Seeking Alpha

Grain Prices To Hold Steady, Trade Within A Range After A Neutral Inspections Report

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Includes: CORN, SOYB, WEAT
by: Andrei Evbuoma
Andrei Evbuoma
Commodities, energy, oil & gas, research analyst
Summary

Corn, wheat, and soybeans all come in line with trade expectations in latest inspection report.

63% or some 831k tons of beans shipped to China.

Corn harvest at 92% with North Dakota (43%) the state lagging behind the most.

Weather pattern over next couple of weeks will overall be mild with precipitation levels near normal over the grain belt.

Investment Thesis

Expect grains to trade within a range over the next week after a neutral export inspection report.

Grain futures close Monday mixed after a neutral USDA inspection report

On Monday, the U.S. March corn futures finished up 0.03% to $3.7588, with the U.S. January soybean futures up 0.93% to $8.9725 and the U.S. March wheat futures finishing lower 0.21% to $5.22880. For the less-volatile, un-leveraged Teucrium ETF grain products, the Teucrium Corn ETF (CORN) finished down on Monday 0.14% ($0.02) to $14.55, with the Teucrium Soybean Fund (SOYB) up 0.76% ($0.11) to $14.87 and the Teucrium Wheat Fund (WEAT) down 0.36% ($0.02) to $5.63.

Figure 1 below is a price trend chart of the front-month March futures contract for corn over the past week.

Source: Investing.com

Figure 2 below is a price trend chart of the front-month January futures contract for soybeans over the past week.

Source: Investing.com

Figure 3 below is a price trend chart of the front-month March futures contract for wheat over the past week.

Source: Investing.com

On Monday, the March Chicago Soft Red Winter Wheat (SRW) futures were seen down 1.4 cents to $5.230, with March Kansas City Hard Red Winter Wheat (HRW) futures down 4.2 cents to $4.266. MGEX's Hard Red Spring Wheat (HRSW) December contract was unchanged at $4.970. Further down the strip, the March contract was up $0.012 to $5.132.

Figure 4 below is a price trend chart of the front-month March futures contract for spring wheat.

Source: MGEX

Monday's USDA export inspection report seen as neutral as corn, wheat, and soybeans all come within trader expectations

Monday's export inspection report showed corn from the week ending December 5 at 481k metric tonnes. This came in more than last week's mark of 440k metric tonnes and within traders' range of 400k-600k metric tonnes. Year-over-year shipments are down 57%. Mexico (167k), Japan (82k), and Columbia (61k) were the main destinations.

Wheat reported 314k metric tonnes, less than last week's 335k metric tonnes, but within traders' range of 250k-450k metric tonnes. Wheat inspections included 124k metric tonnes of Hard Red Winter (HRW) and 58k metric tonnes of Hard Red Spring (HRS). Year-over-year shipments are up 18%. Mexico (61k), Thailand (55k), and Japan (55k) were the main destinations.

Soybeans came in at 1,327k metric tonnes, less than last week's 1,576k metric tonnes, but within traders' range of 800k-1,600k metric tonnes. Year-over-year shipments are up 22%. China (831k) was the main destination.

Figure 5 below is Monday's grain inspection chart for the week ending December 5, 2019.

Source: USDA

Corn harvesting at 92% on last weekly crop report of the year; More than half of North Dakota's corn hasn't been harvested

On Monday afternoon, the USDA issued its weekly crop progress report. The report showed that as of December 8, corn harvested is at 92%. That's behind both last year's 100% and the 5-year average pace of 100%. States well behind include North Dakota (43%), Michigan and Wisconsin (74%), and South Dakota (83%).

Figure 6 below is a graph comparing the years (since 1995) of corn progress in the harvested phase of development.

Source: Andrei Evbuoma

Other crops of note from Monday's report include:

  • Cotton - 89% harvested (up 6% from the prior week)
  • Sunflowers - 73% harvested (up 8% from the prior week)

Here is the link to this week's USDA's Crop Progress Report.

Mild, variable pattern over the next 10 days becomes warmer in the 10-15 day; precipitation pattern near normal across much of the grain belt/central U.S.

The weather pattern will remain quite progressive/variable, but mild overall sprinkled with punctuated periods of cold shots here and there over the next 10 days or so.

This progressive yet mild state that we'll be in over the next 10 days or so will feature an active jet stream that will mostly be in a zonal to semi-zonal configuration and at times becoming more amplified that will support the periods of cold air intrusions.

Figure 7 below is a map from the 12z ECMWF ensemble depicting the 1-6 day (December 10-15) temperature pattern.

Source: WeatherBell

Figure 8 below is a map from the 12z ECMWF ensemble depicting the 7-12 day (December 16-21) temperature pattern.

Source: WeatherBell

After that in the 10-15 day period, the pattern is then expected to turn less progressive and even warmer across a vast majority of the country. The 10-15 day period will take on that of a cool West U.S. vs. a mild Central and East U.S. type pattern.

Figure 9 below is a map from the 12z ECMWF ensemble depicting the 10-15 day (December 19-24) temperature pattern.

Source: WeatherBell

As far as precipitation, there will be multiple weak upper level disturbances that has the potential to bring light/scattered rain and/or snow chances to the northern and central U.S. Overall, we're looking at near normal precipitation across the northern and central U.S. over the next week. The eastern U.S. will be where heavier precipitation falls as a couple of storm systems bring moderate to heavy rainfall up the East Coast over the next 7 days. This will result in wetter than normal conditions for the eastern U.S. over the next week.

Figure 10 is a map from the 18z GEFS depicting a drier-than-normal pattern over a vast majority of the country (outside of the eastern U.S.) in the 1-7 day time frame (December 9-16).

Source: Tropical Tidbits

Final Trading Thoughts

Corn, soybeans, and wheat all should trade within a range over the next week after each grain came within the trade range in USDA's export inspection report.

Stay Tuned For More Updates!

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.