Wheat Rally Continues on Hot Weather Forecasts
July 09 2020 - 3:22PM
Dow Jones News
By Kirk Maltais
--Wheat for September delivery rose 1.7% to $5.25 a bushel on
the Chicago Board of Trade Thursday, as grains traders maintained a
focus on a heatwave that could potentially damage wheat crops in
the U.S. and abroad.
--Corn for December delivery rose 0.8% to $3.57 a bushel.
--Soybeans for November delivery rose 0.5% to $9.01 1/2 a
bushel.
HIGHLIGHTS
Can't Take The Heat: The grains market continued to focus on
potential hot weather affecting major crop-growing areas, possibly
inflicting crop damage. "Back to trading a weather market. Weather
models look warmer and drier," said Terry Reilly of Futures
International. Agricultural weather firm DTN is forecasting
scattered and isolated rainfall in the Midwest and northern plains
through the weekend, with temperatures at or above normal. If
rainfall fails to appear, then hot temperatures could damage the
growing crops.
Wheat Worldview: Wheat led grains higher Thursday. Traders
fixated on the weather in both the U.S. and other wheat-growing
nations like Russia. However, how long shrinking harvest estimates
can continue remains to be seen. "It's not like we are running out
of wheat," said Charlie Sernatinger of ED&F Man Capital. "What
the market is trying to tell us is that going into a government
report, with the spring grains looking at disturbing weather, we
just have too many shorts."
Chinese Appetite: Grain export sales released by the USDA this
morning exceeded forecasts provided to The Wall Street Journal by
traders. Chinese buying boosted totals for corn and soybeans. Corn
sales for both marketing years totaled 1.01 million metric tons,
while soybean sales totaled 1.33 million tons. Chinese buying for
corn totaled 407,200 tons in the 2019/20 marketing year and 653,400
tons of soybeans across both marketing years.
INSIGHTS
Balancing Out: Grain analysts are forecasting tomorrow's WASDE
report to show that even though planted acreage of corn and
soybeans by U.S. farmers is lower than previously expected, higher
yields will keep grain production high. Analysts surveyed by The
Wall Street Journal this week say that they expect corn production
to total 15.06 billion bushels, down nearly 1 billion bushels from
the USDA's estimate last month. Meanwhile, soybean production is
expected to rise to 4.17 billion bushels from 4.13 billion bushels
in June. In both cases, crop yields forecasts are expected to be
higher, which is mitigating the decrease in planted acreage
reported by the USDA last month.
Bellies of the Beasts: The USDA's stockpile estimates for grains
could be most largely affected by how the USDA perceives the U.S.
livestock industry recovering through the rest of the year. If the
USDA sees feed grain usage rising into 2021, then stockpiles could
decline more than expected. "One key to watch will be whether USDA
reduces both old- and new-crop corn feed usage," said Arlan
Suderman of StoneX. "It's new-crop feed usage estimate is pretty
aggressive, and the stocks report adds evidence of such." Livestock
supplies have remained high through the coronavirus pandemic as
meatpacking plants work through a glut in animal supplies.
Mother Nature Rules: The focus of grains traders all this week
has been with weather in the Midwest, and the USDA's WASDE report
isn't likely to divert trader attention for too long. "Market
attention will revert back to weather unless figures are way off
expectations and even then Mother Nature is still king right now,"
said Joel Karlin of Western Milling.
AHEAD:
--The USDA will release its monthly WASDE report at noon ET
Friday.
--The CFTC releases its weekly commitment of traders report at
3:30 p.m. ET Friday.
--The USDA releases its weekly grain export inspections data at
11 a.m. ET Monday.
--The USDA releases its weekly crop progress report for the
2020/21 crop at 4 p.m. ET Monday.
Write to Kirk Maltais at kirk.maltais@wsj.com
(END) Dow Jones Newswires
July 09, 2020 16:07 ET (20:07 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.