Higher grain prices remain cure for higher prices

Farmer selling dragged down the previous day’s gains in commodity futures

Soybeans are harvested on Nov. 8, 2019 at Hodgen Farm at Roachdale, about 50 km west of Indianapolis. Significantly lower estimates for U.S. soybean stocks spurred a single-day jump in soy futures.

It is one thing to see substantial gains in futures markets, but it’s something else to see those gains sustained. Such was the case between the Sept. 30 and Oct. 1 sessions on the Chicago Board of Trade (CBOT).

After the Sept. 30 release of the U.S. Department of Agriculture’s (USDA) reports on grain stocks and small grains as of Sept. 1, prices for soybeans, corn and wheat catapulted. The extent of the reduction of stocks wasn’t fully realized until USDA issued its report. It confirmed the U.S was going to have a reduced wheat crop in 2020 compared to 2019.

That saw Minneapolis wheat rise more than 14 U.S. cents per bushel. Chicago wheat jumped 28 U.S. cents and Kansas City wheat vaulted by almost 34 U.S. cents. This was supported by USDA declaring the 2020 wheat crop was down five per cent from the previous year, as it came in at almost 47 million tonnes.

Reductions in U.S. soybean stocks of more than 40 per cent spurred gains of more than 30 cents per bushel. Corn added to the mix as its stocks were 10 per cent lower than last year’s. December corn gained just over 14 cents a bushel.

But then came the inevitable brakes.

With such marvellous increases, farmers took to selling. Soy tried to stay in the green, but eventually settled back where it ended the previous session. Corn managed to nudge further ahead by adding another three cents, while wheat retreated.

This too brought down canola. Gains of $8-$9 per tonne were slashed in almost half. Canola couldn’t sustain itself when Chicago soyoil tumbled seven-10ths of a U.S. cent. Added to that, the Canadian dollar pushed well above 75 U.S. cents, which made canola more expensive in the export market.

Harvest pressure continues to be felt in the U.S. and across Western Canada, helping to keep prices lower.

That said, buyers need to push up the prices to entice farmers to start selling again.

And with that in mind, a new wrench was also thrown into the mix when it was announced U.S. President Donald Trump and First Lady Melania Trump were diagnosed with COVID-19. That resulted in a downturn across the markets.

About the author


Glen Hallick - MarketsFarm

Glen Hallick writes for MarketsFarm specializing in grain and commodity market reporting. He previously reported for Postmedia newspapers in southern Manitoba and the province’s Interlake region.



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