Grains closed the day mostly lower on Wednesday:
Dec Corn – 5 ¼ cents/bu (5.32 ¼ )
Nov Soybeans – 8 ½ cents/bu (12.42)
Dec Chi Wheat + 1 ¼ cents/bu (7.46)
Cdn $ -0.00090 (79.410 cents)
WTI Crude Oil -1.69/barrel (77.23)
Grains values were volatile today, as early market strength gave way to USA Midwest harvest hedge pressure for corn and soybeans. Yesterday, the market was buoyed by strength in energies and as a result, strength in vegetable oil values, as stronger crude oil prices suggest increased values for biodiesel. However, the market slumped today after some concerns over USA economic performance were raised, causing concerns that demand for oil could wane if the economy falters. Much of the debate revolves around USA economic policy going forward and the impact on inflation of interest rates and stimulus spending.
For my money, inflation remains a huge consideration in the direction of grain prices this fall/winter. None of us should be surprised that there is some weakness in grain prices as we see the US Midwest harvest enter it’s peak period. But once the resultant hedge pressure of that harvest declines, we should expect to see the market focus on demand, which remains solid. Add to that inflationary pressure due to pent up demand for all commodities, and we are setting the table for the potential of very good grain prices.
Market bears will point to bigger USA carry out stocks and large South American acreage, and those supply considerations are valid, but we need to be cognizant of where/what demand is coming from. China returns to work tonight after being off for the national celebration of Golden Week. It will be interesting to see if the Chinese choose to take advantage of the recent decline in prices by securing supplies over the coming days.
Wheat prices rebounded from Tuesday losses for most of the day, before being pulled down at the close by the weakness in row crops. Today, Egypt awarded 240,000 tonnes of a wheat tender to Russia (180,000) and to the Ukraine (60,000). That the USA did not get any tonnes is not a surprise or a concern. What is notable is the prices paid for wheat. At $352/mt, the contract values are substantially higher than the prices paid by Egypt just a month ago. World wheat prices are reflecting the tightness of global milling wheat stocks.
Tomorrow morning, the USDA will release their Weekly Export Sales Report for the period ended Thursday, September 30th. Given the lack of USDA Flash Sale reports last week, total sales volumes are expected to be underwhelming, and well off the totals sold last year during the same week. Trade expectations are listed below, in thousands of tonnes:
On a local note for our IP soybean growers, we have seen a number of recent deliveries that have borderline quality due to the presence of earth tag (soil adherence) on the beans. This typically happens when there is moisture present at the time of combining, and dust from harvesting sticks to any moisture on the soybeans. It is for this reason that experienced IP growers seldom harvest at night, when moisture levels increase and the bean quality is compromised. To date, we have not had outright rejections, but some discounts have been taken. In our minds, it is not worth jeopardizing a 3.50 to 4.00 per bushel IP premium by harvesting in unfavorable conditions. Just wanted to make sure everyone is aware of the issue before we resume harvesting.
On the day, funds were believed to have sold 4,000 corn contracts (now long 235,000), sold 4,000 soybean contracts (now long 44,000), while buying 2,000 Chicago wheat contracts (now long 15,000)