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

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