Wednesday, October 4, 2023

Today’s Grain Market Update

by Joe Lackman

DTN reports:

Following Tuesday’s risk-off selling, outside markets were generally quieter on Wednesday. Among grain and oilseed prices, corn and soybeans were quietly mixed, while wheat prices erased Tuesday’s unexpected gains.


December KC wheat closed down 16 3/4 cents at $6.66 1/2, another bearish day that has seen many over the past 15 months and more than its share since hitting a peak of $9.36 on July 25. Tuesday’s reported export sale of 8.1 mb of SRW wheat to China was an encouraging sign for U.S. wheat prices that have been largely ignored by the export market for a long time, but it will take more than that to shake off traders’ bearish sentiment. Even so, it was also encouraging how wheat prices closed higher on Tuesday, a day when the U.S. Dollar Index made a 2023 high and the stock market was selling off sharply. Despite Wednesday’s lower close, December KC wheat is holding a small gain in October and a possible sign of support is Friday’s low of $6.62.

The main bearish influence on wheat prices has been Russia’s ability to dominate export markets with cheap prices, aided by another large harvest in 2023. A tweet from Ukraine’s Grain Association showed grain and oilseed exports at roughly half of last year’s level in September, but Ukraine is working to improve that. Several media sources reported 10 ships were getting ready to leave Ukrainian ports and another 12 were ready to come in, staying close to Romania’s coast. While the widespread availability of cheap wheat is weighing on prices, one bullish difference from last year is Australia’s dry weather pattern, related to the presence of El Nino. USDA is currently estimating a 27% smaller crop in Australia in 2023-24 and further reductions may be on the way.

Here in the U.S., central Kansas received a half-inch to one inch of rain overnight and heavier amounts are expected in Oklahoma, Texas and Arkansas later Wednesday. Winter wheat planting progress is on pace and, while the southwestern Plains could use more rain, early conditions are better than they were a year ago. Early in the fourth quarter of 2023, the trends for December contracts remain down for all three U.S. wheats as prices search for support near their lowest levels in two years or more. DTN’s National HRW index closed at $6.08 Monday. DTN’s National HRS index closed at $6.43.



It was difficult to tell if Tuesday’s broad-based selling in the markets was influenced more by the Labor Department’s report of higher-than-expected job openings or by the new job opening for the U.S. Speaker of the House in Washington, D.C. December corn ended down 1 1/2 cents at $4.86 Wednesday, keeping a low profile during harvest and ahead of USDA’s October 12 WASDE report, a report historically known for being able to dial in on corn’s production estimate, helped by both producer surveys during early harvest and by field data. Wednesday’s radar showed scattered rains in Missouri and Arkansas with heavier amounts expected later in the day for Oklahoma, Texas and Arkansas.

Otherwise, the Corn Belt remains mostly favorable for harvest conditions for the next two weeks with only brief interruptions. One concern this weekend will be chances for sub-freezing temperatures in the Northern Plains hurting immature crops, mostly in Wisconsin and Michigan. After the weekend, the western and central Plains are expecting above-normal temperatures the following week.

On the demand side, corn export commitments are down 3% from last year’s low pace early in 2023-24 and low water levels on the Mississippi River are restricting barge traffic again this fall. Thankfully, much of the early interest in corn has come from Mexico, which can receive corn by rail. Earlier Wednesday, USDA said 7.74 million bushels (mb) of corn were sold for export to Mexico, 4.3 mb for 2023-24 and 3.44 mb for 2024-25.

The U.S. Energy Department (DOE) said ethanol production was unchanged at 1.009 million barrels per day last week, starting the new corn season with ethanol production running 9% higher than a year ago. Earlier this week, USDA estimated corn’s processing value at ethanol plants at $8.40 a bushel in Iowa, a generous margin above the cost of corn. So far, the trend for December corn remains down, but prices are holding support and this year’s crop size remains questionable. DTN’s National Corn Index was priced at $4.58 Tuesday evening, 29 cents below the December futures.

In outside markets, the DOE said crude oil supplies fell 2.2 million barrels to 414.1 million barrels, the third lowest in 10 years. Gasoline supplies, however, are up over 12 million barrels since early September, a significant jump. November crude oil was trading down $4.57 Wednesday afternoon, taking some pressure off the case for higher interest rates.