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Market Report

Tuesday April 17th, 2018

May 17 corn closed down 2 ¼ at $3.80 ¼ and July 18 closed down 1 ¾ at $3.89 ¼. May soybeans closed up 4 at $10.46 and July closed up 4 at $10.57 ¼. May wheat closed up 4 at $4.66 ¼ and July 18 closed up 2 ½ at $4.81 ½. Crude oil closed up $.31 at $66.51.

Corn extended its losing streak to three and five out of the last six sessions. Futures tried to bounce back a little overnight, but failed to carry into the day amid a chronic lack of news. Fund traders pared back their net length again today, and will head into tonight net long an estimated 170,000 futures and options.

Those not occupied with their taxes saw a little back and forth between China and the U.S. China announced they were requiring a large deposit on all imports of U.S. sorghum. Given tariffs have been “built in” to the sorghum export scenario for most of 2018, the impact was not substantial on our futures markets, but sent Chinese feed ingredient markets soaring. At least today, the markets appeared to be comfortable with ideas of improved weather over the next couple of weeks stimulating some U.S. planting progress.  Northern parts will still need plenty of time to “thaw out”, but some of the southern reaches of the Belt could be itching to get into the field next week. Farmers will certainly have some catch up work to do, and the markets will want to see every bit of those 88 million acres get planted. To date, Brazil safrinha growing weather has been pretty good, but there appears to be a growing concern over the dry spot in the south. An area stretching from Mato Grosso do Sul through Sao Paulo, Parana, and neighboring areas have been drier biased since the beginning of April. The next two weeks may stay that way, implying the need for some rain into May to help pollination along.

The Soybean action was two sided today giving up small overnight gains following an absence of fresh export confirmations for a third day but firming back to close higher with support coming from meal. Fear that the larger than expected duties that were announced on sorghum overnight would ultimately flow through to the proposed soybean tariffs and this firmed the local Chinese meal market. Trade uncertainty continues to factor into our price action and that is also reflected in the low trade volumes. Weather is a key input going forward where a drier outlook for the corn belt evolves starting next week and temps warm up for the second week which will be more conducive to field work, planting progress and mindsets for the corn belt.  The more positive weather outlook factored into the weakness in corn and the strength in beans today.  The bean to corn ratio widened out to 2.57%.

For much of the session, wheat slowly gave back its gains made during the opening. Trade would not stay lower for very long, however. Prices rebounded during the final hour of the session and the markets would settle a little better across the board. The higher trade was sparked by the condition reports Monday afternoon that showed conditions across almost every important HRW wheat state deteriorating. Most northern white wheat states along with many of the SRW states saw conditions improve slightly. KC traded as much as seven cents higher overnight, but the rally may have been tempered some by the weather forecast that show rains expected into the dry areas of the HRW wheat belt Thursday through Sunday. The rains should help some of the crops in those areas, but the question going forward is how much.

Anna Kaverman

anna@mercerlandmark.com

Market Report

Monday April 16th, 2018

May 17 corn closed down 3 ¾ at $3.82 ½ and July 18 closed down 3 ½ at $3.91. May soybeans closed down 12 ¼ at $10.42 and July closed down 11 ¾ at $10.53 ¼. May wheat closed down 10 ¼ at $4.62 ¼ and July 18 closed down 10 ¼ at $4.79. Crude oil closed down $1.13 at $66.20.

The corn market picked up right where we left off Friday, finishing lower. Markets were weak overnight and maintained a defensive tone throughout the day, no doubt heavily influenced by double-digit declines in wheat. Futures have now corrected a $.10 off the most recent April 9th high. Managed Money traders were viewed net sellers of 15,000 corn today, which would leave them net long 180,000 futures and options. Grain inspections remained a bullish highlight in an otherwise quiet day for corn news. For the week ended 4/12, U.S. exporters shipped 1.5 mmt of corn, which was down from last week’s dominant 1.94 mmt tally, but above the year ago week’s 1.34 mmt.  This takes total YTD corn shipments for 17/18 to 28.0 mmt (1.1 BB) vs. 35.9 mmt (1.4 BB) at this period in 16/17.

The USDA told us what we already knew after the close. There was very little corn planting progress achieved last week. National corn planting progress was pegged at just 3% complete, which compares to 6% average and 2% last week. Only three states, Texas, North Carolina, and Tennessee registered progress above 10%. This did not seem to excite the markets too much today, likely because better weather is in the forecast beginning this weekend. There is less precip in the mix Fri-Sun, and temps are expected to warm although stay slightly below normal. In South America, harvest disruptions could occur in Argentina given a rainier outlook. Brazil could use more rain in southern growing areas, and this could be a bigger deal as we get into pollination next month. Argentina’s first crop corn is over 25% harvested, Brazil first crop corn is closing in on 80% harvested, and second crop corn has been completely planted.

The Soybean market traded slightly better in the overnight but for a second consecutive session, in the absence of fresh export sales confirmations, we were unable to hold strength and reversed lower. Weather is far from ideal but the forecasts suggest an improving trend as we head into the second half of April. Price relationships do support additional bean acres but don’t fall for the almost annual ‘we won’t get corn in the ground’ hype. Weekly soybean inspections totaled 445 mt slightly above the 430 mt trade estimate. Total shipments to date stand at 42.350 mmt vs. 48.296 mmt this time last year representing a 218 mb deficit to last year’s pace. Keep in mind the recent export activity will increase shipments over the coming months and help to narrow that gap some. In the breakdown, China was the destination for only 33 tmt. Elsewhere in the news, Argentina’s national food health and quality service is looking at regulatory requirements including genetics and sanitary protocals to help open up imports of US soybeans.

The wheat complex started the evening around a nickel lower and trade never really looked back. The funds did not seem to have any intentions on waiting to see what the condition reports this afternoon were going to say. They seemed to have just looked at the rains forecast into the dry areas of the HRW wheat belt later this week and looked at the gap lower start and said it was a time to alleviate some of its long position. Condition reports this afternoon had almost every important HRW wheat state falling. Almost all of the northern white wheat states along with most SRW states saw conditions improve slightly. It will be an important day for the wheat complex Tuesday. State by state wheat condition ratings were out this afternoon. Expectations were for conditions to be mainly unchanged from the week prior and they were. Winter wheat conditions came in at 31% G&E and 37% P&VP vs last week’s data of 30% G&E and 35% P&VP. Every HRW wheat state saw conditions fall. Spring wheat planting came in at 3% complete vs 2% last week.

Anna Kaverman

anna@mercerlandmark.com

Market Report

Friday April 13th, 2018

May 17 corn closed down 2 ½ at $3.86 ¼ and July 18 closed down 2 ¾ at $3.94 ½. May soybeans closed down 6 ½ at $10.54 ¼ and July closed down 6 ¾ at $10.65. May wheat closed down 8 ½ at $4.72 ½ and July 18 closed down 9 at $4.89 ¼. Crude oil closed up $.38 at $67.33.

FOR THE WEEK ENDED 4-13-18

CORN – Another report week, this time the release of the monthly WASDE.  The day before the report, May corn matched the previous week’s high at $3.92 ½ per bushel.  The neutral report didn’t provide a lot of price direction, but prices faded the balance of the week.  Corn was caught between a rallying soybean market and weakening wheat markets.

Results of the March WASDE report included a 50 million bushel cut to feed/residual and a 5-million-bushel reduction in FSI.  Exports were unchanged at 2.225 billion bushels as was corn for ethanol at 5.575 billion bushels.  Ending stocks for 2017/208 rose 55 million bushels to 2.182 billion bushels.  The average trade estimate was 2.196 billion bushels.  World ending stocks fell 1.39 mmt to 197.78 mmt, the smallest since 2013/2014.   The average estimate was 197 mmt. Argentina’s corn crop was estimated at 33 mmt, down 3 mmt from last month.  Brazil’s crop was cut 2.5 mmt to 92 mmt.  The BAGE and the Rosario Grain Exchange are carrying Argentina’s corn crop at 32 mmt.  Argentina’s corn harvest was estimated at 31% complete versus 21% on average.  Conab is pegging Brazil’s corn crop at 88.6 mmt. Brazil’s first corn harvest was pegged at 66% complete versus 64% last year.  The US attaché in Brazil is forecasting their corn crop at 89 mmt, well below the USDA’s 92 mmt outlook.

Weekly export sales were below the pre-report estimates at just 33.1 million bushels for old crop and 2.2 million bushels for new crop.  The sales were above the 15.3 million needed per week to hit the USDA’s 2.225-billion-bushel target.  We are just 2% behind last year’s total commitments when the USDA is projecting a 3% year on year decline in exports.  Weekly ethanol production was down 4,000 bpd to 1.034 million bpd.  Stocks were 600,000 barrels lower at 21.8 million barrels.  Margins improved 4 cents per gallon to 12 cents per gallon.

It may be safe to say we won’t have an earlier than normal planting season this year, but it’s probably too early to say we’ll have a late planting season.  The average corn planting progress for April 15th is 15% complete.  The average planting progress is 25% by April 22nd.  As of April 8th, corn planting in the US was 2% complete, spot on with the average.

OUTLOOK: Uncertain planting weather and underlying good demand likely prevented further losses in the corn market this week.  For the week, May corn fell 2 ¼ cents to $3.86 ¼, July was down 2 ½ cents at $3.94 ½, and December dropped 1 ¾ cents to $4.10 ¾ per bushel.  US planting weather will attract more attention in the coming weeks.  If we continue to be delayed, prices should stay in the upper end of the recent trading ranges. The next WASDE report will be released May 10th.

SOYBEANS – Unlike corn, soybeans shot higher to begin the week.  Gains were cut going into the weekend on profit taking and a lack of fund buying.  Strength was derived from good demand for US soybeans, fading fears of a trade war with China, and a slightly bullish WASDE report.  We have now rebounded back to pre-tariff talk price levels.  The tariff threats pushed Brazilian soybean premiums higher and ultimately made them uncompetitive.  Enter US beans as the cheapest in the world.  Argentina bought 240 tmt of new crop 2018/2019 US soybeans during the week, the first such sale since 2008/2009.  There was reportedly interest even from Brazil.  However, as the concerns eased, so did Brazilian values.

The March WASDE report showed few changes: crush was increased 10 million bushels to 1.97 billion bushels, seed and residual were each reduced 3 million bushels.  Exports were left alone at 2.065 billion bushels.  Ending stocks were up 5 million bushels to 550 million bushels.  The average trade estimate was for a 20-million-bushel increase to 575 million bushels. World ending stocks decreased 3.6 mmt to 90.8 mmt.  The average trade estimate was 90.8 mmt. Argentina’s soybean crop estimate was slashed 7 mmt to 40 mmt and Brazil’s was pumped up 2 mmt to 115 mmt.  The average trade estimates were 42.1 mmt and 115.6 mmt, respectively.

China imported 5.66 mmt of soybeans in March, up slightly from 5.42 mmt imported in February.  In the first quarter of 2018, China has imported 19.57 mmt of soybeans, up just 0.2% from the previous year.  In the first six months of the marketing year, China has imported 43.6 mmt of soybeans.  The USDA is anticipating them to import 97 mmt this year.  For them to reach that target, their monthly imports will need to be at record levels from here on out.

Weekly export sales were record large for this week at 55.5 million bushels for old crop and an impressive 35.1 million bushels for new crop.  The new crop sales were the largest for the year so far.  Old crop total commitments are only 4% behind last year when the USDA is expecting a 5% decline in year on year exports.  We need weekly sales of 6.8 million bushels to achieve the USDA’s 2.065-billion-bushel forecast.  New crop commitments are 122 million bushels versus 98 million bushels on the books last year at this point.

OUTLOOK:  Support from Argentina’s purchases of US soybeans this week helped propel prices higher.  Good demand in general was also supportive.  If we see exports begin to fade, it will weigh on prices, so continue to monitor demand. Nearby soybeans hit new highs for the recent rally this week, before pulling back slightly into the weekend.  For the week, May soybeans rallied 20 ½ cents to $10.54 ¼, July was up 20 ¼ cents at $10.65, and November gained 16 ¼ cents at $10.49 ½ per bushel.  May meal fell $3.50 to $382.80 per ton and May soyoil was down a fraction at $.3148 per pound.  Weather and demand will be the drivers next week.

Winter wheat crop conditions declined again. In the second full rating of the spring, the good+excellent category fell from 32% to 30%. This is the lowest the rating has been for this week since 1996. The wheat market is more concerned with the forecast for rains then the damage inflicted from dry and cold temps. Upcoming rain events took the wheat market down by 20 cents from the highs set on Tuesday. Only one change for the US wheat balance sheet on the WASDE report and that was a cut of 30 million bushels to the feed/residual category. World stocks were 3 million tons above the average guess, adding to a very bearish world supply scenario.

Anna Kaverman

anna@mercerlandmark.com

Market Report

Thursday April 12th, 2018

May 17 corn closed up 1 ¾ at $3.88 ¾ and July 18 closed up 1 ½ at $3.97 ¼. May soybeans closed up 13 at $10.60 ¾ and July closed up 13 at $10.71 ¾. May wheat closed down 6 ¼ at $4.81 and July 18 closed down 6 at $4.98 ¼. Crude oil closed up $.21 at $66.95.

The corn market continued its recent “bob and weave” trade, ultimately finishing a couple cents higher on the day. Overall interest was relatively light, though the final day of the Goldman Roll did plump up the volume numbers a little. Managed Money were viewed net buyers of about 5,000 corn today, which would leave them net long 160,000 combined futures and options. Export sales were slightly disappointing for a second week, though the market did not seem to care. Net new sales of 839,900 MT were very close to the prior week, but down 46% from recent weekly averages. Destinations were Japan, Vietnam, Mexico, Egypt and Saudis. Total sold and shipped now for 17/18 stands 48.2 mmt vs. 49.2 mmt in the year ago week (and USDA estimates of 56.5 mmt).

News wires were humming with Trump’s comments about year-round E-15, which in our interpretation likely refers to his administration finally revisiting the issue of an RVP waiver.  This would allow E-15 to be sold year-round and nationwide without condition. Exxon and Chevron, apparently, are the latest refiners to apply for “hardship waivers”, exempting their smallest refineries from the RFS program. At any rate, an RVP waiver merely opens the E-15 door another inch. Retailers still need to adopt it and deploy the appropriate infrastructure to dispense it.

The Soybean market extended its gains to a new 5-week high in the May contract and established a new contract high close for the November new crop. The weekly export sales report was the driver today as the USDA confirmed 2.464 mmt in combined bean sales which was well above the trade estimates. There were no daily sales announced today but the market is anticipating more sales are coming due to the recent surge in Brazilian export values making us very attractive to world buyers. How long this export interest lasts will be up to China and the US negotiators. For now, at least, this renewed trade has taken some of the downside risk away from the soybean market as the hefty 550 mb US carryout now has an outlet for better export trade.  Fund and spec length is growing.

The wheat complex has tried to fend off negative data the past couple of days, but overnight price action looked as if trade had thrown in the towel. Trade did try to bounce back once we moved into the day session, but around an hour into the day the markets started to unravel. It looked as if Chicago was going to fill in its downside gap, but as prices traded to within a couple cents of filling that gap, trade stabilized. There was nothing friendly in Tuesday morning’s crop report, and now the 6 to 10-day weather maps are showing rains for much of the HRW wheat belt. When you combine that with condition reports Monday afternoon that showed Kansas with a 3% uptick in its ratings (even though they are still the worst on record for this time of year), and a weaker Russian Ruble that hit a 15 year low Wednesday (a weaker Ruble only helps Russian wheat prices become more competitive to the rest of the World. The drought monitor this week showed no change in the areas most affected by the lack of rains across the HRW wheat belt, but that had little effect on price action today as there were just too many negative vibes around the marketplace. Yesterday, trade was able to rebound from a poor start to the day. Did not expect to see a repeat performance of that price action today.

Anna Kaverman

Anna@mercerlandmark.com

Market Report

Tuesday April 10th, 2018

May 17 corn closed down 1 ½ at $3.89 ¼ and July 18 closed down 1 ¼ at $3.97 ¾. May soybeans closed up 3 at $10.50 and July closed up 2 ¾ at $10.60 ¼. May wheat closed up 1 ¼ at $4.92 and July 18 closed up 2 ½ at $5.08 ½. Crude oil closed up $2.01 at $65.44.

“Report day” did not move the needle much in corn today.  Despite a few interesting moves, the USDA data offered no real surprises relative to trade expectations, at least in corn.  Managed Money traders were viewed close to flat on the day, as they hang with net long of 190,000 combined futures and options.

The April WASDE is rarely a market-mover, and fully lived up to its dull reputation, though the balance sheet did feature a few changes worth noting.  The USDA moved closer to private estimates on South American corn and bean crops. They trimmed Argentina corn another 3 mmt to 33 mmt (vs. 41 last year) and Brazil corn -2.5 mmt to 92 mmt (vs. 98.5 last year). With the March Quarterly Stocks data fully in mind, the USDA raised domestic (U.S.) carryout projections to 2.182 BB from 2.127 in March (and 2.350 last year). The feed and residual category took most of the brunt of the damage, and was reduced 50 MB from prior despite evidence of strong animal feed usage. Despite the U.S. bump, world corn carryout down ticked another notch to 197.8 mmt from 199.2 mmt in March (and 231 last year).  Fundamentals continue to move in the “right” direction for corn, though the report played out extremely close to expectations.

Elsewhere, export interest for U.S. corn remains active, particularly out of the usual suspects in Latin America and Asia. Ethanol margins improved again today, as the trade begins to focus more on positive seasonality and less on future export jitters. China will begin their reserve auctions in earnest Thurs-Fri, offering a large quantity of 2014 vintage supply.  Turkey is rumored to be considering reducing or eliminating grain tariffs to boost livestock fodder supplies.

Soybeans finished higher today but well off session highs as bullish news from the USDA  report and new export sales failed to keep traders from taking profits. November held up a little better than May but was unable to break through last week’s contract highs. Futures surged to double digit gains on the morning open, after USDA reported new sales, including 10.25 MB of old crop to Argentina and 9.3 MB of new crop to China and unknown destinations. The deals with Argentina were the largest in some 20 years, as the world’ largest soy product exporter tries to maintain production despite a crop that down 30% from last year. USDA slashed another 257 million bushels off its estimate today following the country’s severe drought, but added 74 million to the size of the crop in Brazil.

Still, it was the bottom line on the U.S. balance sheet that got the market’s attention. While traders braced for an increase due to weaker exports, the government held its forecast of sales steady, cutting 5 million bushels off carryout. Stronger crush helped by the Argentine drought offset lower see and residual usage. At 550 million bushels, however, carryout would still be large, which appeared to temper bulls by the close.

It was Crop report day, and typically, this early April report is non-influential for wheat. Much of the report for wheat saw only very minor changes. The surprise came from World stocks, raising them another 2.33 MMT. Came primarily from increased production in the Middle East. Meaning, there was nothing in the report that was bullish wheat. Price action reacted accordingly, with the knee-jerk reaction. But the markets quickly rebounded, meaning there were buyers looking to buy that break. It also means that these buyers probably are not trading the data from the report, but weather, and conditions here in the US.

Conditions were expected to worsen by around 1% in both G&E and P&VP, and nationally, they slipped 2% in G&E and 5% in P&VP. However, much of the slippage especially in P&VP came in two states, Montana and Oklahoma. The slippage in G&E mostly came in three states, Arkansas, Idaho and Oregon. Kansas conditions actually improved 3% in both G&E and P&VP week over week, and recently, the Kansas conditions usually has taken precedence over how the markets react. So, the initial knee-jerk reaction was a slightly higher start in HRW, and a slightly lower start in SRW because of the overall conditions, but it wasn’t long before the KC markets started to react to the Kansas conditions. Looking ahead to the rest of the week. If nothing else, today’s report reminded us that there is no shortage of wheat around the World, despite the potential problems here in the US. Technically, the market is respecting the gaps left on Monday. It will be important to continue that trend the rest of the week.

Anna Kaverman

anna@mercerlandmark.com

Market Report

Monday April 9th, 2018

May 17 corn closed up 2 ¼ at $3.90 ¾ and July 18 closed up 2 at $3.99. May soybeans closed up 13 ¼ at $10.47 and July closed up 12 ¾ at $10.57 ½. May wheat closed up 18 ½ at $4.90 ¾ and July 18 closed up 17 ½ at $5.06. Crude oil closed up $1.33 at $63.43.

Corn was nothing if not consistent today, maintaining modest gains throughout. Managed Money traders were viewed net buyers of 12,000 corn today, which would leave them net long 190,000 combined futures and options. The stand-out statistic in corn today was export loadings. The USDA inspections report found a whopping 1.937 MMT of corn were loaded for export in the week ending April 5th. This was the largest single week of corn export loadings seen in at least three years, possibly longer.  It compares to an upwardly adjusted 1.445 mmt last week and 1.212 mmt in the year ago week. This takes YTD corn shipments to 26.5 mmt versus 34.6 mmt on the books this time last year, as they play catch-up after a sluggish start to the 17/18 marketing year.

The first national crop progress report of the year was as unremarkable as expected, finding just 2% of the U.S. corn crop had been planted, which is in-line with average but slightly behind last year’s 3%. Texas carried the load at 58% complete, with North Carolina bringing up the rear at 13%. No other state topped 2% planted. The Midwest remains extremely chilly, though a temporary warm-up is expected into the weekend. 6-10 and 8-14 day maps are still below average for temp; the 6-10 day dried out, while the 8-14 day remained wet for most of the Midwest.  No doubt the markets remain somewhat concerned about a slow start to planting.  Another threat to one of the Plains wheat crop’s nine lives helped boost markets overnight.

Nothing new out of the latest “biofuel policy” meeting at the White House. The mantra “no news is good news” likely applies here, and looking at the ethanol market of the day. Tomorrow is “report day”, believe it or not. The April S&D is usually not a big market-mover. It will get some attention given potential bullish world changes, along with generally bearish quarterly stocks data which could impact domestic carryout projections.  On the world scene, AgRural projected that 60% of Brazil’s first crop corn is harvested, which was up 9% wk/wk. The more important second (safrinha) crop is in mostly good shape, though southern growing areas could get a little dry in the short run.  They left production estimates unchanged, raising first crop a touch and lowering second crop a like amount.

Soybeans gapped higher to follow through on Friday’s outside day higher as media-stoked fears of trade wars give way to the reality of increased trade.  US soybean basis at the Gulf continues to firm across the curve suggesting our newfound export interest remains in place. The USDA flashed an additional 233 mt of old crop beans sold to unknown. This takes the total over the past two sessions to 625 mt old crop and 196 mt new crop beans sold. The market sees cheap US beans relative to Brazil thanks to the trade dispute with China and this has led to value buying in the export market and providing welcomed demand where there wasn’t much just a week ago.  This doesn’t suggest we should welcome a trade war where the threatened tariffs are actually enacted but this is all part of a larger negotiation and for now at least, farmers are benefiting with stronger demand and prices for a commodity that the world needs to feed its populations even if the origin changes.

Weekly soybean inspections highlight the state of our export trade heading into the escalating trade dispute. Bean shipments fell short of modest expectations at just 374 mt compared to 579tmt last week and 858 mt this week a year ago. Year to date shipments stand at 41.893 mmt compared to 47.842 mmt this time last year. This represents a 219 MB deficit to last year’s export shipment pace. The USDA last estimated total exports trailing last year by 111 MB. This export deficit was due to a low protein US crop which is the downside of big yields and this sent China to Brazil for a greater share of purchases and who just happened to grow a then record 114 mmt crop last year.  Don’t forget that China also imposed a 1% FM requirement on US soybeans that did not apply to Brazil which can be construed as the opening shot in penalizing US beans.

It is only April the 9th so difficult to get overly concerned about planting conditions but there is a sense of growing anxiety with forecasts suggesting cold/wet conditions will keep many farmers out of the field for a while longer. If planting delays persist, it would benefit beans with additional acres at the expense of corn – but it is only April the 9th so cool your jets.

Buoyed by a strong start the night the wheat complex was able to extend its rally today. The Spring wheat market still finished the strongest, but Chicago was right behind. It was the third consecutive double digit higher close in Minneapolis and seventh consecutive higher close in Kansas City. Weather played a big role in today’s price action. The extreme cold temps across much of the HRW wheat belt came to fruition over the weekend, with readings in the upper teens as far south as the Texas panhandle. Keep in mind, in last Monday’s crop condition report, wheat progress was said to be 46% in the jointing stage in Oklahoma (with some of that wheat said to be already starting to head out) and was 11% headed in Texas. It might be too soon for the USDA to access the damage from this past weekend into the condition reports this afternoon, and therefore it may be difficult for the USDA to show deteriorating conditions across the HRW belt week over week as they were already in very poor shape. Another market mover tomorrow will be the monthly USDA supply/demand crop report. It is not a very big Crop Report for wheat, but it potentially can be for corn and soy. Analysts are forecasting 2017/18 US wheat ending stocks at 1.035 BB vs the 1.034 BB in the March report. Global 2017/18 wheat ending stocks are seen by analysts to be around 268.2 MMT vs the March report figure of 268.89 MMT.

Anna Kaverman

anna@mercerlandmark.com

Market Report

Friday April 6th, 2018

May 17 corn closed down 1 at $3.88 ½ and July 18 closed up down 1 ¼ at $3.97. May soybeans closed up 2 ½ at $10.33 ¾ and July closed up 2 ¾ at $10.44 ¾. May wheat closed up 7 ½ at $4.72 ¼ and July 18 closed up 7 ¼ at $4.88 ½. Crude oil closed down $1.44 at $62.10.

FOR THE WEEK ENDED 4-6-18

CORN – Corn followed the same path as the soybeans this week.  Corn will be affected by the proposed Chinese import tariffs, but China isn’t a major importer of US corn.  China has only imported 200 tmt and 700 tmt of US corn in the last two years.  May corn traded to a low of $3.72 and December to a low of $3.96 per bushel, neither one taking out their March lows.  The market’s attitude in corn has been to buy breaks until proven wrong, and that mentality has continued.

Other corn news this week included the EPA expanding RFS waivers for refiners.  For 2017, 25 refiners received hardship waivers.  In a typical year, 6-8 hardship waivers are granted.  There are 57 refiners that have capacity under 75,000 bpd, which is the threshold to qualify for a waiver.  Argentina’s corn harvest was 21.6% complete as of April 5th and Brazil’s first corn crop harvest at 60% complete. The BAGE left their corn estimate at 32 mmt. Weekly export sales were poor and the lowest in the last 12 weeks at just 35.4 million bushels.  We stayed at 2% behind last year’s total commitments.  The USDA is projecting year on year exports to be down 3% this year.  We need to sell 16.1 million per week to hit the USDA’s current 2.225-billion-bushel export target.

The average trade estimates for the April 10th WASDE report: corn carryout at 2.189 BB versus 2.127 billion last month. The Grain Stocks as of March 1 was a bearish number and will be incorporated into the April balance sheets.  World carryout is estimated at 197.3 mmt versus 199.2 mmt last month.  Both Argentina’s and Brazil’s corn estimates are expected to fall.  Argentina’s corn crop is estimated at 33.3 mmt versus 36 mmt last month.  Brazil’s corn crop is expected to come in at 91.6 mmt versus 94.5 mmt last month.

SOYBEANS – We’ll start with beans this week since most of the recent news has a more direct effect on this market versus corn.  It’s bad enough we try to out-trade Mother Nature and all her forecasters, but now we’re having to trade politics front and center.  After a “shocking” bullish Prospective Planting report on March 29th, we came back from the 3-day weekend to the calm before the storm.  Gains were extended early in the week, before China announced their list of proposed US goods on which they would put a 25% import tax.  The list of 106 products included soybeans, corn, sorghum, airplanes, automobiles, to name a few.  The market responded with a plunge lower at mid-week.  May soybeans traded as low as $9.83 ½ per bushel and November soybeans to $9.97 ¾ per bushel, their lowest levels in both since early February.

A Purdue University study commissioned by the US Soybean Export Council said US exports to China could fall by 33% with a 10% tariff and 71% with a 30% tariff.  China accounts for 60% of US soybean exports. Prices rebounded the following day as the market absorbed the news and the fact that a comment period on the proposed tariffs is needed to take place in the US before implementation.  China indicated they would also wait to set an effective date for their new import tariffs until the US did.  Brazil’s soybean premiums skyrocketed in response to the trade war posturing between the US and China.  Brazil would benefit from the conflict with higher soybean demand from China.  US soybeans became the cheapest source in the world on the fluctuations.  Traditional South American customers may be pushed to the US by both price and execution

Then the next shoe dropped.  President Trump asked US trade advisors to consider $100 billion in additional tariffs on Chinese goods.  The markets again plummeted, but not by as much as at mid-week.  Prices clawed their way off the overnight lows as the day progressed on Friday and managed to close in the black.   In the end, it’s believed South America can’t supply all the soybeans China will need over the next twelve months.  But that doesn’t mean they won’t try.  Customers that would usually buy from South America may be inclined to take advantage of cheaper US beans.  And that’s what we saw.  At the end of the week, the USDA announced the sale of 65 mmt of beans to Mexico for both old and new crop, plus 327 tmt of old crop beans sold to unknown and 131 tmt of new crop beans to unknown.  For the week, a total of 522 tmt of old crop beans and 520.3 tmt of new crop beans had been reported in the USDA’s daily report.  Also interesting was trade talk that US soybeans work on paper into Argentina.  The US buys South American soybeans periodically to fill slots, so why not the other way around?

The market was whipsawed by tariff threats this week and anything else was pushed aside.  Other news included the BAGE cutting their Argentine soybean production estimate by 1.5 mmt to 38 mmt.    The USDA’s last number was 47 mmt, but it’s expected it will be cut on the next report.  Argentina’s soybean harvest was put at 9% complete and Brazil’s at 77% complete.  The average trade estimates for the April 10th WASDE report:  US ending soybean stocks at 574 million bushels versus 555 million last month.  World soybean ending stocks are pegged at 93 mmt versus 94.40 mmt last month.  Argentina’s bean crop is estimated at 42.1 mmt.  Brazil’s soybean crop is estimated at 115.6 mmt versus 113 mmt last month.

Weekly export sales were excellent and the biggest in the last 11 weeks at 41.6 million bushels.  Total commitments at 7% behind last year.  The USDA is calling for a 5% decline in year to year exports.  We need to average 9 million bushels of sales per week to achieve the USDA’s current 2.065-billion-bushel forecast. The February NASS Crush Report indicated 165 million soybeans were crushed, a record for the month.  Soyoil stocks were larger than expected at 2.4 billion pounds.

OUTLOOK:  For the week, May soybeans were down 11 cents at $10.33 ¾, July was 10 ¾ cents lower at $10.44 ¾, and November soybeans fell 14 ½ cents to $10.33 ¼ per bushel.  The May beans traded a weekly range of $9.83 ½ to $10.60 ½ and the November beans traded from $9.97 ¾ to $10.60 per bushel.  May soymeal was up $2.30 per ton for the week at $386.30 and May soyoil was down $.0034 at $.3153 per pound.  The trade will be watching the political shenanigans and US weather ahead of the April WASDE report on April 10th.  The market showed us this week that there are wrenches that can still be thrown at us.  US weather should gain in trading prominence as will new business coming our way.  For now, it’s all about political posturing, with no dates announced for any tariffs to take effect.  Negotiations may work the issues out before any tariff is enacted, but you never know.

WHEAT – Not much to say in the way of wheat other than conditions continue to support all wheat. Russian winter wheat crops are doing well.  92% of the crop is good or satisfactory, while only 8% is rated in poor condition.  In the US, winter wheat crop conditions are down sharply.  In the first full report of the spring, condition were on at 32% good/excellent.  This is down sharply from the last rating last fall when the good/excellent category was at 50%.

Anna Kaverman

Anna@mercerlandmark.com

Market Report

Tuesday April 3rd, 2018

May 17 corn closed up 1 ¼ at $3.88 ½ and July 18 closed up 1 ½ at $3.97 ¼. May soybeans closed up 2 ½ at $10.38 and July closed up 3 at $10.49 ¼. May wheat closed up 11 ¼ at $4.57 ½ and July 18 closed up 10 ½ at $4.74. Crude oil closed up $.47 at $63.46.

In many respects, Tuesday’s price action in corn played out like a condensed version of Sunday-Monday. Mid-day, the markets were quite firm, similar to the Sunday night spike and much like Monday, these gains struggled to hang in there. Managed Money traders were viewed net buyers of 5,000 corn today. They will head into tonight long just over 150,000 contracts. The first national condition report (for wheat) proved to be the main catalyst for price action today. Corn data remains limited, available only on a state-by-state basis. TX 55% planted (42% avg), LA 84% planted (69% avg), MS 50% planted (34% avg), and Arkansas 24% planted (22% avg). The main Midwest states remain in neutral. Both the US Midwest and the FSU could use some warmer and dryer weather to get started on spring planting, which should offer some support to the market. China planting weather has been better, but it will be interesting to see how many corn acres they lose, as the gov’t subsidizes bean plantings more aggressively to limit corn supplies and wear away at their old and moldy national corn stocks.

The soybean market bounced back from yesterday’s reversal but struggled into the closing bell. Soybeans appear to be establishing more of a two-sided market for the near term with market support coming from the small USDA acreage estimate and strong crush demand while poor export demand, trade war fears and bloated stocks limit upside potential. The products also struggled to hold strength but did a better job than beans did. Elsewhere in the news, Informa raised their Brazil soy production estimate by 2 mmt to a new record 116 mmt while they lowered their Argentine crop by 5 mmt to 39 mmt. They lowered Chinese soy production by 500 tmt to 15 mmt on reduced acreage. USDA crop report and WASDE on the 10th. Trade estimates will be streaming out but look for stronger crush demand to possibly be offset by another reduction in exports while increases in Brazil’s soy production only partially offset Argentine losses.  New crop acreage will not addressed in this report.

The first weekly condition report and continued dry conditions in the heart of the hard wheat production were the catalyst to the price action. It looked as if trade was going to make a run at that gap left from March 19, but over the latter half of the day the entire grain complex started to give up their gains. The HRW wheat contract would finish the day off highs, but still managed to post $.17 gains. Chicago wheat prices were able to muster gains at one point, but like much of the grain floor weakened a bit over the latter half of the session. Prices still finished higher, a big accomplishment considering the SRW wheat market does not have a story. Many in the trade are thinking back to a sub 600 MB hard wheat crop requiring rationing while soft wheat stocks are already bigger than domestic consumption and wondering where the export trade went.

Anna Kaverman

anna@mercerlandmark.com

Market Report

Monday April 2nd, 2018

May 17 corn closed down ½ at $3.87 ¼ and July 18 closed down ½ at $3.95 ¾. May soybeans closed down 9 ¼ at $10.35 ½ and July closed down 9 ¼ at $10.46 ¼. May wheat closed down 5 at $4.46 ¼ and July 18 closed up 5 ¾ at $4.63 ½. Crude oil closed down $1.88 at $62.99.

It was another “night and day” type trade in corn. Futures were off to the races Sunday night, extending report day gains another notch. Corn would ultimately finish fractionally lower up-front and steady/better in the back. Funds were viewed small sellers today; when taking into account the CFTC surprise from Friday, they will likely head into tonight net long 145,000 corn futures and options. It was all about the Thursday reports early. Other, less exciting factors came into play during the day, which tempered the market’s overall enthusiasm. One feature that played out in a number of related markets was the implementation of threatened Chinese retaliatory tariffs on a handful of ag-related goods. Of those that traded actively in futures, hogs finished limit down and ethanol traded to new recent lows. Cattle have also been caught in the undertow of late, but we did not see them on the initial list of tariff targets. This and technical regulation jitters also weighed on the stock market of the day. The Dow traded almost 800 points lower at one juncture, finishing down almost 600.

On the weather front, Brazil safrinha crop weather remains in good shape for development, though some net drying is expected to occur in the south over time and bears watching.  Rains in Argentina are mostly “too little too late”, particularly given the fact farmers there are believed nearly 20% harvested. The next issue will likely be the cool/wet outlook for much of the Midwest, which will raise the near-yearly specter of planting delays.  China early planting weather is expected to be favorable, while Europe and the CIS could use a warm/dry spell to get moving.

The soybean market was unable to sustain its overnight gains as the post-USDA report rally faltered with November beans closing $.20 off its highs. This should give us more of a two-sided market for the near term with market support coming from the USDA acreage estimate and strong crush demand while poor export demand, trade war fears and bloated stocks limit upside potential. Funds are estimated long around 150,000 beans and 120,000 meal. Soybean export inspections totaled 542 mt down from 710 mt a week ago and compares to 628 mt this week last year. Elsewhere in the news, Brazilian trade data showed March soybean exports at 8.81 mmt vs. 2.86 mmt in Feb and compares to 8.98 mmt in March 17, oil exports were 106 mt vs. 125 in Feb and 102 in March 17, meal exports were 1.32 mmt vs. 1.35 mmt in Feb and 1.16 in March 17.

The overnight strength in wheat was unable to carry into the day, and prices steadily fell through the morning. The weakness continued throughout the final hour and the entire wheat complex settled right off their lows. Minneapolis continues to struggle with the huge acreage number from Thursday’s report despite trade prior to the report already moving into new contract lows. Also, the one-month outlook maps do show some relief for Kansas, but not so much for Oklahoma or Texas. Those were the influences behind the rally across the wheat complex overnight. As expected, overall wheat conditions compared to last year are not very good, coming in at 32% G&E and 30% P&VP vs this time last year when they came in at 51% G&E and 14% P&VP. For HRW, Texas improved a little, but that Kansas number is what is going to garner the most attention. It was a mixed bag for SRW wheat conditions, but overall there was some deterioration. This, along with the 6 to 10 day and 8 to 14 day weather maps should be more than enough to give us a higher start to the evening.  Ohio conditions saw no change, coming in at 75% G&E and 3% P&VP versus back at the end of March when they were 75% G&E and 3% P&VP.

Anna Kaverman

anna@mercerlandmark.com

Market Report

Thursday March 29th, 2018

May 17 corn closed up 14 ¼ at $3.87 ¾ and July 18 closed up 14 at $3.96 ¼. May soybeans closed up 26 ¾ at $10.44 ¾ and July closed up 26 ¾ at $10.55 ½. May wheat closed up 5 ½ at $4.51 and July 18 closed up 5 ¾ at $4.68 ½. Crude oil closed up $.52 at $64.87.

FOR THE WEEK ENDED 3-30-18

CORN – It’s been awhile since we had a USDA generate such activity!  The March 29th Prospective Planting report caught everyone off guard with smaller than expected acreage at 88.026 million acres.  The trade was looking for 89.420 million acres, with estimates ranging from 87.550 to 91.0 million acres.  Last year, US growers planted 90.167 million corn acres.  Total planted acreage to major crops was forecasted at 251.4 million bushels versus 252.1 million acres last year. The trade was anticipating 254.2 million acres.  Acreage numbers captured everyone’s attention and prices flew higher.

The bearish Grain Stocks as of March 1st report was pushed aside.  Corn stocks were reported at 8.888 billion bushels.  The average estimate was 8.703 billion bushels with a range of estimates from 8.550 to 8.881 billion bushels.  Last year on March 1 there were 8.622 billion bushels of corn stocks.  This year, 56% of the corn stocks are on-farm versus 57% on-farm last year.

Weekly export sales were as expected at 53.3 million bushels, bringing total commitments for the year to1.8 billion bushels.  This is now just 2% behind last year.  The USDA is forecasting a 3% year on year drop in exports to 2.225 billion bushels.  I would not be in a hurry to expect the USDA to increase the export line on the balance sheet until our shipments confirm the need for a sales increase.  We need 17 million bushels of sales per week to accomplish the USDA’s outlook, which would be a record pace for the time frame. US corn remains the cheapest source of corn in the world, but Brazil becomes competitive in late July.

Weekly ethanol production fell 10,000 barrels per day to 1.039 million bpd.  Stocks were sharply lower at 22.8 million barrels compared to 24.3 million barrels in the previous week.  Ethanol crush margins were steady at 15 cents per gallon.  The US has asked Brazil to raise their limit of tariff-free US ethanol imports. The US request came after the US granted Brazil’s request to be exempt from the new US metal import tariffs.  Presently, Brazil has a 20% import tariff on any US ethanol imports over 40 million gallons per quarter.  China’s purchases of ethanol in February were their highest since May 2016, with 96% sourced from the US.  This may be an on-going positive for US ethanol exports.

OUTLOOK:  For the week, May and July corn rallied 10 ½ cents to $3.87 ¾ and $3.96 ¼ per bushel respectively.  December corn jumped 12 ¼ cents higher to $4.11 ½ per bushel, its highest close since last August.  The March 29th reports left the trade with a bullish sentiment, although many expect the acreage number to climb on future reports.  Focus will continue to center on development of Brazil’s safrinha corn crop and US planting weather.  Under the Mr. Obvious banner, if US weather is nice, we know the US farmer likes to plant corn and would likely result in more than 88 million acres being planted. Especially if December corn stays above $4.00 per bushel.  This week’s acreage number narrows the window for the US to have any weather problems this crop year.  And to add some perspective, funds are carrying a big long, the grain stocks number was bearish, and some believe this acreage number may be the smallest we see this year.   Stay tuned and buckle your seatbelts, we could be in for a rocky ride.  For now, the trend is higher with limited downside/correction expected.  Keep an eye on US spring weather forecasts.

SOYBEANS – The shockingly small soybean prospective planting number of 88.982 million acres sent November soybeans to a new contract high of $10.49 ¼ per bushel!  The acreage figure was below the lowest trade estimate.  The average trade guess was 91.056 million acres, with a range of 89.9 to 92.6 million acres.  Last year we planted 90.142 million acres to soybeans. The Grain Stocks as of March 1 was at the top end of the estimates at 2.107 billion bushels with 41% of the stocks on-farm.  The average trade guess was 2.030 billion bushels, with estimates ranging from 1.810 to 2.110 billion bushels.  Last year we had 1.739 billion bushels of bean stocks on March 1st with 38% on-farm.  The stocks report was bearish, but the bullish acreage news took center stage.

The reports resulted in key reversals higher on all the daily soybean charts as all the attention was on the acreage number.  May soybeans have retraced nearly two-thirds of the drop from the March high of $10.82 ½ (March 2) to the March low of $10.09 ¼ (March 23) with the weekly settlement at $10.44 ¾ per bushel.  Price action leading up to the March 29th reports was lower as funds liquidated long positions in preparation for the reports and month and quarter end.  Trade war concerns were also alive in the background.  US soybeans have become competitive with Brazil through the fall time frame as Brazil’s values have jumped higher in anticipation of increased Chinese purchases.

Weekly soybean export sales were a disappointment at 11.7 million bushels and the third lowest of this marketing year.  Total export commitments at 1.85 billion bushels are 8% behind last year versus 7% behind last week.  The USDA is targeting exports at 2.065 billion bushels this year for a 5% year on year decline.  China’s purchases, so far this year, are 28.5 mmt compared to 34.8 mmt last year at this time.  We need our total sales to average 10.4 million bushels per week to hit the USDA’s forecast.  As in corn, this would be a record pace for the next 5 months. AgroConsult this week raised their Brazilian soybean production estimate to 118.9 mmt. They pegged soybean exports at a record 72 mmt. Safras & Mercado left their Brazilian bean outlook unchanged at 117.3 mmt.   AgRural estimated Brazil’s soybean harvest at 71% complete, slightly ahead of the 69% average.  The BAGE pegged Argentina’s soybean harvest at 9% complete with corn harvest at 18% complete.  They left their soybean and corn estimates unchanged at 39.5 mmt and 32 mmt respectively.

After a meeting between the US Soybean Export Council and the Chinese Ag Ministry, a US official said US soybeans are not currently being targeted for retaliation, but they are still on the table.  This will keep any trade war talk and its effect on US soybean exports to China looming in the background of trade chatter.

OUTLOOK:  For the week, May soybeans gained 16 ½ cents to $10.44 ¾, July was 16 ¼ cents higher at $10.55 ½, and November outpaced them both with a 21 ¼ cent increase to $10.47 ¾ per bushel.  May soymeal was up $6.10 per ton for the week at $384.00 per ton and May soyoil was up 45 ticks at $.3187 per pound.

Will soybeans hold their gains after traders have a long Easter weekend to ponder the report numbers?  Many believe we will see the soybean acreage number increase from here and the stocks number nearly exceeded the trade estimates.  Bean acreage from the March report to the June report has increased in 5 of the last 6 years, with last year’s number steady.  The increases have ranged from 500,000 to 3.3 million acres.  Higher prices will also encourage additional planting.  But US beans are now competitive with Brazil and our exports may increase.  US weather will garner more attention going forward and the current forecast looks cool and wet.

Anna Kaverman

anna@mercerlandmark.com