Grain prices continued to drift lower overnight after turn around Tuesday failed to produce much upside movement in prices. In outside markets, S&P futures and crude oil were off sharply on continued economic fears in China.
Weather in South America continues to show favorable growing conditions. Plenty of rain will fall in Brazil crop areas during the next two weeks, although southern Brazil may dry down for a while next week, which is a welcome change from prolonged wetness. The change to wetter conditions in center west and the far north and drier weather in far southern Brazil will be ideal. Argentina is expecting rainfall Sunday through Tuesday after net drying over the next few days. However, soil conditions in Argentina today are plenty moist and the alternating dry/wet patterns are pointing to excellent yield potentials.
In South Africa, there are more concerns mounting about the effects of the drought. A CEO of Grain SA said overnight that the corn crop in South Africa is a disaster and may lead the country to being a net importer of 5 MMT of corn this versus a net exporter of the same amount.
In corn, US export competitiveness continues to struggle as Argentina’s plummeting currency value and newly eliminated export taxes make Argentina corn extremely cheap. Current FOB export prices for US corn are $7 per MT (or 18 cents a bushel) higher than Argentina. This time last year, US corn was cheaper than Argentinean corn by $13 a MT.
World stocks fell for a fifth day on Wednesday as China fueled fears about its economy by allowing the yuan to weaken further. Traders and economists fear the yuan's depreciation may mean the world's second-biggest economy is even weaker than had been expected and that it could trigger another wave of competitive devaluations around Asia and in other key economies. The People's Bank of China surprised on Wednesday by setting the yuan's official midpoint rate at its weakest level in 4-1/2 years at 6.5314 per dollar.
Adding to the risk-off mood, crude oil prices hit new 11-year lows as the face-off between Saudi Arabia and Iran over Riyadh's execution of a Shi'ite cleric was seen extinguishing any chance of major producers cooperating to cut production. Concerns over mounting stock levels added pressure to prices. EIA data released later today is expected to show an increase in US crude inventories by 439,000 barrels according to a Reuters poll.
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