Ag Market Insights is dedicated to bringing you timely information to help you consistently get the most money for your crops. Our team painstakingly goes through mountains of information and data and distills insights into a format that you can consume in a few minutes.
In this edition:
Harvest Headlines: Relatively movement or significant events.
Market Actions: No new market triggers. An unexpected drop in projected supply or a rise in demand could prompt managed funds to cover more of their large short positions, driving prices higher. However, a sustained rally for corn, soybeans, or wheat is unlikely to occur before the harvest is completed.
Farm Stimulus: There are talks of a stimulus bill to help farmers. This is overviewed below.
One Week Wheat Technical Analysis: Wheat prices are still bearish but leveling off and dovetailing with our AI fundamental models’ predictions of prices leveling off and then slowly creeping up.
Market Overview
Grain markets closed mixed yesterday as traders weighed the impact of the Federal Reserve's recent 50 basis point rate cut. Corn and soybean prices showed slight fluctuations, while wheat experienced more significant volatility. The weather outlook and ongoing export demand also played a role in market sentiment. Meanwhile, traders are looking ahead to further economic data that could influence price direction.
Farm Stimulus Package
The U.S. farm sector, after experiencing record profits in 2022, is now facing an indefinite downturn, according to agricultural economists. At a Kansas City conference, experts highlighted a significant decline in farm income, with some calling for a new farm bill or ad hoc financial support to help struggling farmers. John Newton of Terrain emphasized the need for updated risk management tools, while USDA chief economist Seth Meyer acknowledged the cost/price squeeze impacting the sector. Despite USDA's estimate of a stronger-than-expected $140 billion net farm income for 2023, it remains well below the $182 billion peak of 2022. Crop revenue, especially for corn and soybeans, is forecast to decline, though livestock receipts are expected to rise.
The future of the downturn remains uncertain, with Meyer unable to predict its duration. He noted that tight margins are more common than the recent boom periods. Farmers, who have received significant relief since 2019 through trade war and pandemic payments, are now looking to reduce input costs such as equipment and fertilizer. However, rental costs for land are expected to remain high until at least 2026, according to Kanlaya Barr of Deere and Co. Additional government support may be included in future legislation, with some farmers pushing for a two-year ad hoc package to bolster the safety net through the 2024 and 2025 crop years.
Prices as of September 18th, 2024 – 20:00CDT
The information provided in this newsletter is for informational purposes only and should not be considered financial advice. We recommend consulting with a commodities broker and financial advisor before making any commodities decisions.
Harvest Headlines
Corn Price Events
Corn prices saw limited movement, closing slightly lower after a lackluster trading day.
Concerns over crop yields due to dry conditions in the U.S. Midwest continue to support prices.
The Federal Reserve's rate cut may support future demand but had a muted effect on immediate corn price action.
Weekly Ethanol production dropped by 2.9% from last week to 1.049 million barrels per day. This number was up 7.0% from last year. Corn used last week for the ethanol grind totaled 105.84 mb.
USDA will release weekly export sales on Thursday morning. Expectations for corn sales to range from 550,000 – 1.4 mmt. Last week’s sales were disappointing at 666,458 mt as an increase in corn prices and freight costs due to low river levels may have limited corn export sales.
Export demand remains uncertain as traders await new data from key buyers like China and Mexico.
Ethanol production levels have fluctuated, adding a layer of unpredictability to corn markets.
Brazil's corn harvest remains competitive in the global market, capping U.S. corn price potential.
Ukraine’s corn exports are increasing, putting pressure on U.S. exporters in the global market.
Soybean Price Events
Soybean prices were mostly steady but edged higher on news of demand from China.
Soybeans finished the day on a positive note after experiencing a broad trading range throughout the session. Overnight, futures climbed as much as 14 cents before losing momentum, only to rebound during the final two hours. A 50-basis-point interest rate cut by the Federal Reserve, which came shortly before the market closed and was somewhat unexpected, may have helped boost soybean prices at the close.
In South America, particularly in Brazil, conditions have been extremely dry, with major growing regions like Mato Grosso expected to remain rain-free for at least another 10 days. While the likelihood of rain increases for early October, if it fails to arrive, this could potentially support higher soybean prices.
U.S. soybean exports remain competitive despite strong Brazilian shipments.
Drier weather across the Midwest has raised concerns about yield potential for late-planted soybeans.
China's ongoing purchase activity supports bullish sentiment, but trade remains choppy.
Brazil's large soybean crop continues to compete with U.S. exports, tempering gains.
The global biodiesel market continues to impact soybean oil demand, influencing prices indirectly.
Traders are watching South American weather, as early forecasts suggest delays in planting for the next season.
Wheat Price Events
Wheat prices were more volatile, pressured by improving harvest progress in the U.S. and Russia.
This afternoon, the Federal Reserve wrapped up its FOMC meeting by announcing a 50-basis-point interest rate cut, driving the US Dollar Index to its lowest point since July 20, 2023. If this downward trend persists, it could boost US wheat exports, as a weaker dollar makes American products more competitively priced for international buyers.
Egypt's supply minister announced that the nation's wheat reserves are sufficient for at least six months, thanks to recent acquisitions of 770,000 metric tons of wheat from Russia and Bulgaria. Egypt's annual wheat consumption is about 18 million metric tons, with roughly 7.7 million metric tons allocated for subsidized bread production.
Black Sea wheat supplies continue to flow despite geopolitical tensions, capping global wheat prices.
Argentina’s wheat crop is facing dry conditions, leading to potential reductions in yield.
Higher global wheat supplies and a stronger U.S. dollar are weighing on export competitiveness.
Australia’s wheat production forecast remains strong, adding bearish pressure to the market.
Chicago soft red winter wheat futures saw some support due to technical buying after recent losses.
North African nations, including Egypt, have ramped up wheat purchases, creating pockets of demand amidst global oversupply.
Market Actions
No new major market action triggers.
Volatility continues to be problematic and is making it very difficult to make market decisions. The volatility seems as though it is likely to continue.
Our artificial intelligence (AI) models are showing to be accurate; high volatility; corn, soybean, and wheat prices gradually climbing. See models below.
Wheat – Weekly Technical Analysis
9/17/2024-20:00CDT
This analysis presents a composite analysis that we have developed to evaluate technical indicators. We have back tested this model with thousands of scenarios. The back testing has proven the model to be accurate 65.6% of the time. This is significantly better than other technical analysis techniques. This is a weekly analysis that analyzes if there are any changes in trends.
All elements being clearly bearish, it would be possible for traders to trade only short positions (for sale) on WHEAT as long as the price remains well below 631.25 USD. The sellers' bearish objective is set at 549.00 USD. A bearish break of this support would revive the bearish momentum. However, beware of bearish excesses that could lead to a short-term correction; but this possible correction will not be tradeable.
The force of this analysis is 6.3, which is pretty strong but not at level 8 or above. Wheat has been on a downward trend, but that trend seems to be leveling off. This aligns without AI fundamental models that suggest that wheat are going to be volatile but will level off and gradually increase. Keep an eye on the $549 and $631 resistance levels. Hopefully, we will push the $631 level, which could send wheat on a bullish run.
Technical analysis of WHEAT in Weekly shows a overall strongly bearish trend. 92.86% of the signals given by moving averages are bearish. The overall trend is supported by the strong bearish signals from short-term moving averages. The Central Indicators scanner does not detect any result on moving averages that would impact this trend.
On the 18 technical indicators analyzed, 5 are bullish, 7 are neutral and 6 are bearish. No additional result has been identified by Central Indicators, the scanner specialized in technical indicators.
The analysis of the price chart with Central Patterns scanners does not return any result.
No result was found by the Central Candlesticks scanner on Japanese candlesticks.
Pro Trend Lines
Extended Commentary
The grain markets experienced mixed performance yesterday as traders responded to the Federal Reserve's 50-basis-point interest rate cut. While corn and soybean prices showed only slight fluctuations, wheat experienced more significant volatility. With harvest activities underway, market participants continue to monitor weather developments, export demand, and economic factors that could influence future price movements.
Corn prices saw minimal movement, closing slightly lower amid concerns over crop yields due to ongoing dry conditions in the U.S. Midwest. The Fed’s rate cut may support future demand but did not immediately impact corn price action. Meanwhile, ethanol production fell by 2.9% from last week, adding further uncertainty to the corn market. Traders are also eyeing Thursday's USDA export sales report for clues about global demand, especially from critical buyers like China and Mexico. Unpredictable export levels, combined with competition from Brazil and Ukraine, continue to add pressure to U.S. corn prices.
Soybean prices edged higher, partly supported by news of demand from China. Overnight trading saw futures gain momentum, although they later retraced some of their gains before closing on a positive note. Dry conditions in South America, particularly in Brazil, raise concerns about future yields, potentially supporting higher prices if the dry spell persists. U.S. soybean exports remain competitive, but traders closely monitor weather patterns, China’s purchase activity, and global biodiesel market trends, indirectly influencing soybean oil demand and overall prices.
Wheat prices were more volatile, influenced by improving harvest progress in the U.S. and Russia. The recent interest rate cut by the Federal Reserve weakened the U.S. dollar, which could benefit U.S. wheat exports by making them more competitively priced in global markets. Despite some support from technical buying, global oversupply concerns and competitive pricing from other wheat-producing regions, including Russia and Australia, continue to cap price gains. Argentina's wheat crop, facing dry conditions, adds another layer of complexity to the market's outlook.
Discussions around a potential stimulus package have surfaced as the U.S. farm sector faces an indefinite downturn. Experts at a Kansas City conference highlighted the decline in farm income and the pressing need for updated risk management tools. Despite USDA's forecast of a $140 billion net farm income for 2023, crop revenues, especially for corn and soybeans, are expected to decline. Some farmers advocate for a two-year ad hoc financial support package to provide a safety net through the 2024 and 2025 crop years.
