Gauging the markets in mid-September is difficult to do, particularly with stressful heat leaving the Midwest. With harvest reports expected to trickle in soon, expect typical volatility to kick in.
The latest WASDE report from USDA was released after the time of publication, but weakness and mixed trade was the theme of expectations for strong production.
“Expectations are for strong production potential once again,” said Jack Scoville, analyst with Price Futures Group. “The crops will need rain to maintain the condition due to the lack of soil moisture from three months of drought that ended at the end of June, but the crops are not expected to see much rain if any rain at all. A return to hot and dry weather now could impact yields in a bad way.”
Better-than-expected production may be the theme for corn, but soybean production appears to be taking a hit, Scoville said.
“Ideas are that the top end of the yield potential is gone and severe damage is becoming possible in some areas,” he said.
While weather forecasts are cooling off from the highs made over Labor Day weekend, temperatures are expected to hover above typical normal ranges.
Scoville said demand has been “very low” for corn with domestic demand weakening with reduced livestock production. Soybean demand, meanwhile, is starting to become difficult to find with Brazil taking much of the demand from China.
“The U.S. is being shut out of the market for most importers,” Scoville said. “Brazilian basis levels are still low, but the U.S. is price competitive now.”
Wheat markets have also struggled with demand on the world stage as Russian production remains strong and is showing no signs of stopping. Expectations for the WASDE report said wheat demand is expected to be lowered in the U.S. with ending stocks on the rise. That would be a sign for lower overall prices.
“Demand has been poor for U.S. wheat and should remain bad,” Scoville said.
