dakota fell 1% to 3% good, and South Dakota remained unchanged at 5% good. This will likely cause the calves to be removed from the pastures north and sold earlier than expected.
The grain trade did not cause technical damage to wheat or corn, but hurt the soybean chart. Soybeans are at a tipping point, as most months have passed their 200-day moving average. It seems that this market is only stalling while awaiting confirmation of returns.
The cattle market continues to suffer. October’s live cattle contract closed 15 of the last 20 sessions and lost more than $ 10. At this point, the cattle continue to be oversold and in need of a correction, but no one wants to stand in the way of the stampede. Besides technical pressure, cattle are also under pressure from a larger than expected number of slaughter cattle as another wave of drought-stricken cattle begins to move towards the city. Long-term supplies are going to be tight, but traders expect demand to drop.
“The risk of loss in trading futures and / or options is substantial and every investor and / or trader should consider whether this is a suitable investment. Past performance, whether actual or indicated by simulated historical testing of strategies, is no guarantee of future results. “