Views on commodities and energy
All eyes on U.S. harvest weather
U.S. grain markets look to be headed for another week of sideways moves with a lower bias as world grain buyers watch harvest progress of a likely record large American soybean crop and second-largest corn crop. So barring any unusual harvest-time surprises, grain traders will be taking their cue from U.S. weather forecasts.
“Outside of that there isn’t much,” Randy Mittelstaedt, an analyst with R.J. O’Brien, said. “We’re just keeping within ranges until there is more clarity. The new production report next month will help.”
The U.S. Department of Agriculture will update U.S. crop yield estimates, production and supply-demand outlooks Oct. 9. USDA already forecast record corn yields and record soybean output in its monthly report issued on Sept. 11. But meeting those lofty targets is still a question of weather over the next few weeks as crops finish maturing and combines roll.
Delayed planting this year put crops behind from the start, and crop-watchers are not yet ready to bless the bin-busting forecasts on concerns about a possible sudden “killing” frost that could cut off final growth of corn and soybeans.
“The latest National Agricultural Statistics Service Crop Progress report released Sept. 21 showed that 60 percent of the U.S. soybean crop was still vulnerable to freeze damage and only 21 percent of the corn crop was mature,” Mike Woolverton, a Kansas State University economist, said in his weekly newsletter on Friday. “The greatest lags are in the states most likely to experience frost.”
So frost fears will remain a daily factor. But for some traders the main weather story is shifting focus to harvest conditions, with rain clouds threatening speedy progress. Rains, especially in the far southern edge of the Midwestern Corn Belt where crops are the ripest, have stalled an aggressive early start to harvesting. Further north the crops are still behind. A balmy September has helped speed up maturation, but crops are still lagging.
For the coming week, agricultural meteorologist Mike Palmerino at DTN Meteorlogix, said on Friday that the first half looks dry, but storms may move in by the weekend.
“I’ll be looking to see if there is rain causing harvest delays, which I think is going to be important for the basis levels,” Anne Frick, an oilseed analyst with Prudential Bache Commodities said, referring to cash market bids by processors and exporters struggling with a 32-year low in U.S. soy stocks. “The question now is getting the crop into usage channels,” Frick said. “Rainfall is the key factor to watch for (this) week.”
U.S. cash markets — always volatile before the harvest replenishes stockpiles — reacted violently to harvest delays on Friday, as cash basis bids shot up as much as 55 cents at key Midwest soybean processing plants.
The corn market, which has nothing like the current supply tightness in soybeans, is still on a hair-trigger due to fears of a killing frost and weather delays or damage at harvest. Last week, corn looked set for a test of contract lows near $3 a bushel as price charts appeared weak. But prices shot up on Tuesday with a frost threat and that nervousness remains.
Also in the spotlight this week will be USDA’s quarterly grain stocks report and annual small-grains summary on Wednesday, which will include USDA’s 2009 wheat harvest data. On average, analysts expect the Sept. 1 stocks report to show bigger corn and wheat supplies than a year go amid a slowdown in demand while soy stocks remain extremely tight.
“Typically the stocks report isn’t a big mover or shaker,” said Don Roose, an analyst with U.S. Commodities in West Des Moines, Iowa. “More important is going to be that October report because we usually have an adjustment on acres for corn and beans.”
Last week, the benchmark CBOT November soybean contract <SX9> fell 1.5 percent to $9.26 a bushel. December CBOT corn <CZ9> ended 5 percent higher at $3.34 while December CBOT wheat <WZ9> fell 1.5 percent to $4.49-3/4.
Photo: Northern Illinois soybean field taken Sept. 19 by Christine Stebbins