CBOT weekly outlook: U.S. grain traders watch yields, demand

CBOT December 2019 corn with Bollinger bands, a gauge of market volatility. (Barchart)

MarketsFarm — Soybean and corn prices on the Chicago Board of Trade remain at the behest of geopolitical pressures and questionable crop yields.

Terry Reilly, a grains analyst with Futures International in Chicago, said traders are keeping a close eye on the U.S. Pro Farmer tour throughout the eastern Corn Belt region.

The tour has reported “low pod counts,” though that could be due to delayed planting.

“For both corn and beans, the crop tour is indicating the national yield may come in below the USDA’s August estimates,” Reilly said.

However, Scott Capinegro of Barrington Commodities at Barrington, Illinois, didn’t think the tour is moving the market.

“The trade is looking more at the demand side,” he said. “They don’t care about the crop; they don’t care about the yield. They just care about demand.”

Soybean demand, of course, remains a casualty of the ongoing trade war between the United States and China.

Capinegro expected soybean prices to remain stable due to carryover stocks. The only thing that would move the needle is an unexpected trade deal between the two countries.

“If it happened overnight, that would shock the market,” he said.

Corn prices have similarly been hampered by lack of demand, both domestic and international.

“Corn takes one step forward, two steps backward,” said Capinegro.

Due to recent mandates regarding renewable energy put in place by the U.S. Environmental Protection Agency (EPA), corn for ethanol demand has dropped considerably.

The U.S. is also sitting on “extremely high” ethanol stocks. Since China has ceased purchasing corn and ethanol, “it’s putting negative margins into the equation for ethanol producers,” said Reilly.

“We’re talking 100 million bushels down the road that won’t be used,” Capinegro said.

Capinegro expects corn prices to remain bearish, with no possibility of a rally until after the USDA world agriculture supply and demand estimates (WASDE) report on Sept. 12.

— Marlo Glass writes for MarketsFarm, a Glacier FarmMedia division specializing in grain and commodity market analysis and reporting.

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