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FOR THE WEEK ENDED 12-14-18

CORN – Corn direction continues to be driven by soybeans and wheat, but that may be changing slightly.  Demand for corn has been decent, but nothing impressive.  Heading into the weekend, it was reported that China may buy up to 3 mmt of US corn, possibly as soon as January.  This would help meet a previous agreement to purchase of 7.2 mmt on import quota that is subject to a lower tariff.  This helped erase the weekly loss seen in the corn. The December WASDE report was uninspiring as discussed below.  Ethanol production margins are weaker, and production has begun to slow down.  Since the beginning of December, March corn has traded a boring range from $3.80 to $3.87 ¾ per bushel.  Through Thursday’s December 13th close, March corn was down 1 ¼ cents for the week at $3.84 ¼, July was down a penny at $3.98 ¼, and the December 2019 contract was up ¾ cents at $4.03 ¾ per bushel.  As of this writing at mid-morning Friday, corn was up 1 to 3 cents on the day.

The December WASDE report on December 11th didn’t provide any surprises to the trade.  US ending stocks were up 45 million to 1.781 billion bushels on a decline of 50 million bushels in corn for ethanol and a decrease in imports of 5 million bushels.  The average ending stocks trade guess was 1.736 billion bushels. World stocks took a jump of 1.3 mmt to 308.8 mmt and was greater than the trade prediction of 307.2 mmt.    Brazil’s corn production was steady at 94.5 mmt and Argentina was unchanged at 42.5 mmt.

Weekly export sales were disappointing at 35.6 million bushels.  However, the USDA is forecasting a flat year on year export picture and total commitments are currently running 16% ahead of last year.  This week’s sales included an 8.7-million-bushel cancellation to unknown.  Let’s hope this isn’t the start of a trend.  Presently, the Ukraine is competitive on the world export scene.  This month’s WASDE report raised Ukraine’s production 1.5 mmt to a record 35 mmt and their corn exports were raised 1 mmt to 28 mmt.  We need 35.3 million bushels of sales per week to hit the USDA’s 2.45 billion bushels export outlook.  We sold 6.3 million bushels of new crop corn, bringing total commitments for 2019/2020 to 10.7 million bushels.  This is well behind last year’s 40.5-million-bushel total for this time of year.

Weekly ethanol production fell back slightly this week as margins dipped further into the red.  Production was down 23,000 bpd to 1.046 million bpd.  The 4-week average is lagging last year by 3%.  Ethanol stocks dropped 100,000 barrels to 22.9 million barrels.  This is 2.3% higher than last year.  Net margins declined another 2 cents per gallon to a negative 15 cents per gallon.  Margins have been negative for 12 straight weeks.

Informa Economics is pegging 2019 corn acreage at 91.9 million acres, up 2.8 million acres from last year’s 89.1 million planted acres.  This was reportedly a survey-based forecast.

OUTLOOK: The demand picture is supportive for corn, but that at times becomes secondary in light of spillover strength from the soybean market.  If positive effects from the soybeans fade, the demand for corn may help limit any downside moves.  The December 2019 contract is back near $4.05 per bushel.  For now, corn action is a sideways grind with March trapped between $3.80 and $3.90 per bushel.

SOYBEANS – China, China, China – it’s all about China!  This week we finally saw China return to the US soybean market with a purchase of 1.13 mmt or 41.5 million bushels on Thursday.  ON Friday, they bought another 300 tmt.  Before the sales confirmations, the trade was anticipating sales of 1.5 mmt to 2.0 mmt.  The market’s immediate reaction was a classic “buy the rumor, sell the fact” type trade.  The sale did perk up basis levels to the PNW.  Many expect China will still buy up to 5 mmt of US soybeans, with more announcements coming.  Here is the fly in the ointment, China may be buying US origin now, but as we look at 2019 values, Brazil will be the origin of choice for both China and non-Chinese buyers.   Further, it looks as if US acreage switching from soybeans to corn may be much less than earlier estimates of 4-7 million acres.  The US will likely be facing a huge soybean carryout unless China stands in for 8 mmt or more. China’s crush margins this week fell to an 18-month low on poor meal demand and oversupply at plants.

The December WASDE report did not make any changes to the US soybean balance sheet.  US ending stocks remain at an enormous record 955 million bushels.  The trade was expecting a small cut to 936 million bushels.  Brazil’s soybean production forecast was up 1.5 mmt to a record 122 mmt.  Some private estimates have run as high as 130 mmt.  They also increased Brazil’s crop from last year by 0.5 mmt to 120.3 mmt.  Argentina’s production was unchanged at 55.5 mmt.  World ending stocks jumped 3.3 mmt to a record 115.3 mmt, higher than the pre-report guess of 113.1 mmt.  The USDA left China’s soybean imports at 90 mmt.  This month’s report seemed to just kick the can down the street until the January 11th report.

Weekly export sales at 29.1 million bushels were as expected, but meal and soyoil sales were marketing year lows.  Total soybean commitments are 34% behind last year.  The USDA is projecting year on year soybean exports to be down 10.7% this year at 1.9 billion bushels.  We need to average 26.7 million bushels of sales per week to hit the target.  New crop sales were nearly non-existent at 200,000 bushels.  Total new crop commitments are 6.2 million bushels compared to 15.7 million bushels last year.

Brazil’s weather is still generally favorable for crop development but forecasted rain for the latter half of December needs to confirm to avoid raising concerns.  Brazil’s truckers are threatening to strike after the new government essentially wiped out the minimum freight rate regulations.  With soybean harvest expected to start early this year, this situation will be closely watched.

The Office of Management and Budget has stated that the second round of tariff-related payments will be delayed.  No date was given, but they hope to have a determination by the end of the year.  They want to see how recent US/Chinese developments pan out.  USDA Secretary Perdue, President Trump, and OMB Director Mulvaney were scheduled to meet on the matter December 14th.

OUTLOOK:  For the week through the close on Thursday, December 13th, January soybeans were down 9 ¾ cents at $9.07, March down 8 ½ cents at $9.20 ½, and November 2019 down 5 ¼ cents at $9.56 per bushel.  At this writing, soybeans were trading a couple of cents either side of changed.  The market bulls need to be fed a stream of supportive news, without it, prices may drift into the holidays.  Informa Economics is forecasting 2019 soybean acres to fall 4 million acres to 85.1 million planted acres.  This number has likely already been incorporated into traders’ ideas.

WHEAT

A lot of times when you have an early week crop report, by Friday, trade seems to be tired. When you throw in a whole bunch of China talk and rumors, the market gets exhausted, and that is how the wheat complex traded today. The SRW wheat contract finished the day the weakest. However, it was a good week for the wheat complex in that it battled back from early week losses.

The rally leading up to the morning pause, which then carried into the start of the day was led by corn and was mainly due to a story from Bloomberg that talked about China starting to buy corn again starting next month, and the amount they are said to be buying is roughly 3 MMT. Now keep in mind, China bought only a little over 300 TMT of US corn last year, so if they do buy around 3.0 MMT, that would be a big boon for the corn market. As far as wheat, still no word, but China did buy a little more than 900 TMT of US wheat last year and more than double that the year before, so when or if any official announcement comes that they are buying US corn, one would think that wheat will be not too far behind.

Anna Kaverman

anna@mercerlandmark.com

Market Report

Thursday December 13th, 2018

March 19 corn closed down 1 at $3.84 ¼ and December 2019 closed unchanged at $4.03 ¾. January beans closed down 13 at $9.07 and November 19 closed down 10 at $9.56. March wheat closed up 9 ½ at $5.36 and July 19 closed up 8 ¾ at $5.47 ½. Crude oil closed up $1.47 at $52.83.

Corn was truly the middle child of the ag complex today, trapped between double-digit gains in wheat and double-digit losses in soy. The end result was a back-and-fill session, where corn lower in a $.04 range. Managed Money traders were viewed net sellers of just under 5,000 corn today, which would leave them net short just over 15,000 combined corn futures and options heading home tonight.

Corn continues to struggle to define its own story, as the over-whelming focus of the market is Chinese business (real or theoretical). The USDA finally offered up an announced bean sale, but the rather paltry near-1 mmt total did not exactly set hearts-a-racing. Call it “buy the rumor, sell the fact”, or skepticism we will soon reach the large totals breathlessly rumored last week, but beans did not like it. Many other markets are growing impatient, but the “holding pattern” for corn, as defined by last Sunday night’s gap, remains in place. We shall see. “Other” news flow remains extremely light, which is typical of the weeks leading up to Christmas. We do have the weekly USDA export sales report to discuss. New corn business was close to market forecasts, arriving at 903,200 MT (and 161,400 mt for new). Japan accounted for over half of the business, closely followed by Mexico, the Saudis, Colombia, and New Zealand.  This was slightly below the pace needed to meet USDA sales goals for the year.

According to World Weather, South America weather is becoming a little more volatile with drying in interior southern Brazil and in northeastern crop areas over the next week to ten days while east-central Argentina and Uruguay experience flooding rain. Southwestern Brazil crops in the sandier soil are already stressed by dryness and warm temperatures and this may continue into the middle part of next week before significant relief comes along. Crops in the heavier soil types are likely to remain favorably rated for much of the coming week, but will need moisture later this month. All in all, still strong yield potential, but as is almost always the case, some warts develop over the course of a growing season.

The soybean market set back today as we leave a recovery high for a moment. The chart formation is strong but the technicals had become overbought and due for a pull back. A close below $8.97 on Jan tomorrow would give you a weekly key reversal lower and a recovery top. The fund short was cleaned up on the rally, for the most part, taking away some our recent buyers. Funds were back on the sell side today selling an estimated 10,000 beans and 4,000 corn. The market is also struggling with a touch of a hangover following the confirmation of Chinese bean purchases that had been highly anticipated ever since the Trump-Xi dinner following the G-20.

The good news is that all the right things are happening in the cash to suggest there will be more sales announced to China.  PNW bids have materialized for Jan-Feb-March. With more potential sales to be announced, prices may continue to hang on at these levels. The bad news is that the risk reward of this market is beginning to shift with plenty of optimism and anticipation priced in already. Now, the focus shifts to the bull to justify further strength either through bigger than expected Chinese trade and/or a weather issue down south.

The USDA confirmed a sale of 1.130 mmt old crop beans sold to China in the daily reporting system. This initial confirmation was modest relative to the recently rumored totals and likely was a disappointment to some. But 1.130 mmt is a big one-day announcement and don’t be surprised to see a string of sales announced in the coming days and weeks that could accumulate to that the rumored 5-8 mmt to replenish government reserves.   Additional purchases by private buyers would likely require the removal of the 25% tariff and at this point there is no detail on when that might happen although all the actions and rhetoric since the Trump-Xi dinner (with the exception of the Huawei arrest) point to that result. Another issue for the private crusher is that Chinese crush margins are in the tank due to African Swine Fever and their return to the market.

The wheat complex continued their surprisingly strong trade overnight, and that trend continued during the day. So, what has been behind the recent strength in wheat?  We knew the export sales this morning had the possibility at being a marketing year high, and at 754 MT, the sales report did not disappoint. What’s more, Taiwan’s purchase of 110 TMT of milling wheat did not make the report, and only 169 out of the 224 TMT the USDA reported last Friday made the report, so if everything hit, we could have seen a much larger number. The bad news is there is not much in the way of sales this week, and next week’s report may struggle to even reach half of this week’s number. Iraq’s Trade Minister said they have signed an agreement to import US wheat over the first half of 2019, but Iraq already buys wheat from the US. What is bothersome is that Iraq also made another announcement, with the head of the Iraqi Grain Board saying that a Russian delegation is visiting to discuss the possibility of exporting wheat to Iraq. Russia has already opened doors to Brazil and China, and the fact they continue to try to open doors elsewhere does not bode well for the US wheat export program down the road.

Anna Kaverman

anna@mercerlandmark.com

Market Report

Wednesday December 12th, 2018

March 19 corn closed up ½ at $3.85 ¼ at December 2019 closed down ¼ at $4.03 ¾. January beans closed up 5 at $9.20 and November 19 closed up 4 ¼ at $9.66. March wheat closed up 5 ½ at $5.26 ½ and July 19 closed up 2 ¾ at $5.38 ¾. Crude oil closed down $.48 at $51.36.

Markets were quite firm early, as China threw traders a few extra bones. Futures would close fractionally better. Managed Money traders were viewed net buyers of 5,000 corn today, which would leave them net short less than 15,000 combined corn futures and options heading home tonight. Yep, it was another “China day”. Apparently, the Chinese will allow improved access to their markets for foreign firms and tweak the “Made in China 2025″ policy. Still nothing tangible to lean on for ag trade. This changed a little mid-morning, when wire services reported some purchases of U.S. soy. No official word on other markets, though, including corn.

The weekly EIA report held mostly friendly feature for ethanol this week. Although one could call it a little bearish corn given the drop in production. Weekly production of 1.046 million bbl/day was -2.2% lower wk/wk, which would consume just under 5.60 billion bushels of corn over a marketing year. Weekly export sales report tomorrow should continue on their recent near ~1 mmt/wk trajectory. Note, the large Mexican sale reported earlier this week will likely not make it in this report.  200,000 metric tons of “other sales” will make it in, however.  The U.S. remains competitive on world export markets, though we are not alone, as Ukraine is also in the running, followed not too distantly by South American sellers.

The soybean market extended its rally into a new recovery high.  The recovery in beans off the September contract low has been driven by a combination of short covering, a slowly improving chart posture and a growing sense of optimism that we could resolve the trade dispute with China. The recent meeting between President’s Trump and Xi did represent a breakthrough that was further validated with today’s news that China bought US soybeans for the first time since July. Reuters reported a 500 mt package of beans was bought off the PNW for Jan-Feb-March while our sources report that total was closer to 2.4 mmt and bought by China. Beans bought for Chinese government reserves are subject to the 25% tariff up front but my understanding is that the tariff will be rebated back.

The recent rumors had China buying 5-8 mmt of US beans to replenish government reserves so today’s relatively modest total likely was a disappointment to some but don’t be surprised to see a string of sales announced in the coming days and weeks.  As far as a larger trade deal there is still lots of work to do before the March deadline and the purchase of US agriculture is the easy part of the negotiation. This is a good will gesture that not only will help to narrow the trade deficit. When all is said and done but will hopefully lead to the removal of tariffs and importantly, help grease the wheels on stickier issues like intellectual property and technology theft.

Another headline invigorated trade overnight after President Trump indicated that China was ‘back in the market’ for US soybeans. For wheat, it is hard to explain what kept prices firm throughout the day. Heavy rains across Argentina, Uruguay and southern Brazil over the next two weeks received a lot of attention today. Some regions in those country’s still have half of its harvest still to go, and with expectations for some of those said areas to possibly get as much as 20 inches of rain over the next 16 days means quality loss will be an issue. Another story that was bantered around centered on Russian export concerns. Maybe that came about because of the limited offers the GASC received in its tender overnight or because the Russian wheat offers were some $6.00 above where they were just last week. Either way, there are some that are trying to bring back up the possibility that eventually the Russian Ag Minister will put a halt to wheat exports. At this point, that is hard to believe considering the USDA just raised Russian wheat export expectations to 36.5 MMT, and that so far this marketing year Russia has exported around 21 MMT. This means they still have around 15 MMT to export. Granted quality has been and will continue to be a bit of a problem, but there will need to be a lot more to happen for any halts in exports to come to fruition.

Anna Kaverman

anna@mercerlandmark.com

Market Report

Tuesday December 11th, 2018

March 19 corn closed up ¾ at $3.84 ¾ at December 2019 closed up 1 ¾ at $4.04. January beans closed up 5 ¼ at $9.15 and March 19 closed up 5 ½ at $9.28 ¼. March wheat closed down 4 ¼ at $5.21 and July 19 closed down 1 ¼ at $5.36. Crude oil closed up $.64 at $51.84.

To no real surprise, the Dec WASDE had precious little impact on price action today. The market instead focused on positive “noises” coming out of U.S.-China trade negotiations, though there is still little tangible to lean on. Corn would finish the day higher on light volume, given that it was a WASDE day.  Managed Money traders were viewed net buyers of about 5,000 corn today, which would leave them short less than 20,000 combined futures and options heading into tonight.

As expected, the USDA made no adjustments to U.S. corn production, but did spend a little time on the demand side of the ledger. No doubt in response to poor industry profitability, the USDA reduced the corn-for-ethanol grind by 50 million bushels from their Nov estimate, taking it to 5.6 billion bushels. They also trimmed imports by 5 mil bu. The end result was a small 45 million bushel increase in U.S. 18/19 carryout expectations to 1.781 billion bushels (vs. 2.140 bil last year and 2.293 the year before that). The world balance sheet saw a few token changes, all of which were probably justified. The end result was a modest (+1.3 mmt) increase in world carryout expectations to 308.8 mmt, which is still a notable reduction from 340 mmt in 17/18 and the recent high-water mark of 350 mmt in 16/17.

Missing in the above was any adjustments to South America, which is probably fine at this early juncture. Ahead of the USDA, CONAB updated their thoughts on Brazil’s crop, pegging full year corn production at 91.1 mmt, which was firmed up from a range of 90-91 last month. The USDA is currently sitting at 94.5 mmt for Brazil, which compares to 82 mmt last year. USDA is sitting at 42.5 for Argentina, which compares to just 32 mmt last year.  South America weather will remain mostly favorable, despite some drying in southwestern Brazil and erratic rainfall in far southern Argentina. U.S. weather shaping up for a more seasonable last half Dec.

The soybean market remains stuck in its ‘wait and see’ posture as the bull is angling for a size Chinese purchase confirmation (and growing impatient for that evidence to surface) while the bear is afraid to sell the market because of the potential for a sharp trade relief rally. This leaves the market in a sideways choppy range for a moment where gap support remains just below $9.00 and the recent highs just above $9.20 has limited the recovery.

There was plenty of trade news in the headlines overnight and this morning that hinted at an impending announcement.  The phone call between the Chinese Vice Premier and US trade reps reportedly went well and included discussion on the purchase of US ag products as well as a timetable or roadmap for the next stage of trade talks.  China is also planning to reduce auto tariffs from 40% to 15% in a clear sign of de-escalation.  President Trump tweeted that ongoing talks with China are going well, adding to watch for some important announcements regarding China. With all of that noise, it was somewhat of a let-down that we didn’t have any business confirmed at the 8:00 daily report time.  The White House reportedly will delay the second half of farm aid payments as they want to see if recent progress in talks leads to a resumption of trade.

The December crop report has a reputation as being somewhat of a dud and it certainly lived up to that today.  The report confirmed the burdensome supply side realities of domestic and global soybean stocks but this was anticipated.  All things considered, beans handled the report well and settled near the day’s high. The US soybean carryout was left unchanged at 955 million bushels with no changes on either side of the balance sheet.  The meal and oil balance sheets were similarly unchanged.  On the WASDE, Brazil’s soybean production was raised by 1.5 mmt to 122.0 mmt with higher yields noteded in the Center-West of the country while Argentina was left unchanged at 55.5 mmt.  Brazil’s beginning stocks were raised by 1.6 mmt to 25.15 mmt.  This took the world soybean carryout from 112.08 mmt to 115.33 mmt.  Chinese soybean imports were left unchanged at 90 mmt.  World meal stocks were up slightly from 12.1 mmt to 12.14 mmt on larger Indian meal production.  World oil stocks were raised slightly from 3.64 mmt to 3.73 mmt.

Price action leading up to the crop report was surprisingly two-sided, considering it was hard to imagine that too many around trade could have possibly been looking for friendly data. Because of the slow export pace of HRW wheat, it was thought that HRW wheat exports were going to be lowered, and that US carryout could increase more than people think. The USDA obliged, lowering HRW exports 40 MB(Spring was increased 5 mil bu and SRW was increased 10 mil bu), thus lowering overall US export expectations 25 MB down to 1.0 BB. They also raised HRW wheat ending stocks by 42 MB and overall US ending stocks to 974 MB. After a somewhat muted reaction, wheat prices started to sell-off.

The break may have been muted some following this morning’s news headlines of renewed optimism that a US/China trade deal is moving forward. There was a report that said China had submitted a proposal to its cabinet toward cutting tariffs on US made cars from 40% down to 15%. Keep in mind, this plan has not yet been finalized and could change. Also, China media sources reported that the country would soon announce the details of their first soybean purchases, most of which will go to national reserves. However again, the timing of that announcement was not specified. And finally, Chinese Vice Premier Liu also spoke with the US Treasure Sec Mnuchin and US Trade Rep Lighthizer by phone where they exchanged opinions on implementing the consensus reached during the Trump-Xi dinner 10 days ago.

Anna Kaverman

anna@mercerlandmark.com

Market Report

Monday December 10th, 2018

March 19 corn closed down 1 ½ at $3.84 at December 2019 closed down ¾ at $4.02 ¼. January beans closed down 7 at $9.09 ¾ and March 19 closed down 6 ¼ at $9.22 ¾. March wheat closed down 6 at $5.25 ¼ and July 19 closed down 2 ¾ at $5.37 ¼. Crude oil closed down $1.61 at $51.20.

The corn market started the week in quietly lower fashion, finishing with penny-plus losses. Volume was very light as traders wait impatiently for some word out of China on the mooted ag purchases. There is also a monthly WASDE due out tomorrow, which also squelched activity. CFTC Commitment of Traders data after the close, delayed from Friday, found the expected fund buying in the corn market through 12/4. The agency found large non-commercial (aka “Large Spec” traders were net buyers of 63,584 corn, which included 51k+ new longs and 12k shorts covered.

Elsewhere, Crop Progress reports are over for the year, though U.S. weather is expected to take on a more seasonable track for the balance of December. Above-average temps nationwide may help bring in a few stranded bushels in the field?  South American weather stays mostly favorable, excepting some dryness in SW Brazil. Rains may return to that area Christmas week. Stay tuned. South Africa, a minor net exporter, also struggling with crop losses amid drought. End-user markets were generally weaker today; ethanol and dairy both traded to new lows.

Amid all the China hullaballoo, the December crop report is rapidly sneaking up on us, and will be released mid-morning tomorrow (Tuesday). This is a pure “balance sheet” report, and major changes to U.S. corn production or yield are unlikely.  Demand could be in the crosshairs, but with a few decent weekly export sales reports under its belt lately, they may wait until January to make changes. May see a few small increases in world production, too. Keep an eye on China, as they were the shocker in the November report.

The soybean rally took a breather and gave back Friday’s gains as the market continues to consolidate above $9.00. There was no fresh news on the China trade front and the market anxiety is growing by the day with a lack of confirmation despite lots of rumors and signals that something could be announced soon.   There is chatter of 5.0 to 8.0 mmt of soybeans to be purchased by the Chinese government to replenish reserves but the timing of an official announcement or confirmation is unknown. Both the US and China have taken efforts to distance trade talks from the Huawei arrest last weekend which is calming some nerves in the markets where it was feared the incident would derail recent progress. The USDA flashed 125 tmt of new crop beans sold to unknown along with the big sale of corn to Mexico (1.105 mmt of old crop and 541 tmt of new crop) as world buyers look to front run any potential sales announcement to China.

Assuming no Chinese confirmation tomorrow morning, that leaves the soybean market to contend with the crop report on its own.  A focus on the statistical realities as we know them today spells trouble for soybean prices. The question is, will sellers continue to hold back with the threat of a Chinese trade development whipsawing the market? That has been the case since the Trump-Xi dinner and really has been the case in the weeks leading up to it. With the crop report spotlighting a domestic carryout near 950 million bushels and a world carryout above 112 mmt, it could be a real challenge for beans to defend these recent gains.  It will be interesting to see what kind of stops we find if SF takes out last week’s $8.97 low and fully closes the gap.

The wheat complex struggled to find any footing today, but it was not a complete washout as trade today did not give back all of Friday’s gains. Both Chicago and Mpls each finished the day lower. Much of the markets strength on Friday came on the heels of the USDA announcement of 224 HRW sold to Unknown, along with other fresh business. In fact, last week was a very active export week for wheat, and even though the export lineup at the start of this week is quiet, do not be surprised if we see that pace pick up again as other countries around the World may need or want to facilitate their needs ahead of any US/China trade announcements. However, Friday’s rally did not help.

Tomorrow is crop report day. The December crop report is usually low key, and we see only marginal changes, but it is hard to imagine US ending stocks to do anything but increase thanks to the slow export pace of HRW wheat. We will see some minor adjustments in the World numbers, mainly Australia and the question is will the USDA be able to find anything to offset the Aussie reduction we are going to see. That may be the wild card of the report. Still think that US carryout could be increased more than people think especially if the USDA lowers HRW export expectations. Friday morning’s sales announcement may curtail that thinking some, but we are still behind last year’s pace by around 88 mil bu, and we are almost halfway through the marketing year. If China announces they will buy a significant amount of US wheat, the USDA always could re-adjust back up their expectations.

Anna Kaverman

anna@mercerlandmark.com

FOR THE WEEK ENDED 12-7-18

CORN – Let us pause as we remember former President George H. W. Bush, who passed away last week.  December 7th also lives in infamy as we remember those that lost their lives on this day 77 years ago. Markets sparked higher in the first session and first day of a new month after the historic meeting between President Trump and Chinese President Xi in Buenos Aires December 1st.  The meeting was deemed a success on both sides and the markets surged higher.  Details were thin on how the differences between the two were going to be resolved.  Comments continued throughout the week that the talks were going smoothly, but again, no details.  Corn could benefit from a deal by opening the market for DDGs, sorghum, and ethanol.

Most of the week’s news was associated with the soybean market.  Corn’s price direction has been driven by firm demand, soybean prices, and South American weather.  Even though corn managed a higher weekly close, the news was pedestrian after the Chinese meeting.  Unless the December 11th WASDE report gives us some fuel for another rally, corn may be setting up for range bound trade into the end of the year.

Weekly export sales were excellent at 46.4 million bushels and bringing us to 17% ahead of last year’s commitments.  We need 35.3 million bushels of sales per week to hit the USDA’s target of 2.45 billion bushels.  If South America’s weather forecast is correct, we could be looking at strong competition for corn exports in the first quarter of 2019.  Adding to the competition, the Ukraine increased their corn crop estimate to 35.2 mmt compared to the USDA outlook of 33.5 mmt.  There were no export sales for the 2019/2020 reported on the weekly sales report.  Weekly ethanol production increased 21,000 bpd to 1.069 million bpd, the highest number in 13 weeks.  Stocks rose 100,000 barrels to 23.03 million barrels.  US gasoline demand is 1.2% behind last year in the current corn marketing year.

Trade estimates for the December 11 WASDE report:  US ending stocks 1.738 billion bushels versus 1.736 billion in November; world ending stocks 307.59 mmt versus 307.51 mmt last month; Argentine production 42.43 versus 42.50 mmt; Brazilian production 94.41 versus 94.50 mmt last month.

OUTLOOK: Corn may be relegated to a sideways pattern without fresh input from the USDA report or a change in the status of Chinese trade talks.  Seasonally, corn can rally in December, so be prepared if we inch higher.  How the trade winds blow will provide our direction in the next month. For the week, March corn captured a 7 ¾ cent at $3.85 ½, July was 7 ¾ cents higher at $2.99 ¼, and December 2019 closed 3 ¼ cents higher at $4.03 per bushel.

SOYBEANS – January surged 29 cents higher at their high following the US/Chinese meeting December 1st, but disappointed bulls when they only managed to close 11 cents higher on the day.  Many had been anticipating close to a limit up or 60 cent move on the positive sound bites at the conclusion of the meeting.  A lack of details left some wondering what the 90-day cease-fire really meant.  For now, the US will not raise current tariffs, or pile on additional tariffs, that were scheduled to take effect January 1st.  If no “real deal” is made by March 1st, the US is prepared to raise the 10% tariff on $200 billion worth of Chinese goods to 25% and could put tariffs on an additional $267 billion worth of goods.  For their part, according to the US release, China will purchase “very substantial” farm, energy, industrial and other products.  Chinese traders said China will need to cut the 25% tariff on US farm products before they can buy a “substantial” amount of US products, unless the government forces them.  It’s surmised, that any Chinese soybean purchases would be made by the government for their state reserves.  Brazilian soybeans are still cheaper than US origin before any tariff.  Negotiations continue, but events later in the week brought into question how talks will proceed.  Late in the week, Meng Wanzhou, the CFO of giant Chinese technology firm Huawei (and daughter of its founder), was arrested in Canada, reportedly at the request of the US.  There are allegations that the company re-exported US products to Iran.  She is expected to be extradited to the US.  How this arrest may affect US/Chinese trade negotiations is unclear.  Remember, technology issues were what got us here in the first place.

Was last year’s Brazilian soybean crop underestimated?  In November, they exported over 5 mmt of soybeans, more than double what they exported in November last year.  Based on calculations, at this pace their carryout could be a negative 8 mmt.  In the past, it sometimes hit a negative 2 or 3 mmt, but 8 mmt is huge!  No one will be surprised when the USDA makes balance sheets adjusts to account for the tremendous Brazilian soybean exports.  Also, out of Brazil this week, the government stated that if you did not pay the minimum freight rate implemented earlier this year, you would no longer have to pay a fine.  This essentially did away with the minimum.  A definitive January ruling is expected.  Some have insisted the minimum freight rate was unconstitutional.  The new ruling is expected to eliminate freight barriers in getting the upcoming record crop to market.  Brazilian soybean farmers are looking into a proposed railway giving them access to northern export ports.  The $3.24 billion project could cut transportation costs from Mato Grosso to export ports by 30% from the current $2.34/bushel.  Argentina’s costs are estimated at $1.24 per bushel and the US at 93 cents/bushel, according to Agroconsult.  Celeres this week pondered that with favorable weather Brazil could produce 130 mmt of soybeans this year.  The CEO of a large Brazilian grain producer stated at an industry event that 106 million acres of untapped grassland in Brazil could be brought in agricultural production.  Their combined soybean, corn, and sugarcane acres is currently at 158 million acres.

Weekly export sales were at the upper end of trade estimates at 32.7 million bushels.  However large, we slipped to 33% behind last year when the USDA is forecasting a 10.7% year on year drop in exports. We need 26.7 million bushels of sales per week to achieve the lofty 1.9 billion-bushel USDA export forecast.  Last year from this point forward, weekly export sales average a record 21.3 million bushels per week.  Without a return of China to the US market, the current export forecast could be quite a stretch.  There were only 100,000 bushels of new crop sales reported.  This brings new crop commitments to 6 million bushels and well behind last year’s 11.6 million bushels.  The October NASS Crush Report was in line with trade expectations with 183 million bushels of soybeans crushed.  October soyoil stocks were 2.041 billion pounds compared to 1.909 billion pounds expected.

Argentina has been talking with China to try and capture a portion of China meal import business.  This week, China said they will buy 330-400 tmt of soybean oil from Argentina, but said they were not interested in Argentine meal at this time. Trade estimates for the December 11 WASDE report:  US ending stocks 945 million bushels versus 955 million in November; world ending stocks 112.79 mmt versus 112.08 mmt last month; Argentine production 55.72 mmt versus 55.50 last month; Brazilian production 120.88 mmt versus 120.50 mmt in November.  Some trade estimates for Brazil’s bean crop suggest over 130 mmt, if the weather stays favorable.

OUTLOOK:  We continue to be run by tweets and headlines.  How the recent arrest of a Chinese technology company CFO will influence the US/Chinese trade negotiations is unknown.  Everyone is waiting for China to make that first US soybean purchase.  If they buy anything, it will likely be for the state reserve.  For now, it’s a wait and see situation.  Brazil’s soybean crop was 96% planted by December 4th and 1% is expected to be harvested by the end of 2018.  It’s being bandied about that Brazil will be able to ship double the amount of soybeans in January than normal.  It’s a waiting game for now, but in the long term we must be cognizant of the enormous crop potential in South America. For the week, January soybeans held onto a 22-cent gain at $9.16 ¾ per bushel, March was 21 ½ cents higher at $9.29, and November 2019 jumped 22 cents higher to $9.61 ¼ per bushel.

Wheat – Egypt did not issue letters of credit for several wheat shipments.  This caused some fear in the market about their ability to continue an aggressive import program.  Egypt later clarified that LOC’s were issued except for the wheat yet to be delivered.  They followed that up with a new tender.  The suppliers for the new tender were 290,000 tons from Russia and 60,000 tons from the Ukraine.  There were no US offers for this tender. Russia has exported almost 37 million tons of wheat this calendar year.  This is a 50% more than the same period last year.  Despite smaller production, Russia is doing everything possible to remain the world’s leading exporter. There was a flash sale announcement of 224,000 tons of HRW to unknown.  This activity was very welcomed by the wheat market and pushed futures to 15 cent gains on Friday.  Wheat export sales were the 2nd best of the marketing year.  The SRW business to Egypt was part of this week’s total.

Anna Kaverman

anna@mercerlandmark.com

Market Report

Tuesday December 4th, 2018

March 19 corn closed up 2 ¾ at $3.84 ¾ at December 2019 closed up ¼ at $4.02 ¾. January beans closed up 6 at $9.11 ¾ and March 19 closed up 6 at $9.23 ¾. March wheat closed up 1 ¼ at $5.22 ½ and July 19 closed down 1 at $5.32 ¾. Crude oil closed up $.32 at $53.46.

The ag complex maintained a “moderately higher” holding pattern, as traders await details regarding this weekend’s U.S.-China “trade truce”, particularly from the China side of the bargain.  Corn tried to fill the Sunday night gap overnight, trading down into it, but ultimately, could not completely close it. During the day, trade quietly melted up. Managed Money traders were viewed net buyers of about 5,000 corn today, which would leave them net short a little more than 20,000 combined corn futures and options.

First and foremost, tomorrow’s “National Day of Mourning” over the passing of President George HW Bush will close financial markets and most gov’t offices. Curiously, most commodity markets, will be open for business. Despite a continued optimistic tenor in the ag complex, financial markets did not share in that enthusiasm today. U.S. equities traded lower all day, but losses accelerated mid-session, with benchmark indices falling roughly 3% (Dow off almost 800 points). The dollar erased intraday losses, closing near unchanged.

In truth, it was a quiet news day, with most traders begging for some clarity on the China front. The ag markets are pricing in the potential or some extremely short-run export trade to China.  Financials, meanwhile, are more concerned with the prospects of a longer-term resolution. Make no mistake, ag commodities are also concerned about such things, but the prospect of a quick shot in the arm on the export front is a tantalizing prospect to markets that have recently traded near multi-year lows. China agreed with the decision to hold off on a press conference until after the Bush funeral. That may be what is delaying the delivery of their terms of the bargain?

Both corn and bean markets are also adding in a little weather premium, particularly given prospects for a surge in near-term demand. Dryer conditions for Argentina and southern Brazil are a little interesting, though at this time it is difficult to build a story with some forecast model runs suggesting increasing rainfall once again near mid-month. Analysts at Celeres still projecting very strong crops; they see Brazil soy exports between 77-82 mmt for the coming year’s campaign, which compares to the USDA at 77. Favorable SE Asian weather continues to pressure palm oil (off another 1% and near multi-year lows), while problems in Europe and Australia keep rapeseed (and bean oil, to a certain extent) supported.

Technically, corn is doing its best to make a good trade on the weekly chart, posting an outside week up last week, and now a gap higher. The bear could not quite close the chart gap, which will keep the ball in the bull’s court until it’s closed.  November high of $3.90 is tough resistance but momentum is positive.  Jan Beans feature a similar scenario. Daily gap down to $8.96, which also was not completely closed overnight.  Major resistance near the Sunday highs of $9.30.

After giving back much of its gains from Monday during the overnight session, the wheat complex battled valiantly during the day to try and recoup some of those losses, and for the most part they were successful. The weakness overnight could have easily been attributed to the limited new information emerging regarding the trade negotiations between the US and China, combined with the low offer in the Bangladesh tender. Both bits of news are a bit disturbing for the wheat complex moving forward, but there are signs that China interest in US grains may be once again surfacing as Sinograin is said to be asking for bean offers off the PNW for Jan and Feb, but no trade yet. This news may be good news for beans and corn, but for the wheat market, it needs some confirmation of what USDA Ag Sec Perdue said Monday in that the truce could include purchases of US wheat, sorghum, rice and poultry. In fact, there was some talk today that if a deal is resolved, China could purchase as much as 7 MMT of US wheat.

Anna Kaverman

anna@mercerlandmark.com

FOR THE WEEK ENDED 11-30-18

CORN – At the close on Friday President Trump and Chinese President Xi had not yet met at the G20 Summit.  Soybeans should see the biggest effect, but corn will be the recipient of spillover action.  That said, we’ll look at what happened this week in the lead up to the meeting and possible results going forward.

Corn began the week on a sour note and then spent the rest of the week digging its way out.  March corn sank to its lowest level since late September on an early negative spin to US/Chinese talks.  The balance of the week, we traded headlines and tweets that painted a rosier picture for the talks.  Good export sales also lent a supportive air.  Russia seized three Ukrainian vessels saying they violated borders on the Azov Sea.  Russia has blocked the area between the Black and Azov Seas, but Ukraine says it is having a limited impact on grain shipments as only 4-5% of Ukrainian grain exports go through the Azov Sea.  As of this writing, the ships and sailors have not been released by Russia.  This issue caused President Trump to cancel his meeting with Russian President Putin that was to take place at the G20 Summit in Buenos Aires November 30-December 1.  On the bright side, the US signed the “new NAFTA” trade agreement with Mexico and Canada at the G20 Summit.

Weekly export sales exceeded expectations at 49.9 million bushels to bring total commitments to one billion bushels and 16% ahead of last year.  This was the largest weekly sales total in eight weeks.  The USDA is forecasting year on year exports to be flat at 2.45 billion bushels.  We need to average weekly sales of 36 million bushels to achieve the USDA’s target.  Total commitments are 41% of the USDA ‘s outlook when the average for this date is 46%.  Are we a little high on the forecast? There were no new crop sales this week.  Total new crop sales are a measly 4.4 million bushels versus 40.5 million bushels last year at this time.

Weekly ethanol production was surprisingly higher even with the negative margins and reports of some plants closing or slowing their grind.  Production was 6,000 bpd higher at 1.04 million bpd.  Ethanol stocks were 100,000 higher at 22.9 million barrels.  Ethanol margins improved to a negative 12 cents per gallon.  US ethanol futures fell to their lowest level in 13 years!  The EPA released the 2019 RFS mandates in which they kept the ethanol portion of the19.92 billion-gallon mandate at 15 billion gallons.

OUTLOOK: Corn posted a key reversal higher on the weekly chart in anticipation of a spillover effect from soybeans if the talks between the US and China go well on December 1st.  A negative outcome at the trade talks could mean a weaker soybean market, which would be expected to spillover to corn.  South American weather is moot at this time, but there are a couple of areas that will be monitored for dryness in the last half of December.  For the week, March corn rallied 7 ½ cents to close at $3.77 ¾ per bushel, July corn was 6 cents higher at $3.91 ½, and December 2019 corn gained 4 ½ cents to $3.99 ¾ per bushel.  If a rally is seen next week, consider making a benchmark new crop sale.

SOYBEANS – January soybeans were much the same story as corn this week, falling hard on Monday, but recovering the balance of the week.  Negative sentiment concerning US/Chinese relations was a source of pressure, but later comments that the US and China wanted to get a deal done were viewed positively.  In general, it seems like everyone wants to come out looking like the “winner.”  President Trump has said if nothing gets done, he is ready to add addition tariffs on Chinese goods January 1st.  Additional tariffs would include raising the current 10% tariff to 25% on $200 billion worth of goods with the possibility of tariffs on another $267 billion of imports.  Russian President Putin said Russia is ready to fill the void left by the absence of US soybeans and poultry supplies into China.  What does the spread of African swine fever do to China’s meal and corn demand?  They find new cases almost daily and many believe it’s worse than is being reported.  China made their largest purchase of US pork since February this week when they bought 2.4 tmt.  Trade chatter sees China’s soybean import potentially falling to 6 mmt in December versus 9.6 mmt last year.    First quarter imports could slip to 12 mmt from 19.6 mmt last year.    China’s soybean stocks at ports are estimated at 7.5 mmt, up from 6.1 mmt last year and the highest for this time of year in ten years.  In October, China sourced 94% of their soybean imports from Brazil.  They imported just 66.9 tmt of soybeans from the US in October compared to 1.33 mmt a year earlier.  Argentina has been the largest buyer of US soybeans in the first three months of the marketing year with 1.3 mmt.  An unexpected daily export sale of 268.7 tmt of US soybeans to unknown lent support mid-week, as did a late week 120 tmt sale to unknown.

Weekly export sales were disappointing at 23.1 million bushels with big cancellations to China and unknown.  Marketing year to date, Argentina has booked 1.6 mmt.  Total commitments are 32% behind last year at just 854.6 million bushels.  We need to average 27.1 million bushels of sales per week to reach the USDA’s forecast for 1.9 billion bushels of exports.   The USDA’s outlook for exports is for a year on year decline of 10.7%.  There were no new crop sales.  Total new crop commitments stand at 5.9 million bushels versus 9 million bushels last year.

South American weather looks favorable for the first half of December.  The vessel line-up waiting to unload soybeans at the Rosario and Santa Fe ports in Argentina is increasing.  On November 28 there were 28 US boats waiting to unload with an estimated 27 days wait time.  Argentina’s soybean planting is nearly 41% complete compared to 47.3% complete on average. Argentina announced they signed a $1 billion contract with a Chinese state builder for rail improvements.  The 634-mile project runs through Buenos Aires, Rosario and Mendoza province and is expected to reduce transportation costs by 55% since it will support longer trains.

OUTLOOK:  You will know the outcome of the US/China meeting by the time this is published.  If there was a truce of sorts, i.e. no additional tariffs are to be added in January, or they agree to keep talking, soybeans are expected to see a push higher in the short run.  Factors tempering a sustained rally include: China’s battle with African swine fever, which is reducing meal demand and pushing their crusher margins into the red; heavy soybean purchases already made by China from Brazil; and Brazil’s anticipated record soybean harvest which is expected to be harvested early.  With US carryout expected to get closer to one billion bushels, even if tensions between the two countries improve, extensive rallies may be hard to hold.  For the week, January soybeans jumped 14 cents higher at $8.94 ¾ per bushel, March was up 13 cents at $9.07 ½, and November 2019 was 9 ¼ cents higher at $9.39 ¼ per bushel.  January soybeans also posted a key reversal higher on the weekly chart.

WHEAT – Last weekend there was a major escalation in tensions between the Russian navy and Ukraine in the Black Sea/Sea of Azov region near Crimea, where Russian ships have blockaded passage and Ukraine’s government has declared a state of emergency. This action shouldn’t disrupt the wheat trade as roughly 5% of Ukrainian wheat leaves these ports.  However, the bigger issue is more fighting that would alter the risk premium for all Black Sea/Russian wheat supplies. SovEcon upped their Russian wheat export forecast to 34.7 mil tons, 500k higher than their previous estimate.

First notice day for wheat was this Friday and the December contracts for all classes, way outperformed the deferred months blowing out the front spreads. Wheat inspections were very weak and the gap behind the USDA pace has widened every week. US wheat export inspections are running 19% behind last year at this time  which is about 370 million bushels.

Market Report

Thursday November 29th, 2018

March 19 corn closed unchanged at $3.73 ¼ at December 2019 closed unchanged at $3.96. January beans closed down 3 ¼ at $8.87 ¼ and March 19 closed down 3 ¾ at $9.00 ½. March wheat closed down 3 ¾ at $5.07 ¾ and July 19 closed down 4 ¾ at $5.21 ½. Crude oil closed up $1.13 at $51.62.

Eerily quiet day in the markets, “the calm before the storm”, if you will, ahead of the G-20 summit this weekend. It is also “position day” for Dec delivery, which occupied most traders’ attentions today. Flat price trade was on virtual lockdown, excepting some early “Tweet buying” on more positive U.S.-China trade comments. Managed Money were viewed small net buyers of corn today, and will head into tonight short just over 55,000 futures and options.

The weekly export sales report got the day started right, as new business topped 1 mmt for the first time since early October.  1.267 MMT made it on the ledger. Not much new on the weather front. U.S. is warming up again, but snow cover will make fieldwork difficult, if not impossible. South America appears to be entering a dryer trend, particularly after the weekend. In the short-run, this should help get Argentina crops planted, but follow-up precip will need to be monitored heading into December days. North Brazil could actually get a little too wet?  Exchanges report 38% of Argentine corn has now been planted, advancing a 1.4% wk/wk.

Soybeans and products traded slightly lower as the market looks ahead to the weekend G-20 summit in Buenos Aires and specifically, the Saturday Trump-Xi dinner. Trade volumes are thinning out with most participants seemingly positioned the way the want to be and in a ‘wait and see’ mindset. Aggressive up front call buying has been a feature all week and has firmed January option volatility 5.5% from a week ago.

The latest trade news hit the wires mid-morning when the WSJ reported that the US was exploring a deal with China where they would suspend any additional tariffs until the spring in exchange for new talks looking at big changes in Chinese economic policy and at least temporarily de-escalate the trade war. Trump was quoted as saying that he is close to doing something with China on trade, but he doesn’t know if he wants to do it. The general market impact of today’s headlines helped provide underlying support perhaps but lacked anything to change our current range bound market structure. We won’t know how the dinner meeting between Trump and Xi went until later Saturday night or Sunday, quite likely by tweet, which sets the stage for a dynamic Sunday evening opening.

Soybean exports of 629 tmt were within expectations.  Outstanding sales on the books stand at 11.342 mmt vs. 13.304 mmt this time last year while exports to date are 11.915 mmt vs. 21.022 mmt this time last year. That represents a shortfall of 335 million bushels from last year’s pace while the USDA is currently estimating exports on the year to fall short of last year by 229 million bushels. China is looking at stockpiling pork reserves as the threat of swine fever threatens to reduce domestic supply and prices remain relatively low. In today’s export sales report, China bought 3 tmt of US pork so if/when a trade deal is reached you would likely see much more US pork sold to China. In terms of feed, their feed demand has begun to slow down meaning less meal usage which has taken their domestic crush margins into negative territory.

Price action across the wheat complex was similar to that of the past few days. As far as flat price, the markets were unable to build off Wednesday’s solid performance and finished the session slightly weaker. Export sales this morning were in line with expectations but were a little disappointing in that it is looking more and more like we did not win any of the Saudi business from a couple weeks ago, the Egypt and Tunisia business from late last week were not on this week’s report and Bangladesh was absent after a couple of consecutive weeks of picking up some HRS.

The Bloomberg story that came out after the close Wednesday talked about how Egypt is asking traders to delay shipments thru December. So, shortly after the US was able to snag three cargoes of Egyptian business in two separate tenders, the GASC has told grain traders they are not able to open letters of credit before January and said they should delay their shipments. The article says some traders have decided to proceed with shipments for the Dec period rather than paying higher costs for shipping delays by waiting until letters of credit are issued. It does not look to effect last week’s tender where the GASC bought four cargoes, of which one was Russian, one Romanian and two US SRW because that shipment is not until mid to late Jan, but it does affect the tender back on Oct 26 when the GASC bought eight cargoes (470 TMT), of which six were Russian, one was Ukrainian and one was US SRW and the tender back on Oct 3 when the GASC bought three Russian cargoes (180 TMT). The story said GASC was not available for comment over the alleged news.

Anna Kaverman

anna@mercerlandmark.com

Market Report

Wednesday November 28th, 2018

March 19 corn closed up 4 ¾ at $3.73 ¼ at December 2019 closed up 4 at $3.96. January beans closed up 15 at $8.90 ½ and March 19 closed up 15 at $9.04 ¼. March wheat closed up 5 at $5.11 ½ and July 19 closed up 6 ¾ at $5.26 ¼. Crude oil closed down $1.24 at $50.49.

What a difference a day can make in the grain markets these days. China trade deal sentiment went from extreme pessimism Monday to unbridled optimism today. This sent beans to double-digit gains, with corn coming along for the ride. In fact, more Dec corn traded (198k) on the day than there were contracts left open last night (181k). Managed Money funds were viewed net buyers of 15,000 contracts, and they will head into tonight net short 60,000 corn futures and options.

“Tweet markets” continue, though this time, China gets the credit. President Xi of China himself reportedly made a very conciliatory speech in Spain. In it, he claimed China will open wider to foreign investors and protection for intellectual property rights will improve. These are both currently key demands of U.S. trade negotiators. Note, the talk was given in Europe, which China would obviously like to keep on its side if the U.S. trade conflict continues, but it was enough to spark rallies in many commodities. Macro sentiment was also positive on comments from the Fed, with 600+ point gains in the Dow and a sharp break in the US Dollar.

Elsewhere, U.S. harvest progress has likely stalled out for a moment, as the Midwest grapples with bitter cold and the aftereffects of a winter storm. More precip on the way for the Plains, though temps warm back up some. Today’s weather remains mostly favorable for Brazil and Argentina, although with net drying expected in much of Argentina and similar conditions in southern Brazil next week there is potential for a little more interest in long term rainfall.

The soybean market extended its sharp recovery back to the upper end of the daily and weekly chart formations on another fresh surge of trade optimism and short covering ahead of the weekend G-20 summit and Trump-Xi dinner this coming weekend. Trade volume picked up again and was roughly on par with Monday’s big volume, hard down flush.

Today’s headline support originated in Spain where Chinese President Xi made a speech to the Spanish parliament stating that China plans to widen market access for foreign investors and will step up protection of intellectual property rights. Xi also said China planned to import $10 trillion worth of goods over the next five years without specifying which goods. “China will make efforts to open, even more, its doors to the exterior world and we will make efforts to streamline access to markets in the areas of investment and protect intellectual property.”

The market liked this new sign of cooperation and willingness to address intellectual property as it possibly signals that key change in attitude/action that the US has been noting was absent from the latest talks with Chinese trade representatives.  Elsewhere in the news, the USDA flashed a sale of 269 tmt of soybeans sold to unknown.  They also changed a previous announced sales cancellation of 180 tmt from China to unknown. That cancellation was originally reported on October 19th.

The wheat markets had a little bounce overnight, and prices continued to firm during the early stages of the day, but shortly thereafter the rally stalled and the theme for the rest of the morning. There was talk that of the 600 MT of wheat Algeria bought, Cargill sold 240 TMT of it, and that it was probably Argentine. Eventually, that could be good news for US. The more the Argentinians sell to Algeria or whomever, the less they will have to sell to Brazil, and that Brazil will need to come to us.

In a Bloomberg story that came out after the close, a top Egypt wheat buyer is said to be asking traders to delay shipments. That is correct, right after the US is able to snag three cargoes of Egyptian business in two separate tenders, the GASC has told grain traders they are not able to open letters of credit before January and said they should delay their shipments. The article says some traders have decided to proceed with shipments for the Dec period rather than paying higher costs for shipping delays by waiting until letters of credit are issued. It does not look to effect last week’s tender where the GASC bought four cargoes, of which one was Russian, one Romanian and two US SRW because that shipment is not until mid to late Jan, but it does affect the tender back on Oct 26 when the GASC bought eight cargoes (470 TMT), of which six were Russian, one was Ukrainian and one was US SRW and the tender back on Oct 3 when the GASC bought three Russian cargoes (180 TMT).

Anna Kaverman

anna@mercerlandmark.com