This is the SFN Market Report with Brooks Schaffer of Palmetto Grain. Reach him at brooks@palmettograin.com or 843-540-4540.
On Monday, the grain market bulls were able to drive market direction after last week’s failure. The bullish news was some big export sales announced. China continues to buy U.S. commodities, with almost daily soybean sales announced. On Monday, we got updated condition ratings showing the toll that the hot, dry weather has taken on the U.S. corn and bean crops. Corn conditions dropped 2 points from last week to 61% good or excellent vs. 63% expected. That is well below last year’s 73% and also now below the five- and 10-year averages. The crop has been hurt, but the market debate is by how much. StoneX came out with its yield estimate at 184.8 for corn, which was higher than USDA’s trend estimate of 183.0. Soybean conditions also dropped, but not as much, only down 1 point from last week to 63% good or excellent. That is also not as much below last year’s rating of 69% and right at the 10-year average. StoneX’s yield estimate for beans came in at 53.0, which is the same as USDA’s trend estimate.
After Monday’s bright spot, the market struggled to maintain any bullish momentum despite near-daily additional export sales. Weakness came from rain falling in the Midwest this week. Parts of Iowa that missed out on rains last week picked up some showers this week. In addition to the rains that fell this week, the long-term forecast is also looking less threatening, with more precipitation and cooler temperatures in the next two weeks. The corn crop is past pollination but still has a few weeks of grain fill left. The soybean crop is in prime reproductive growth in August, so the less threatening weather forecasts have brought significant selling to the soybeans. There is still a lot of weather left to trade, so the volatility will continue for a while yet.
The market will continue to trade weather forecasts and watch for continued Chinese purchases. If the weather turns even a little, the market is going to need to price in all the additional Chinese demand. We will continue to get private estimates of yield leading up to USDA’s official estimates that come out this Wednesday, Aug. 12, at noon. This will be USDA’s first update to U.S. corn and bean yields. The agency will use actual field measurements as well as satellite data and surveys. We may also get an update to acreage using FSA data. USDA has been making acreage adjustments earlier in the year than in the past. The Pro Farmer Crop Tour will run Aug. 17 through 20 and will also be closely watched for signs of the crop size.
There are no fewer geopolitical risks in the world right now. Ukraine and Russia continue to hit each other’s energy and grain infrastructure and will have long-term implications that have not been priced into the market yet. There is a little of the “boy who cried wolf” syndrome when it comes to headlines from that war. Hostilities may be declining between the U.S. and Iran, but who knows anymore.