With the last U.S. Department of Agricuture grain reports throwing significant curveballs at the grain market, all eyes are on how those numbers may be adjusted at noon today.
Randy Martinson, president of Martinson Ag Risk Management confirmed that the last Quarterly Grain Stocks estimate and the Small Grain Summary report each offered significant surprises that caught the trade off guard.
That USDA adjustment, harvest conditions, demand and economic pressures are all at work to shape grain and livestock markets in the coming week. Martinson discussed those issues during the Agweek Market Wrap on Friday, Oct. 9, with Jamie Dickerman of the Red River Farm Network.
The big question Friday was how will USDA adjust or will they adjust the grain estimates?
“You know, right now a lot are thinking that because harvest progress has been so delayed because of the wet conditions across the western Corn Belt and the eastern Corn Belt that we might not see any adjustments to yield in this, they might wait till the November-December report,” Martinson said. “So there's a lot of speculation right now, and you know, and it's USDA. I mean, it's hard to say what they're going to come with.”
Dickerman noted that the corn yield estimates are wide ranging. He wondered what they would need to be to bring movement into the marketplace. Martinson said there needs to be at least a bushel reduction for corn to move the needle in a friendly direction.
“That will offset quite a bit of the increase in supply that USDA is going to come with for the old crop,” Martinson said. “If it's less than that, then I think the market kind of just waffles around, and we are going to look at this market trading maybe a little bit lower, just because of harvest progress.”
If there is a significant cut to corn the market has a chance to rally back toward highs.
Drier weather in the last week has allowed harvest to roll across much of the Corn Belt. That progress should continue through the weekend until cool and wet weather is expected to return.
That weather has allowed many producers to harvest soybeans in the last week. Dickerman said the soybean yields have been better than expected for producers in and around the northern Plains.
Martinson agreed that yields have been strong despite drought conditions. Quality has also been good. But, he shared that quality in southern Minnesota and South Dakota has hit some rough spots with abundant moisture.
“But what's interesting is, so far, they have not been docked for that discoloration for the black beans or the purple beans, which is kind of surprising,” Martinson said. “So it'll be interesting to see as we get deeper into harvest how this is going to behave.”
Dickerman pointed out that China has not been making U.S. soybean purchases, though he indicated that the country has also been on holiday.
“But it does sound like China is now opening up, and they're going to sell some more soybeans out of their reserves,” Martinson said.
On the cattle market side if things, that market continues to swing back and forth.
Martinson listed reasons for the shifting is due to packers backing away from buying. Some of that is due to immigration issues, not being able to staff some facilities.
“So that slowed down the slaughter runs, and I think that kind of slowed down the purchasing of a lot of the packers,” Martinson said.
The other issue against beef is the condition of the economy. With one or possibly two interest rate hikes still planned for the near future, there is some extra weight on pocketbooks.
“What's interesting is that it's likely going to be really close to the Christmas holiday, which is not a time most people like to see their belts tighten down,” Martinson said of the timing of the next rate hikes.
Looking ahead, the outcome of today’s report will likely shape market movement for the coming week.
“If it turns out to be a friendly report, then I think we continue to watch where harvest progress goes and where the yields are at,” Martinson said. “And if we start seeing some discounts … because of quality issues from the southern regions, you know, if the report comes out to be a little negative, I would expect this market should see a decent sell-off. We could possibly lose, you know, 20 to 25 cents in corn. You know, probably close to 35 to 50 cents in soy.”
Seasonally, grain markets hit lows this time of year. If that’s the case, there is hope for strength to come post harvest.
(The Agweek Market Wrap is sponsored by FMNE Insurance.)