If there is one word that probably describes the grain markets heading into Wednesday, it is waiting. The market has been very quiet throughout the last several sessions, but traders have been positioning ahead of USDA’s August Crop Production and WASDE reports, and with the first survey-based yield estimates of the season arriving, there is plenty of room for the market to move once the numbers hit.
Corn has been caught in that holding pattern. September corn settled Monday at $4.3825, while December finished at $4.6175, with both contracts posting only modest losses. The market has plenty to chew on: analysts surveyed ahead of the report were looking for USDA to trim its corn yield estimate from 183 bushels per acre (bpa) in July to about 182.4 bpa. That would put production near 15.93 billion bushels, assuming harvested acreage of 87.358 million acres.
But there is another side to the corn story, and it is demand. USDA export inspections totaled 68.5 million bushels for the week ending Aug. 6, pushing marketing-year inspections to 3.11 billion bushels , which is about 25% ahead of last year and already above the pace needed to meet USDA’s current export target. That makes it increasingly difficult to argue that corn demand is anything other than a bright spot. Soybeans may have the more interesting demand story. November beans closed Monday at $11.7950, gaining a little ground as traders continued watching China. Soybean export inspections are running 18% below last year, but the current total is still slightly ahead of the seasonal pace needed to reach USDA’s target. More importantly, there are signs that China could become a bigger buyer. StoneX sources expect China could ultimately import as much as 25 million metric tons, compared with roughly 16 million metric tons built into USDA’s current new-crop projection. If that demand materializes, the soybean balance sheet could tighten faster than the market currently expects.
And then there is the weather. Recent rains have generally been helpful across much of the Corn Belt, particularly Ohio, Indiana, Iowa and Minnesota. Early scouting reports are encouraging, with good kernel fill and relatively little tip back reported in several states. Minnesota may even have record potential, while Iowa and Illinois are generally looking at trendline to slightly above-trend yields. The problem areas remain the Dakotas and parts of Nebraska, where heat and dryness have continued to chip away at yield potential.
That combination explains why the market is reluctant to get too bullish on corn and soybeans before USDA has its first real survey-based look at the crop. StoneX’s own customer survey pegged corn at 184.8 bpa and soybeans at 53.0 bpa, both close to long-term trend. In other words, the market has a lot of crop already priced in.
Wheat, meanwhile, has a little more fuel underneath it. September Kansas City hard red winter wheat settled Monday at $7.1350, barely lower on the day, while Chicago wheat edged higher. Geopolitical risk is providing some support. Continued disruption around the Black Sea is a concern because Russia and Ukraine account for more than a quarter of global wheat exports, while Ukraine is also a major corn exporter. The immediate supply pinch may not arrive until later this year, but the market is understandably reluctant to ignore those logistics risks.
Outside the grains, energy markets are adding another wrinkle. Crude oil jumped sharply Monday as hopes for a quick U.S.-Iran agreement faded, with Brent climbing to around $87 per barrel and WTI near $81. Higher energy prices can eventually filter into everything from transportation to fertilizer costs.
Once USDA gives traders a better handle on crop size, the conversation should shift toward demand, especially corn exports and Chinese soybean buying. If the crops come in near expectations, the bulls will need demand to do the heavy lifting. If USDA finds a smaller crop than expected, however, the market could have a much different conversation by the end of the week.
