Grain prices remain in the doldrums, with prices losing more ground in the past week. Corn is now near its worst level in Chicago in 2 months, while soybeans trade at a 1 ½ month low. This isn’t unusual seasonally, as the US nears the end of harvest.

Corn is now 76 percent harvested, up 10 percent in the past week, but still behind the average pace of 92 percent. Soybeans are 91 percent in bins, up 6 from last week. Usually, by now 95 percent are off.

The Ontario corn and soybean harvests are further behind than that in most of the US. Corn is drying down at a slow rate, which isn’t unusual for this time of year. The recent wet weather and damp forecasts obviously won’t help that situation either.

China has resumed poultry imports again from the US. The week before, they announced they were going to increase meat imports from Canada also. They need more meat protein as they deal with the African Swine Fever that has decimated their hog numbers.

Despite these announcements, US livestock futures weakened. Cheap grain prices throughout the world are giving incentives for producers to increase their herds. Eventually, this will increase feed demand, but it is a slow process.

South America is expected to see regular rainfall over the next week or two. This is also contributing to the lower prices in Chicago. Some areas in the south are dry. December and January weather will determine their crop sizes.

US exports of grain have been poor lately, due to the ongoing trade war and stiff competition from other sellers, such as Russia. However, international prices are firming, which should allow the US to get back some of the customers they lost.

Outside markets also remain quiet for the most part. US stocks again traded at new record highs.  There seems to be some disconnect between main street and Wall Street. Other than employment, most economic indicators aren’t firing on all cylinders.

With interest rates still near record lows, investors keep putting more dollars into stock markets. The major US stock indices are up over 20 percent again in 2019. Because the trend has been up since the recession low in 2009, the rally is long in the tooth by historical standards.

As in all markets, though, the trend is your friend.

Grain prices were mixed over the past week, and remain rangebound. The biggest news was the USDA report on November 8, and there wasn’t enough there to move markets decisively.

The corn yield was lowered 1.4 bu/acre from the October report to 167 bu. Usage was lowered in every category for a total 100 million bu., which pretty much wiped out the lower production. The carry out (CO) was pegged at 1.91 billion bu, compared to 2.114 for the 2018/19 crop.

The soybean yield was left unchanged at 46.9 bu/ac. Traders had expected a small reduction. Crush was dropped a minor 15 million bu, so the CO increased the same amount from the Oct estimate to 475 million bu.  That is still a nice drop from last year’s 913 million., however.

Wheat fundamentals were tweaked only marginally. The final CO is now expected to be 1.014 billion bu, versus 1.043 predicted last month. The previous crop year CO was 1.08 billion., so the CO is hanging in at just over 1 billion bu.

Brazil weather has improved, with more rain in most areas except the south. It’s too early to kill this crop, but traders’ attention will divert to South American weather over the next few weeks.

US basis levels are firm, with the eastern grain belt trading at a huge premium to the western belt, where supplies are more plentiful. The strength in the former is helping Ontario basis levels trade at higher levels than normal for this time of year.

China is resuming pork and beef imports from Canada, despite a very poor trading relationship since we arrested the Huawei executive for extradition to the US. It is likely more because they need the meat protein than better trade relations.

The roller coaster China/US trade news continues. It’s positive one day and negative the next. With Trump impeachment public hearings starting tomorrow, it is likely China will stall for longer, hoping that he does lose his job. 

Winter conditions are hitting most of the Us and Canada earlier than normal. This will slow harvest activity further. The 8 to 14 day forecasts show a warming trend, and below normal precipitation, however.

There’re still a lot of soybeans out in field, and very little corn off. Hopefully, the better forecast will be right. 2019 has been stressful enough all year for most farmers. A bit of Indian summer would sure be appreciated.

Soybeans and wheat were a bit firmer over the past week, while corn weakened. There was little in the news to create excitement or disappointment. Large speculator buying was the main impetus for the soybean rally.

In the latest week, they bought another 5500 contracts, to be long 72,300. That is their largest long position since June 2018. Large specs remain short the corn and wheat markets

Harvest is proceeding, and now 52 percent of the corn has been harvested, while 75 percent of the soybeans are in bins. This is still behind the 75 and 87 percent respectively that is normal for this time of year.

October marked the 15th straight month in which precipitation was greater than the long-term average in the Midwest. This is thought to be a record. This is obviously OK during the growing season but is not ideal during planting or harvest.

Ontario harvest progress remains slow. There’s still a lot of soybeans out in fields and corn combining has only just begun in a few areas. The colder temperatures in the forecast could actually be beneficial, especially in the wetter areas.

South America is expected to see normal to above rainfall for the next 2 weeks. This will alleviate any concerns about it being too dry to plant. The best hope for a significant rally in grains would be from dry weather in the southern hemisphere.

The other short-term fundamental bit of news will come out on November 8, when the USDA releases its monthly demand/supply report. Not a lot of change in yield is expected compared to the October version. Corn usage could be lowered, however.

Nothing concrete happened with the trade war. Again, it was all rumours and speculation. However, China has been a much larger buyer of soybeans from the US over the past 6 weeks. China is usually a buyer from US sources at harvest time.

Last week, the US Federal Reserve dropped its short-term interest rate 25 basis points, while the Bank of Canada kept our rates steady. Logic says this should have supported our dollar, but it didn’t. Canada now has the highest interest rates in the G7.

Prices were lower over the past week, led by soybeans. Often the last part of harvest can cause price weakness. Slow corn exports and ethanol grind aren’t helping that market either.

US corn is 41 percent in the bin. Normally it is 61 by now. Soybean harvest is also lagging at 62 percent, 16 percent behind the average pace.

October has been uneventful, pricewise. Corn has been confined to a 20-cent range for the month. Soybeans have had a 35-cent range, while wheat has traded between $4.85 and 5.35.

Ontario basis levels are as dormant as futures, even though our dollar rose a cent and a half since early in the month. Strong US basis values are supporting our basis here, as US grain companies bid up for the smaller crops.

Large speculators don’t hold any extreme positions in the grains. They are short corn (32,900 contracts) and wheat (12,300 contracts). They are long a relatively small 35,700 soybean contracts.

Soybean harvesting in Ontario is wrapping up. Yields are highly variable, but overall are expected to be less than the past 2 years. There will be very little corn off before November starts, with more rain in the short-term forecast.

The China/US trade war is still very much in the news. Supposedly, Phase 1 is to be signed Nov 17, but don’t hold your breath on that one. There have far too many false alarms already, and what exactly is in Phase 1?

South America is getting more rains, which will help with their soybean planting. Periodic rains later are more critical later when plants are in their vegetative and reproductive stages, as their soils tent to be course.

There wasn’t much movement in other markets either. It’s getting tougher and tougher to write about markets when, so little is happening. Perhaps it’s just the calm before the storm?

Grain prices were mixed over the past week. Harvest pressure was countered by better news on the China/US trade front.

US corn is 30% harvested. A year ago, and the average for Oct. 20 is 48%. Some think the recent snowstorm in the Northern Plains (and Canadian prairies) may reduce their corn crop by 200-300 million bushels.

Soybean harvest is 46% done. Usually, 64% is off by now, but US farmers aren’t far behind last year’s 51% in the bin. Up to 40 million bushels of soybeans may also have been lost in those storms.

The ebb and flow in the trade talks continue. The most recent development is that China will allow its importers to purchase 10 min mt of soybeans from the US without tariffs.

That is a substantial quantity, but the timeframe wasn’t specified. Perhaps that’s why prices gave back early gains.  It may well depend on how well the South American (SAM) crop is developing.

Planting progress is picking up there, as moisture levels in many areas have increased. Soybean acres are likely to increase from last year also at the expense of corn, as freight remains a big expense for Brazil farmers.

With US harvest nearing half done, traders will increasingly focus on South America growing conditions. USDA’s soybean carry out estimates have come down sharply, making SAM output more critical.

Technically, November soybean futures traded to their best level in 4 months. The $9.40 to 9.45 level resistance still hasn’t been broken, however. Futures are up $0.94 since Sept. 9, a very nice gift for farmers at harvest time.

The weekly and monthly continuation charts look even more bullish, trading at their highest since June 2018. This may cause the speculators to get out of their short positions and be price supportive. However, taking some risk off the table here may still make “cents”?

The US dollar index was weaker again, helping the Canadian dollar and other currencies. Gold and crude oil also benefitted. Trump keeps tweeting he would like a lower US dollar and interest rates to help spur their economy.

Canada returned Justin Trudeau to a second term, although only a minority this time. Rural Canada is primarily blue, while the large cities went mainly red. Rural issues weren’t even discussed during the campaign.

Obviously urban people have different priorities and expectations compared to their rural counterparts, at least politically. Unfortunately, the latter group are seriously outnumbered.

Corn lost ground over the past week, while soybeans and wheat were a bit firmer. These changes can be tied directly to the monthly USDA demand/supply report that was released on Oct 10.

The US corn yield estimate was raised.2 bushels/acre compared to the Sept. report, to 168.4. Traders had expected a lower yield. They also lowered projected 2019/20 usage by 90 million bushels.

The net result is a projected carry out (CO) of 1.929 billion bushels, compared to 2.114 billion for the crop year just ended. That is still nearly a 9% drop, bushels traders had expected a much lower CO of 1.784 billion., so the report was considered negative.

The soybean yield was lowered 1 bushel/acre to 46.9, which is well below last year’s 50.6. Adding in the drop in old crop stocks reported on September 30, the CO was lowered 180 million bushels to 460 million.  In USDA’s June report, they reported the CO would be 1.045 billion.

This continues the pattern where USDA seriously overestimates the soybean carryout all year. You would think if you error in one direction consistently, you would adjust for those miscalculations, but that doesn’t seem to be the case.

US wheat ending stocks remain stubbornly stuck at over 1 billion bushels Unfortunately, that’s a big number. The US is becoming a smaller and smaller factor in world wheat fundamentals, as its acres are in a long-term downtrend.

The 15-month US/China trade war continues. Last Friday, it was reported phase 1 of 3 would be signed shortly. It supposedly included large purchases of US ag products by China. Now they’re saying that may not be the case…again.

Illinois passed new dicamba laws for spraying on soybeans, as they had over 900 injury cases this past summer. Dicamba now can’t be sprayed past June 20. In 2019, that date was July 15. They also can’t spray it if the temperature is over 85 degrees Fahrenheit. 

Livestock prices rose sharply in the past week, especially hogs. However, that is just recovering some of their recent losses. Asian importing of meat products will be with us for the foreseeable future, which will be supportive.

The US dollar index was weaker, which was likely the main reason our dollar gained this week, causing a small drop in Ontario basis values. Basis values in US terms are higher than normal, as elevators bid up for the smaller North American crops to fill their storage space.

Grain prices firmed marginally over the past week, adding to the gains that were made after the surprising USDA stocks report from September 30. Traders are still focused on the trade war and the weather, which will influence final yields.

High-level trade negotiations are going on now, but expectations for an agreement are dwindling. Some think the impeachment rhetoric will impede the process as China may take more of a wait and see approach. As if this hasn’t gone on long enough already!

US corn is 58% mature as of October 6. Normally it is 85% by this date. Less than 40% is mature in the Northern Plains. Frost and snow are likely there this coming weekend. This will affect the quality and quantity.

Generally, yield reports in the US are more below expectations in soybeans than in corn. Both will be below the past two years. This coincides with the weekly crop condition reports which showed good and excellent crop ratings well below normal all year.

Much of Ontario has an open window for soybean harvest this week, which will give everyone a better handle on yield. Variability, depending on rainfall, will be extreme. Most corn is still far from maturity. The corn looks vom-free, which is a blessing, but test weights could affect grades.

USDA will release its monthly demand/supply and carry out estimates on October 10. Another shocker shouldn’t surprise anyone. Apparently, they will also update the prevent plant acres, adding even more uncertainty.

The Canadian dollar remains rangebound. So far in 2019, it has been confined to a 3 cent range. Local basis levels are higher than normal, however, following the lead from the US. Central Illinois corn harvest basis is at its best level in 5 years.

Bond markets remain firm, as economic growth nearly everywhere in the world is slowing. Trump is blaming the Federal Reserve for the US slowdown, as the US interest rates are amongst the highest in the developed world.

This is keeping the US dollar firm. Plus, the US dollar is still considered the safe-haven currency in the world when there’s fear or uncertainty. Proof of this was in 2008. The US banking crisis caused the worldwide recession, but the US dollar still rallied sharply.

Grain prices firmed over the past week. Most of the gain was after USDA released its quarterly grain stocks report on Mon Sept. 30.  For corn and soybeans, these are the final carry outs (CO) for the 2018/19 crop year, which ended Sept. 1.

Last year’s final US corn CO was lowered to 2.114 bln bu.  In their monthly demand/supply report from Sept 12, they said it would be 2.445 bln., so suddenly the US “lost” 331 mln bu. That’s not far from the 345 mln bu that Ontario produced last year!

The final US soybean CO was lowered to 913 mln bu. That’s still a new record, but 92 mln bu less than they reported on Sept 12, and 68 mln bu less than traders thought. This was all because USDA lowered the size of last year’s crop by a significant 116 mln bu.

One thing you have to say about USDA is that they are consistently inconsistent. That makes it impossible to second guess any of their reports. The trade and the markets still, however, react to what to whatever they report.

Soybeans took out the Sept. high and closed at their best level since July 19. The large speculators were leaning the wrong way, which added fuel to the fire. China is buying more US soybeans, non-tariff, which is also helping.

As of Sept 29, 11 percent of US corn and 7 percent of US soybeans were harvested. Normally, they are 19 and 20 percent off by that date. Overall, corn yields are meeting expectations, but soybean yields are disappointing.

A few soybean fields in Ontario have been cut, with huge variability in yields. Most of Ontario planted late due to a wet spring. In the areas that missed the rains in July and August, yields are disappointing. Hopefully, we will again have an extended fall to allow our corn crop to mature.

South America (SAM) remains drier than normal, especially Argentina. Crop problems there would cause China, and other importers, to source more from the US. The supplies in SAM are down, as China has been buying most of their soybeans from there, until just recently.

The US dollar index traded at its highest level since May 2017. A strong US dollar is usually negative for commodities and perhaps helps to explain the weakness in crude oil and gold this week. The fact grains gained is another sign that maybe grains have seen their harvest low.

Prices were mixed compared to a week ago, despite warm weather the crops need to reach maturity. China buying more soybeans also helped. When prices are depressed, early harvest lows are not uncommon.

US crop ratings are still amongst the worst in 10 years, and crops remain behind in development. Corn is only 29 percent mature; normally it is 57 percent now. Only 34 percent of US soybeans are dropping leaves, usually it is 59 percent by now.

Weather forecasts show no threat of frost over the next 2 weeks, except maybe in the extreme Northern Plains, and Western Canada. It is also very wet in those areas, preventing farmers from harvesting their spring wheat, barley and canola. This is also affecting quality.

Hard red spring wheat futures, which trade in Minneapolis, have shot up 50 cents per bushel since early September because of this. Unfortunately, this is having little affect on Chicago wheat futures, as that is soft red wheat, which has a different use.

China has bought another 10 cargoes of US soybeans this week, without tariffs. Was this because of necessity, or was this a goodwill gesture heading into critical trade talks scheduled for early October? Either way, demand is demand.

African swine fever (ASF) is still very much a problem. It has also hit South Korea, who produce 20 million hogs per year. Apparently in China, ASF is occurring in areas where they are trying to rebuild their herds. This story will be with us for longer.

The large speculative funds were a main contributor to the short-lived rally in May and June. They have been heavy sellers in corn for nine consecutive weeks and are short 170,000 contracts now. This is still well short of the record 320,000 contracts they were short when they started buying last May.

Politics in Canada is dominating the media with the election less than four weeks away. Promises by the various parties are flying almost daily. Despite all the rural ridings in Ontario and Canada, agriculture isn’t even part of the discussion.

Farmers today make up only about 1.7 percent of the population. This is likely why they are being ignored. However, your votes can make a difference as to which party forms the next government. If you don’t vote, you have no reason to complain about what happens politically.

Prices were firmer over the past week. China/US trade talks, once again, appear to be progressing. China did buy US soybeans without tariffs for the first time in over a year, and traders expect they will likely buy more shortly.

The highly anticipated USDA report on Sept. 12 was mostly disappointing to bullish traders. They left corn acres at 90 million and soybeans at 76.7. Apparently, they will update acres in the Oct. 10 report.

USDA did lower the corn yield 1.3 bu/ac., but that was less of a reduction than was expected. The old crop corn carryout (CO) was raised 85 mln bu. on lower demand. New crop demand was also lowered, resulting in a CO of 2.190 bln bu, also above expectations.

The soybean yield was lowered .6 bu/ac to 47.9. Traders thought it would be 47.2. The old crop CO was lowered 65 mln bu., but at 1.005 bln., will still easily be a new record. The new crop CO was dropped by 115 mln bu to 640 mln., which is still a large number.

The recent weather and the forecasts will likely add bushels to the spring planted crops in North America. Temperatures are warmer than normal which will also help the crops reach maturity and keep any frost threats out of the picture.

US crop ratings were mostly unchanged, but the US corn and soybean crops both have 13 percent less in the good and excellent categories compared to a year ago. 68 percent of US corn has dented; last year it was 87. Five percent of US soybeans haven’t started podding yet.

The Argentine peso has dropped sharply in the past 3 months. Producers there are not selling their crops, as it’s better to hold the hard asset than to turn it into a depreciating currency. Argentina is the largest soymeal exporter in the world.

Crude oil had one of its largest daily gains ever yesterday, rising over $7.00 per barrel or 13 percent. This should support commodities in general, including grains. The attacks on Saudi oil facilities highlights the fragility that still exists in the Middle East.

The Canadian dollar barely reacted to the oil price surge. This is a sign of underlying weakness, in my opinion. The US is expected to drop their interest rates on Sept. 17, which should also be supportive to our dollar.

Ontario basis levels have been rising, especially in corn and wheat. Chicago values may also be turning the corner, as markets firmed after the USDA crop report, even though it wasn’t bullish. Farmers need and deserve some better prices.

Always remember that listening to me can be hazardous to your wealth!

Frank Backx