MarketsFarm — Hurricane Ida has wreaked havoc on the U.S. Gulf Coast, pressuring Chicago Board of Trade soybean and corn futures as exports face disruptions — but the market is reacting more to what’s coming next than what has already happened, an analyst says.
“I don’t know what the ramifications, if any, are for the Cargill terminal (at Reserve, La.) being shut down,” said Sean Lusk, vice-president of Walsh Commercial Hedging Services in Chicago.
“I think what we’re seeing here is some harvest pressure…I think we’re seeing a lot of long liquidation here and then what we’ll see (Sept. 10) in the next (U.S. Department of Agriculture) crop report is that they’ll see some short covering. The question is how far the market is going to drop going into that report and what is that report going to reveal?”
Late-August rains in grain-growing areas of the U.S. and seasonal pressure after harvest are two primary factors causing weakening prices, according to Lusk. Despite strong Chinese demand for U.S. soybeans, increasing corn sales and tightened crop supplies, many producers have decided to sell.
“We’re seeing a deflationary spiral here in not only beans, but meal, bean oil, corn and now wheat’s starting to turn over. That’s not good given supply shortages throughout the world,” said Lusk. “That said, I think whatever breaks we do get, longer-term, are going to be bought here, but we’ll see.”
As for the upcoming USDA report, Lusk wonders if the agency will raise its corn and soybean estimates after sharp cuts in the August report. If the estimates are raised, he said they could translate into a $1 decline per bushel in beans and a 50-cent drop per bushel in corn prices (all figures US$).
“At the end of the day, should you get those drops, I think you’ve got to buy it because I think ending stocks at best, no matter what they do to crush or demand, will still be low.”
— Adam Peleshaty reports for MarketsFarm from Stonewall, Man.