After a sideways week of non-eventful trade, headline traders took control to end the week. As has become a seemingly annual occurrence, China once again signed framework contracts to buy a specified volume of soybeans from the U.S. over the next two years. Initially the market had very little reaction to the announcement Thursday afternoon. However, after the Fed Chair made comments pointing to better world economic indicators and a likely interest rate hike yet this year, the “algo” traders sent the market higher on positive headline news. Accelerating the gains on Friday morning was another announced sale of soybeans to China and a stronger tone to the financial markets.
Looking ahead, the weather looks very conducive to harvest progress. Most of our trade territory should see new beans flowing steady by early next week, if it hasn’t already started. Corn harvest looks to be close behind as well. We have heard of some isolated cases of stalk integrity issues that are forcing producers to go after the corn sooner rather than later. The big question in most areas is how much impact did the diseases have yields, in both corn and soybeans. Only time will tell at this point.
Local basis has held mostly steady over the past week. Some pockets of strength have been noted in the ethanol and soy crush markets. Space constraints are likely to play a part in basis movement through the end of harvest. Basis has the potential to stay firm until available storage space is filled, after which it is likely to fall off. A sustained board rally could also pressure basis.
CHS – Rochester Grain Team
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