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Market Report

Monday April 1st, 2019

May 19 corn closed up 5 ¼ at $3.61 ¾ and December 2019 closed up 4 at $3.88 ¾. May beans closed up 11 ¼ at $8.95 ½ and November 19 closed up 9 ¼ at $9.14 ¾. May wheat closed up 5 at $4.62 ¾ and July 19 closed up 4 ½ at $4.68. Crude oil closed up $1.45 at $61.59.

Markets bounced back Monday after Friday’s report-inspired break. Corn finished the day with $.04-$.05gains, beans $.10-$.11 higher. Managed Money traders appeared to take some profits on shorts today. They were believed net buyers of 20,000 corn (to take them to 240k net short), 10,000 beans (now 75k net short), 4,000 meal (10k net short), and were net even on oil (30k net short).

Exports have been a sore point for the bull in recent months, but it was a point of support today. Overnight, South Korea announced they were in for more corn, obviously spurred on by the recent market break. Last week’s trade rumor of China buying more beans also appeared to be confirmed, when the USDA announced a private sale of 828,000 MT of old crop soy to China.  Last but not least, the weekly grain inspections release mid-day found a very solid week of corn shipments. For the week ended 3/28, exporters shipped 1.26 mmt of corn, which compared favorably to the prior week’s total just under 1 mmt, but still lagged the year ago week’s 1.45 mmt. Mexico was easily the number one destination. Corn shipments YTD moved to 29.7 mmt, which compares to 24.6 mmt on the books this time last year.  Soybean inspections of 0.731 mmt saw a small wk/wk reduction from 0.860 mmt the week prior, but still easily bested the year ago week’s 0.584 mmt. YTD bean inspections stand at 29.3 mmt versus 41.5 mmt on the books this time last year.

Weather influences remain largely unchanged to start the week. Flooding in the U.S. Midwest continues, which continues to raise the possibility of acreage switches and/or lost yield potential, should it persist too long. Temps are expected to warm-up, but the lower Midwest and Delta are still expected to see frequent rains. Short-run conditions in South America are mostly favorable. Crop watchers there would like to see a little more rain in the April outlook. Brazil export/import data for March was fairly pedestrian, showing modest increases in most commodities.

Technically, May Corn never seriously checked out the report day lows, which is now interim support. Expect selling back near “old support” just below $3.70. Beans also held their support shelf, and came close to challenging initial support just below $9 in May. Same story for Meal, which remains solidly within the recent range. Support near $300, initial resistance starts at $310 and intensifies every $5 higher.

Hopefully, Monday’s wheat price action will not be remembered as a bad April Fools day joke, and the price action in wheat may be coming to an end. After a mixed overnight session, the wheat complex caught a bid and raced out to double digits higher in Chicago. That strength may hot have held, but futures did remain higher over the balance of the day. Trade looks like it may still be trying to adjust after Friday’s crop report data, which was not overly bearish to trade, but not friendly either. Monthly condition reports this afternoon showed the SRW wheat crop well behind where it was last year, but the HRW wheat crop much better than where it was last year. The data was mostly expected, but it still may give a boost. Algeria is in tomorrow, and Bangladesh is in later in the week, and they may give us a better gauge as to where World wheat prices are week over week. Talk this morning that they may have been a couple dollars lower, but that data was hard to come by.

All state by state weekly wheat condition ratings started this afternoon. Many states are below, with some compared to last week, while others are compared to this time last year. Overall conditions came in at 56% G&E and 9% P&VP vs 32% G&E and 31% P&VP this time last year. HRW states were rated 57% G&E compared to only 18% last year, while SRW states were rated 41% G&E vs 58% last year. Spring wheat planting will start next week.  Colorado wheat conditions declined slightly from last week with G&E falling 2% up to 66%, while P&VP was unchanged at 5%.

South Dakota wheat conditions fell slightly week over week, with G&E dropping 6% up to 38%, while P&VP remained at 3%. Ohio wheat conditions are the worst on record to start a year, with 28% of the crop rated G&E (vs 75% last year), while 26% of the crop is rated P&VP (vs only 3%last year). Tennessee wheat conditions are off slightly from this time last year. In its first report of the year, G&E was pegged at 54% vs 57% last year, while P&VP was 14% vs 6% this time last year.

Anna Kaverman

anna@mercerlandmark.com

Market Report

Tuesday March 19th, 2019

May 19 corn closed down ¼ at $3.71 ¼ and December 2019 closed up ½ at $3.95 ¼. May beans closed down 1 ¾ at $9.04 and November 19 closed down ¾ at $9.38 ¼. May wheat closed down ¼ at $4.56 ½ and July 19 closed down ¾ at $4.62 ¾. Crude oil closed down $.09 at $59.29.

Choppy day overall for the markets, though much like yesterday, the feature in our view was the inability to sustain downside momentum. Corn finished near unchanged. Managed Money players remain firmly ensconced on the short side. They sold 7,000 corn (to take them to 240k+ net short).

The “Trade War Sentiment Wheel” spun again, and one could argue that it did so twice in the same day. Around noon, one news service reported that China was “walking back” some of the concessions made in past negotiations. This tended to drive markets down to session lows. Not fifteen minutes thereafter, another news service report signaled a U.S. and China trade deal was entering the “final” phase, which firmed markets right back.  President Trump called China trade talk progress “very well”, and also labelled ongoing discussions with Brazil as “great”.  Sigh. At least we know the next ministerial level talks will occur March 25th, as negotiators are due to take turns shuttling back and forth between DC and Beijing.

Also helping the corn market in particular is the shift in model runs suggesting a continued wet bias to weather into late March and early April. For now, the markets are not pricing in much risk of any weather event, let alone delayed U.S. planting, but such premiums will likely take root should current trends continue. Note as well that U.S. farmers were not able to do much of their fall prep due to an unusually early cold snap this November. The risk is not only that plantings get delayed, but also potentially that yields could suffer due to less inputs applied. Texas corn planting was pegged at 26%, which is close to average, but lagging behind last year’s 34%. Brazil weather remains mostly favorable, while Argentina has evolved into a more mixed situation as the week drags on. In particular is a dry pocket in SW Cordoba province. Crop Scout Cordonnier did not change his estimates much

Soybean prices turned lower on disappointment in trade war outcome and lack of Chinese purchases for US soybeans. Trade guesses are starting to surface with reductions in acres planted coming in less than earlier thoughts. Weather patterns are expected to change for the better in Brazil, which should allow active harvest progress to resume.

It was a back and forth trading session wheat, which at the end of the day turned out to be rather disappointing as the market settled marginally lower. For the second day in a row Mpls wheat has separated itself from the other two and has traded higher throughout. Trade there has been influenced more on the extreme flooding seen across many parts of the northern plains. There continues to be limited influential news around for both the HRW and SRW wheat markets, and after a short covering bounce that has taken futures some $.30 off their contract lows. At some point we were eventually going to see the funds say enough is enough and start defending their position. This has kept a lid on rallies over the past week, and until some new development surfaces, this trend will probably continue. World wheat prices have been flat to a little lower over the past several weeks, and the export lineup is rather bare. Not too concerned at these prices that the US is not securing any business, but with World prices as low as they are, trade is not expecting huge export sales data in the coming weeks either.

Anna Kaverman

anna@mercerlandmark.com

Market Report

Friday March 15th, 2019

May 19 corn closed up 3 at $3.73 ¼ and December 2019 closed up 2 at $3.96. May beans closed up 10 ¾ at $9.09 ¼ and November 19 closed up 9 ¾ at $9.42 ½. May wheat closed up 9 ½ at $4.62 ¼ and July 19 closed up 8 ½ at $4.68 ¼. Crude oil closed down $.09 at $58.82.

FOR THE WEEK ENDED 3-15-19

CORN – Corn tumbled to new contract lows early in the week, but fund short covering engaged to push corn to four straight higher closes.  For the week, May corn rallied 9 cents to settle at $3.73 ¼ after setting a new contract low of $3.61 per bushel.  July corn settled 8 ¾ cents higher at $3.82 ¼ and the December contract gained 7 ½ cents to close at $3.96 per bushel.

There didn’t seem to be one major headline that precipitated the steady upswing in corn this week.  The news from China was perceived as friendly, although the two world leaders won’t likely meet until April.  China passed new laws to protect the IT and IP rights by making it illegal to force companies to give up their rights, and they also passed laws to open their markets to more foreign investment.  The US had been asking for these measures.

Mother Nature has provided significant moisture across the Midwest this winter.  As a result, we are seeing widespread flooding.  This makes traders nervous about the possibility of a late planting season.  A lot can happen in the next 45 days.  While it is too early to say planting will be late, many would agree we won’t have an early planting season.  This leads to ideas that we may not see as many acres switch from soybeans to corn.  The USDA’s early forecast is for 92 million corn acres this year, up from 89.1 million acres last year.  They are projecting 85 million soybean acres versus 89.2 million acres last year.  IEG Vantage (formerly Informa Economics) pegged US corn acreage this year at 91.8 million acres and US soybean acreage at 85.5 million acres.  Conab’s latest corn production forecast for Brazil is 92.8 mmt, up 1.1 mmt from their February outlook.  The USDA is carrying their corn crop at 94.5 mmt.  Brazil’s safrinha crop is 70% planted in favorable conditions.  Argentina’s corn crop is estimated at 47.3 mmt by the Rosario Grains Exchange compared to the USDA’s outlook for 46 mmt.

Weekly export sales were below expectations at 14.6 million bushels.  Total commitments fell from just 1% behind last year in last week’s report to 6% behind this week.  Total sales stand at 1.61 billion bushels.  The USDA is calling for a 2.6% decline in exports year on year.  We need to average 26.9 million bushels of sales per week to hit the USDA’s current 2.375-billion-bushel export forecast.  New crop sales were 18.7 million bushels, bringing new crop sales to 69.8 million bushels versus 62.5 million last year at this time.  Weekly export inspections have fallen below the weekly average needed for seven straight weeks.  Weekly ethanol production was down 19,000 bpd to 1.005 million bpd.  Stocks fell by 600,000 barrels to 23.7 million barrels.  Weekly ethanol production has been below last year in 15 out of the last 17 weeks.  Further cuts to the ethanol usage line could be coming on future balance sheets.

The USDA announced this week they plan to discontinue the objective yield survey used in their August report.  They will continue with farmer surveys and satellite imagery for the August report, and will continue to use objective yield surveys for the September through November reports.  However, the objective survey will use about half the number of what they historically used.

OUTLOOK:  Funds had built a sizeable short position coming into this week, leaving the market susceptible to a short covering rally.  Rumors that China is on the verge of buying US corn/ethanol/DDGs and the major snow storm provided a spark to lighten up on short positions.  However, as we’ve seen over the past several months, rumors about Chinese buying can turn on a dime. Have your upside targets in mind as we are fighting just to get back to mid-February price levels.  If China actually makes purchases of US grains, the rally could be extended.  For now, we may have found an interim bottom.  The March 29 Prospective Plantings is right around the corner and could provide price direction for the next month.

SOYBEANS – Soybeans dropped to a new low for the move early in the week, but a resulting reversal higher on the chart helped kick start a rally that extended through the balance of the week.  Of course, Chinese rumors and how the trade talks are progressing were positive inputs. China did buy 926 tmt of US soybeans to begin the week.  This brought their total purchases to 11 mmt so far this marketing year compared to 28.2 mmt by this time last year. Fund short covering was apparent in soybeans, as it was in corn.

Weekly export sales were above trade estimates at 70.2 million bushels.  This brings total commitments to 1.5 billion bushels and 16% behind last year.  To hit the USDA outlook for 1.875 billion bushels of exports, we need to average 15.9 million bushels of sales per week for the balance of the marketing year. The February NOPA Crush report showed 154.5 million bushels were crushed, much less than the trade estimate of 158.7 million bushels.  Soyoil stocks were up to 1.75 billion pounds versus 1.61 billion pounds expected.

China’s problems with African swine fever in their pig herds was reinforced this week when they purchased 52.5 million pounds of US pork.  This is the third biggest weekly purchase ever made by China.  China reported their hog inventory had fallen nearly 17% in February from last year and their sow numbers had plunged 19% versus a year ago.  There were reports this week that some schools, businesses, and military units in China will no longer serve pork in their cafeterias.  China’s poultry production is expected to be up 8% this year due to ASF.

Conab updated their Brazilian crop estimates this week.  They cut their soybean forecast 1.9 mmt from last month to 113.5 mmt.  The USDA is using 116.5 mmt.  The Rosario Grains Exchange in Argentina upped their soybean crop estimate from 52 mmt to 54 mmt.  The BAGE left their estimate at 53 mmt versus the USDA’s 55 mmt projection.

OUTLOOK: May soybeans were 13 ½ cents higher for the week at $9.09 ¼, July rallied 13 ¼ cents to $9.23, and November was 12 cents higher at $9.42 ½ per bushel.  Soybeans may have found a short term low ahead of the March 29 plantings report.  China’s situation is still up in the air and US weather is becoming a headline.  Short term we may see some short covering rallies, but longer term it’s difficult to get overly bullish without a threat to the next crop.

WHEAT- On a week/week basis funds did not impact their short position in SRW to much extent. On 3-12-19 funds were approximately short 108,200 contracts in Chicago.  Ahead of the visit to Washington D. C. by Brazil’s President Jair Bolsonaro’s , Brazil is considering granting an import quota of 750,000 tons of U. S. wheat per year without tariffs in exchange for other trade concessions. Brazil is looking for the U. S. to reopen the import of fresh beef from Brazil as well as access to the U. S. market for its exports of limes.  Ethiopia has issued an international tender to purchase 400,000 tons of milling wheat. The tender deadline is April 19, 2019. China sold 2,000 tons of imported 2013 wheat at an auction of state reserves overnight. The sale represented less than one-half of one-percent of the total grain wheat available at the auction.

Updated wheat crop condition for the states of Kansas, Oklahoma and Texas will become available this afternoon. Texas conditions should improve given the mid-week rain event last week. More extensive state generated condition reports should be forthcoming next week. Government generated crop conditions begin on April 1, 2019.          

Market Report

Tuesday March 12th, 2019

May 19 corn closed up 3 ¾ at $3.65 ¾ and December 2019 closed up 5 at $3.91 ½. May beans closed up 7 at $8.97 and November 19 closed up 6 ¾ at $9.32 ¼. May wheat closed up 24 ½ at $4.53 and July 19 closed up 23 ¾ at $4.60 ¾. Crude oil closed up $.08 at $57.20.

Finally, a “Turnaround Tuesday” worthy of the name. The corn market overcame a slightly uncertain start, riding on the back of a short-covering bounce in wheat. While futures couldn’t quite stick the “good trade” (a close above Monday’s high), the resulting four cent higher close is a welcome break from recent bearish trends. Managed Money traders basically bought back what they sold yesterday, trimming their net short to 235,000 combined futures. Make no mistake it was all wheat today. After a near-relentless $1 dive, wheat recovered 25% of it in a single day of short bashing. Corn and soy merely rode its coat-tails. Trade was unable to identify a single catalyst for the rally (other than a record large fund short), but it was broad-based, encompassing the equally beaten-up European markets.

There was a little news around today, but it was not ultra-bullish. Brazil’s gov’t (CONAB) raised projections of the corn crop by 1 mmt from prior to 92.8 mmt. This is sharply higher than the drought-shortened 80.7 mmt crop last year, but still 2 mmt below current USDA projections. If weather continues in a favorable direction, the USDA may look smart. Still a lot of growing season there, though, with safrinha planting still ongoing. Argentina is also in decent shape, with crops there broadly in pollination mode; condition ratings have been slipping, but the forecasts still appear mostly good. U.S. Midwest gearing up for another winter storm. Elsewhere, exports remain a sore point for the bull. South Korea continues to actively source corn for summer, but little/none is going to U.S. sellers. U.S. is roughly $15/mt uncompetitive. Turkey/Iran are both in for feed grains, but that business will almost certainly go to the Black Sea, on freight and politics.

The soybean market reversed higher as part of a broad-based short covering/technical recovery across the grain complex. Beans and meal nearly had key reversal trades (outside day up out of new lows for their respective moves) but were unable to hold the momentum into the close and had to settle for standard reversals. Follow through to confirm these trades will be important tomorrow and would help to stabilize our downside for a moment.

South American weather remains favorable overall with production estimates on the upswing although the privates generally are coming in below the latest USDA projections. There were plenty of private estimates around the headlines today. Cordonnier sees Brazilian beans at 113.5 mmt with harvest now 57% complete with his corn production estimate at 93.5 mmt. He estimates Argentina’s soybean crop at 54 mmt and corn at 44 mmt. Agrural puts Brazil soybeans at 112.9 mmt. CONAB estimates the Brazilian soybean crop wat 113.459 mmt vs. 115.543 mmt last month, they are using a yield of 3.168 mt/hecatare and lowered exports by 1.5 to 70.0 mmt. CONAB put the Brazilian corn crop at 92.807 (26.21 and 66.59) vs. 91.652 mmt last month, they are using a yield of 5.436 mt/hectare and left exports unchanged at 31.0 mmt. USDA is at 116.5 mmt and 94.5 mmt respectively for Brazil  beans and corn and 55.0 mmt and 46.0 mmt for Argy beans and corn. Big crops in Brazil and Argentina are going to compete hard with US corn and soybean exports moving forward with combined soybean production around 11-13 mmt above last year and combined corn production around 23-26 mmt bigger.

Informa updated US acreage estimates with corn 91.8 million (up 180,000 from Feb), beans 85.5 million (down 550,000 from Feb), all wheat 46.7 million (down 60,000 from Feb), spring wheat 13.580 million (down 60,000 from Feb)and cotton 14.7 million (up 50,000 from Feb).

The enticing carrot of a China trade deal remains in the background, but time has eroded market optimism and until we see a conclusion and final details confirmed, the bull has retreated to a full defensive posture.  Chinese media reports that trade rep Liu He spoke with US reps Lighthizer and Mnuchin by phone today to further discuss the trade deal text and make plans for the next stage of work. There were no follow through export sales confirmation after the USDA flashed 1.5 mmt Friday-Monday.  The talk was 2-3 mmt+ of purchases so we will be on the lookout for additional sales confirmation over the coming days.

Price action across the wheat complex was a little better throughout the night, and when trade moved into the day session the markets took it to a whole new level. After moving above yesterday’s highs some buy stops looked to be triggered, and the rally continued through the midday time frame.

Trade was looking to rebound after yesterday’s disastrous start to the week, and even though one day’s gains are not an indication that the break is over. One would think that traders will take a step back at look at things a little differently now. Today’s trade does the same thing as what happened on March 1. If you recall, that was when we saw that big reversal, thus putting in a base low. At that time, prices eventually went back down to those lows, took them out, and proceeded to fall another $.20. If that were to happen again, we would probably expect to find the same type of price action, with the $4.00 level probably providing huge support. The funds do not feel threatened, and even after Tuesday’s $.20 pop, they probably have no intentions of throwing in the towel. But remember at these levels, wheat could be used for just about anything. After yesterday’s break, traders started hearing of famers thinking of plowing under their wheat with intentions of planting corn. In the areas where it has been extremely wet, or maybe they have had some sort of winterkill, maybe they have enough of an insurance guarantee to plow their wheat under and plant a different crop. Keep in mind, Informa lowered their winter wheat acreage estimates today.

Anna Kaverman

anna@mercerlandmark.com

Market Report

Monday March 11th, 2019

May 19 corn closed down 2 ¼ at $3.62 and December 2019 closed down 2 at $3.86 ½. May beans closed down 5 ¾ at $8.90 and November 19 closed down 5 at $9.25 ½. May wheat closed down 11 at $4.28 ½ and July 19 closed down 10 ½ at $4.37. Crude oil closed up $.69 at $57.12.

The corn market finished a couple cents lower, producing new contract lows for old crop futures. Futures once again made a brave stab at a bounce overnight, but turned decisive sellers shortly after the day open. Did not help that wheat finished double-digits lower. Managed Money traders continue to pad their large net short in the market. They are estimated to have sold another 10,000 contracts today, which would leave them net short close to 245,000 combined futures and options heading home tonight.

Mid-Day Grain Inspections report did nothing to staunch the bleeding, finding another rather subpar week of corn shipments.  For the week ended 3/7, exporters shipped 765,618 metric tons of corn, which was down slightly from the prior week, and compares to 1.377 million metric tons in the year ago week. YTD inspections total 26.6 mmt versus 20.4 mmt in the year ago period. Still a large lead, no doubt, but it is certainly in jeopardy given strong foreign competition this spring and summer, combined with last year’s back-end loaded pace.

The soybean market extended its slide despite some trade confirmations with China. The USDA flashed 926 tmt of US old crop beans sold to China. This takes the total confirmed to 1.590 mmt on the latest round of purchases with more possible in the coming days if the 2-3 mmt+ rumored total from last week is realized.

There was a more upbeat tone to US-China trade talk rhetoric over the weekend with both sides commenting on an agreement being finalized. There may be two different interpretations of an agreement at this point, but they continue to work toward a deal. Once terms are agreed upon by both sides, then a Trump-Xi signing ceremony will be scheduled with sometime in April now the best guess for that to take place. The White House this afternoon confirmed that no date has been set for a summit and that negotiations are ongoing. Weekly grain inspections data was delayed by a technical issue but eventually did get published and showed bean inspections of 874 tmt compared to estimates for 800 tmt and last week’s shipments of 848 tmt. Total soybean shipments to date stand at 26.832 mmt compared to 39.730 mmt this time last year. This represents a deficit of 474 million bushels to last year’s pace, the USDA sees total soybean exports for the year falling short of last year by only 254 million bushels.

Existing soybean fundamentals tell a clear story, but even more disconcerting is the outlook moving forward which suggests ending stocks will continue to grow. Larger than anticipated US soybean acreage this spring is likely due to a combination of favorable price relationships, a slow start to spring fieldwork/planting due to weather and a tight farm economy that doesn’t favor the higher input cost of planting corn. Even if China and the US reach a trade agreement, overall Chinese soybean demand is wounded by the spread of African Swine Fever that some reports say will limit feed demand by 30% this quarter from the prior year and may still be getting worse. It is not a rosy outlook for soybean fundamentals. China may come to the rescue, but any deal would appear to be longer term supportive rather than solving our oversupply problem this marketing year.  We have plenty of competition out of the Southern Hemisphere this year where net production is estimated 13-14 mmt higher than last year and it is competitively priced.

For much of the night, price action in wheat was two-sided, but in the few hours leading up to the morning pause all trade turned a little lower. Funds seem to care less about the size of their position they are building. There was nothing in the report on Friday that was friendly, and the funds do not feel threatened at all. Looking back over the past 17 years, the biggest percentage move from Chicago wheat has had from the end of January to the end of March was a move of a little under 12% back in 2013. After Monday’s settle, since the end of January, Chicago wheat has experienced a move of more than 18%. Granted, today is only March 11, and there are three more weeks to the month, but Chicago wheat futures will have to rally more than $.30 just to get back to that 12% threshold.

Impossible to tell when the fund selling will stop. Today may have been the last day, or it may not come till next week. For now, there are no threats around, and look for them to be there to sell any extended rally. On Friday trade talked about the USDA trimming all the fat after Friday’s report, and that may be true, but there is still going to have to be that one phenomenon to occur to spook the fund into a significant short covering rally. There has been plenty of demand around, and the US seems to be getting its fair share, but so far that has not slowed the break. At these levels, wheat could be used for just about anything right now, but the funds don’t seem to care.

Anna Kaverman

anna@mercerlandmark.com

Market Report

Thursday March 7th, 2019

May 19 corn closed down 7 ¼ at $3.65 ¼ and December 2019 closed down 6 at $3.89. May beans closed up ½ at $9.02 ½ and November 19 closed down ¼ at $9.36 ½. May wheat closed down 11 ¾ at $4.38 ¼ and July 19 closed down 10 ½ at $4.45. Crude oil closed up $.41 at $57.03.

Ouch. There’s not much else to say after the drubbing the grain markets took today. Corn futures erased their entire Fri-Tues recovery and then some, settling lower in the end. Today marked the lowest May Corn settlement seen since the September lows.  Managed Money traders smell blood in the water, adding 20,000 more corn shorts today. It is estimated that they are heading into tonight net short 165,000 combined futures and options.  CFTC will finally be current tomorrow, reporting data through this Tuesday.

Unfortunately, there was no magical reason the markets were down as much as they were today. To sum it up, the bull side of the picture is still more talk than action, while at the same time, bears can tout poor U.S. export competitiveness for summer slots, and the negative tug of cheap feed wheat on world corn demand. The former was best demonstrated by South Korea, who has been actively picking up corn supplies for summer days on the break. Prices hint at South American origin, mostly Brazil at this point. A surging US dollar trading at the highest levels in one year today was also not doing U.S. markets any favors.

In fact, the day started in relatively decent fashion after weekly export sales arrived toward the high-end of market expectations. Net old crop sales were 969,700 MT. When factoring in a 281k dollop of new crop sales, both combined topped 1 mmt versus expectations for something just under that. Mexico was the big net buyer of record, accounting for nearly half the business, with Colombia, South Korea, and Canada, bringing up the rear. Exports sold and shipped are running in a dead heat with 17/18, which is not optimal given the fast start to 18/19 (and strong finish to 17/18). The wild card remains China. If they do indeed come through with some old crop corn purchases, the current USDA forecast looks close to the mark. If not, they have considerable room to fall in coming crop reports. Indeed, we would not be surprised if a cut in corn export demand is the primary feature of the March WASDE update. Likely too early for the USDA to make major wholesale adjustments to South American corn production.

The soybean market had a mixed performance which was somewhat impressive in shaking off the substantial negative influence of the wheat and corn action along with a very lackluster weekly sales report and a negative currency input to settle slightly higher in the old crop.  While export confirmations to China have been lacking there was some new business being shopped today and that helped keep beans on the board afloat today in a sea of bearishness.

In the weekly export sales report, old crop bean sales of 311 tmt fell well below market expectations. The meager total featured China. Outstanding soybean sales on the books is 12.7 mmt vs. 9.2 mmt this time last year while accumulated exports total 26.5 mmt compared to 38.7 mmt this time last year. This represents a shortfall of 449 million bushels to last year’s export pace. The USDA is currently projecting year over year exports to fall by 254 million bushels. We must really need bean acres because we are price incentivizing a whole lot of them, certainly much more than was assumed following harvest. Besides price, a tight farm economy and a cold wet spring could also support larger than expected bean acres at the expense of corn and spring wheat acres. The new crop bean/corn ratio is near its recent highs at 2.41%.

The only positive you can take out of today’s wheat price action was that the day ended. It was a day in which every tick lower you thought to yourself this is it. Every time the board rallied a couple cents, you thought finally the board is catching a bid. As it turned out, the markets kept finding more and more selling, and by the end of the day. Back-to-back sessions of double-digit losses has left many wondering how much lower can we go? Going home Wednesday there was not a lot of positive things around for wheat, but this morning’s export sales report changed that thinking a little. It gives hope that the US, even though it may not look it, is capturing business on the lower board, and with futures only continuing to unravel, that demand will remain.

If this morning’s export sales report would have been as dismal as most thought it was going to be, traders would have completely understood today’s price action. But, if we could get a good export number with most of the demand flying under the radar, the lower board only makes US wheat that much more enticing to vendors. For several days it was mentioned that the funds are nowhere near their record short position in Chicago, and if they wanted to pound wheat lower they had more than enough ammo (power) behind them to accomplish this feat. They have done that, and at least in Chicago, even after the selling of the last two days they probably still have a manageable position. The crop report Friday morning is the smaller of the two crop reports in March, but it does not mean it is insignificant. For wheat, we were not expecting the USDA to change much in the report.

Anna Kaverman

anna@mercerlandmark.com

Market Report

Monday March 4th, 2019

May 19 corn closed up 1 ¾ at $3.74 ¾ and December 2019 closed up 1 ½ at $3.95 ¾. May beans closed up 4 ½ at $9.16 and November 19 closed up 4 ¾ at $9.50 ½. May wheat closed down 1 ¾ at $4.55 ½ and July 19 closed down 2 ¼ at $4.61. Crude oil closed up $.78 at $56.97.

The corn market got off to a fast start Sunday and early Monday, leaving Friday’s positive close in the dust. As so often is the case, it is difficult to keep those bull fires burning all day long, and the action ebbed and flowed throughout the day. The higher close will not set hearts racing, but it still leaves behind many shorts who sold “in the hole” late last week.  Managed Money traders were viewed small net buyers today, and we estimate they are net short about 145,000 combined futures and options.

You’re tired of reading it, and analyst are even more sick of writing about it, but the main driver overnight was China once again. We appear to be inching closer to an interim accommodation of sorts, after President Trump called on China over the weekend to drop ag tariffs. The U.S. would respond by beginning to unwind a certain portion of the tariffs imposed last year. At the same time, China would begin the long task of rewriting their laws to accommodate some of the structural economic reforms demanded of it by the U.S. This led to fast gains in most risk assets early, but it appears like the financials are beginning to take a similar attitude as the grains.

Mid-day grain inspections remain mediocre. Not a disaster, but they are now trending below year ago equivalency and have long fallen short of levels needed to meet USDA sales goals. For the week ended 2/28, the U.S. shipped 865,617 MT of corn, which is up slightly wk/wk, but down slightly from the prior year tally of 980k mt. YTD inspections now stand 25.8 mmt, which compares to 19.0 mmt on the books this time last year. Expect this gap to continue to narrow given last year’s back-end-loaded pace.  Lingering export bulls are counting on China to keep this year’s exports ahead of last year. There was a small batch (100k metric tons) of corn sold to Colombia this morning under daily USDA reporting.

The soybean market had a mixed performance where on the positive side, we confirmed Friday’s reversal by leaving a close and settling higher but also found it difficult to sustain strength.  The feature of the product trade was strength in meal where we rejected new lows on Friday and built on the recovery, oil was the odd man out today and the oil share spread settled back to a two-week low although flat price bean oil remains in its near-term range.

Renewed trade optimism following reports that China and the US were closing in on a trade agreement helped to support the recovery, but the market is weary of talk and that was reflected in less than convincing price action in beans. Look for short covering and technical buying against these lows to support prices heading into Friday’s USDA crop report and WASDE. This report will feature a reminder that we are still sitting on record domestic and global soybean supplies. It will also feature Southern Hemisphere production that has benefited from favorable weather for most of Brazil since February and Argentina crops that have bounced back smartly from last year.  The report should not be bullish.

Not too surprising, price action across the wheat complex today was choppy. With still no confirmation on whether the US was able to snag any business. Either what was already known or any of the fresh demand that popped up over the weekend. For now, the complex still needs demand to stimulate a further recovery, and until we see the US win its fair share of business, the funds look to be in control. They have been pressing the market lower over the past two weeks, and on days such as today. They are there to sell any significant bounce and keep a lid on rallies.

Anna Kaverman

anna@mercerlandmark.com

Market Report

Friday March 1st, 2019

May 19 corn closed up 2 ¼ at $3.73 and December 2019 closed up 2 ¼ at $3.94 ¼. May beans closed up 1 ¼ at $9.11 ½ and November 19 closed up 2 at $9.45 ¾. May wheat closed down 2 ¼ at $4.57 ¼ and July 19 closed down 3 ¼ at $4.63 ¼. Crude oil closed down $1.42 at $56.19.

FOR THE WEEK ENDED 3-1-19

CORN – Corn finally broke out of its trading range this week, only not in the direction growers were hoping.  Despite going home the previous week with raised hopes for Chinese business, nothing came to fruition.  Corn posted a sharp key reversal lower on Monday and extended those losses until Friday posted the only higher close of the week.  Corn traded to lows not seen since last September with May hitting $3.66 per bushel before profit takers stepped in ahead of the weekend.  Funds were sellers throughout the week, building their net short to the second largest ever for this time of year.  Extreme weakness in the wheat market also spilled over into corn.  Both Chicago and Kansas City wheat set new contract lows during the week.

The market has grown tired of the rhetoric from Washington that tries to build up ideas that China will be a buyer of US corn, ethanol, DDGs, and/or soybeans. The US has requested China lower the current 70% tariff on US ethanol to 15%.  No response has been received.  They want to see something concrete on the books.  Despite very good weekly export sales and actual new daily sales, the selling continued.  First notice day for the March contract didn’t help with growers having to price or roll their basis contracts.  Heavy deliveries as the month ended were also a negative factor on prices.  South American and US weather have not been factors for a few weeks.  It’s too early to talk about US planting weather and how it may affect acres.  Some quick shipment basis pushes were seen in localized areas due to weather related logistical problems.

Weekly export sales were much higher than anticipated at 48.8 million bushels.  Total commitments for the year jumped to 1.56 billion bushels and were able to hold a small 1% advantage over last year.  We need to average 31.2 million bushels per week of sales to hit the USDA’s 2.45-billion-bushel export target.   Mexico continues to be the leading buyer of US corn. New sales to Mexico, South Korea, and unknown were also announced in the USDA’s daily reports. Weekly export inspections were only 29.6 million bushels, when we need 46.5 million bushels per week.  Weekly ethanol production was up 32,000 bpd at 1.028 billion bpd.  Stocks fell 200,000 barrels to 23.7 million barrels.  Margins dropped to breakeven, down 2 cents per gallon for the week

One of the next headlines to watch is planting intentions.  The USDA runs the farmer survey the first two weeks of March.  The February crop insurance level for corn came in at $4.00 per bushel and $9.54 per bushel for soybeans.  This is a ratio of 2.39.  This ratio isn’t encouraging any change in acreage allocation between corn and soybeans.  What will the grower do?  Will the banker have a say?  The USDA will release the Prospective Planting report on Friday, March 29th.  The USDA Outlook Forum on February 22 put 2019 US corn acres at 92 million versus 89.1 million last year and soybean acres at 85 million acres versus 89.2 million last year.

OUTLOOK:  A very disappointing week as prices slid lower four days in a row without any promise of buying from China.  Weather in the US and South America is a non-issue at this point on the calendar.  Corn was able to rally for a higher close before the weekend, but for the week May corn was down 11 ½ cents at $3.73, July 11 cents lower at $3.81 ½, and December fell 7 ½ cents to $3.94 ¼ per bushel.  The downside may have been overdone, but politics will continue to overshadow the markets.  In the short-run, a bounce back into the recent trading range wouldn’t be unexpected. The USDA will release the monthly March WASDE report on Friday, March 8 at noon.

SOYBEANS – Soybeans spiked higher on Monday in anticipation of the previous Friday’s announcement that China would buy an additional 10 mmt of US soybeans.  No details were provided in the announcement, but traders were optimistic that this time something would come of it.  Unfortunately, the trade was once again disappointed when no new sales were announced, and it was unclear whether China just promised to buy or if the US was just being overly optimistic.  It was announced the US won a World Trade Organization case against China which accused them of exceeding domestic support limits for wheat and rice from 2012 to 2015.  This isn’t likely to help in trade negotiations.  Prices edged lower throughout the week without any fresh fodder for the bulls.  The market is tired of waiting for new purchases.  South America has the cheapest soybeans and Brazil’s weather is allowing for their soybean harvest to plug away at a record pace.  Production estimates from South America have stabilized with expectations that we have seen the smallest production forecasts for the season.  Attitudes have turned from a neutral to lower bias for production to neutral to higher.  AgRural pegged Brazil’s bean harvest at 45% complete versus 27% on average with growers having sold only 40% of their crop.  BAGE put Argentina’s soybeans at 88% blooming compared to 89.5% on average with 68% setting pods versus 70% on average.  Conditions were rated at 47% good/excellent, up from last week’s 45% rating.  They left the production forecast at 53 mmt, down slightly from USDA’s 55 mmt outlook.

Weekly export sales exceeded expectations at 80.7 million bushels.  This brings total export commitments to 1.4 billion bushels versus the USDA outlook for 1.875 billion bushels of exports.  We need to average 17.7 million bushels of sales per week to achieve the forecast.  China was the leading buyer for the week with 1.8 mmt, but this could still be playing catch up for when the USDA was closed since nothing was announced through the daily reporting system.  China has bought 9.2 mmt of US soybeans in this marketing year versus 26.2 mmt last year.  Weekly inspections were good at 48 million bushels.  We will need to average just over 32 million bushels per week to meet expectations.

China continues to try and contain the African swine fever outbreak.  They are seeking local government comments on dividing the country into five zones to combat the spread of the disease. China estimates their meal demand has fallen 5% due to ASF. China’s Purchasing Managers Index for February fell for the third consecutive month.  It dropped to 49.2 versus estimates for 49.5.  Anything under 50 is considered contraction.

OUTLOOK:  Soybean prices headed south this past week despite good weekly export sales, but the trade has been focused on additional sales to China which didn’t materialize.  For the week, May soybeans fell 12 ¼ cents to $9.11 ½, July lost 11 ¾ cents to $9.25 ½, and November declined 8 ¾ cents to settle at $9.45 ¾ per bushel.  The trade still wants confirmation that new business with China is being completed.  For now, we could go back into a sideways pattern and more talk focusing on acreage for the upcoming year.

WHEAT – The Russian wheat crop is now pegged at 78.5 million tons for 2019.20. The previous estimate was 77.6 million tons.  This is almost a 10% increase from last years crop but not at record levels. Some US crop conditions for wheat are being released on a state by state basis. Those conditions are compared to December 3rd. In Kansas G/E was 51% up from 45%, Colorado was 50% G/E vs 54%, Nebraska was 60% vs 66% and Oklahoma 43% vs 46%.  Wheat export inspection were outstanding posting the biggest total of the marketing year.

Market Report

Thursday February 28th, 2019

May 19 corn closed down 3 at $3.70 ¾ and December 2019 closed down 2 ½ at $3.92. May beans closed down 6 ½ at $9.10 ¼ and November 19 closed down 5 ½ at $9.43 ¾. May wheat closed down 7 ¼ at $4.59 ½ and July 19 closed down 6 ¾ at $4.66 ½. Crude oil closed up $.24 at $57.61.

Corn has been nothing if not consistent this week, finishing lower and extending its losing streak to four. Managed Money funds continue to lean in, selling another 10,000 corn today, which by our estimate would leave them net short 120,000 futures and options.

Though not obvious given the end result, the markets actually had a little good news around to start today, in the form of solid weekly export sales. Net new corn business of 1.24 MMT for the week were reported by the USDA, which was better than the sub 1 mmt tally expected. Mexico and Japan were the big buyers of record, taking over half, with South Korea, Colombia, and Morocco bringing up the rear. This takes corn sold + shipped for the 18/19 campaign to 39.56 mmt, which compares to 39.27 mmt on the books this time last year.

Most other market inputs are still very much in a holding pattern. China remains a four-letter word for most, and the market is quickly becoming deaf to rumors. Need to see something on paper. Not much weather risk premium in with rains expected to bail out SW Argentina growers in a matter of days. Most of the rest of South America is suspected to be in good shape.  Some talk increased usage and a shorter crop in India could permit them to import small quantities of corn, likely locally-sourced?  South Africa in a similar posture. U.S. weather is cold for the next week. Extreme snowpack and moisture implies slim odds of an early Midwest planting start.

The soybean market closed weaker with the charts pressing nearby support levels despite a better than expected weekly export sales report confirming new trade with China. It has been an extremely active geopolitical news cycle. The Trump-Kim summit was cut short, with no deal after North Korea demanded an end to sanctions first in exchange for partial de-nuclearization. This was not sufficient to make a deal so Trump walked.

In terms of negotiations with China, this underscores the reality that unless China gives into US demands on structural trade issues and enforcement, no deal will be made there either and was a negative influence in today’s market. The tariff deadline tomorrow has been delayed indefinitely which will keep the 10% tariffs in place instead of moving to 25% to allow more time to complete ongoing negotiation and the two sides do appear to be making progress. Lighthizer shed some light on a ‘triple-tiered enforcement mechanism’ backed by the threat of unilateral U.S. punishment that the US is pushing for.

The WTO dispute settlement panel sided with the US in finding that China has provided trade distorting domestic support to its grain producers well in excess of its commitments under WTO rules. China’s market price support policy artificially raises Chinese prices for grains above market levels, creating incentives for increased Chinese production of agricultural products and reduced imports. Moving forward, this will help American farmers compete on a more level playing field. This dispute is the first to challenge China’s agricultural policies that disregard WTO rules.

Another poor performance for Chicago wheat, with another move into new contract lows and settling the weakest between all three classes of wheat. It was a month Chicago wheat is going to want to forget, as it closed $.64 lower during the month of February. The worst preforming month since Aug of 2017. USDA export sales this morning was in line with this weeks’ expectations, coming in at 476 TMT, with an additional 61 TMT of new crop for a combined sales number of 537 TMT. Takes total sales for the marketing year to 806 mil bu vs 795 mil bu this time last year.

Anna Kaverman

anna@mercerlandmark.com

Market Report

Wednesday February 27th, 2019

May 19 corn closed down 2 ¼ at $3.73 ¾ and December 2019 closed down 1 ¾ at $3.94 ½. May beans closed down ¼ at $9.16 ¾ and November 19 closed up ½ at $9.49 ¼. May wheat closed down 1 ½ at $4.66 ¾ and July 19 closed down 2 at $4.73 ¼. Crude oil closed up $1.40 at $57.37.

The corn market kept the pressure on the bull, which is common on “position day” ahead of the delivery cycle. Futures finished the day lower, bouncing back a little late to close off the session’s lows. Markets attempted a bounce overnight, but the “up” board did not survive the first hour of trade. Managed Money funds were believed net sellers of another 20,000 corn today. This was the third consecutive day of such activity which by estimates would leave them net short roughly 110,000 futures and options.

One of the major emerging stories in our view in corn has been the dramatic repositioning of the corn market over the past month. As noted above, funds have decisively flipped to the “short” side of corn. Slowly at first, and more rapidly in recent days after being small net longs into late January. At the same time, the advent of the March delivery cycle has no doubt stimulated many smaller speculators and frustrated bull commercial players to “throw in the towel” on some length. The end result is a cleaner market positioning with some fuel underneath via the fund short. But what spark will ignite it?  Until then, we wait.

The weekly EIA report leaned neutral for ethanol, as expected.  Production rebounded +3.2% off the prior week’s very low level, which was more than the 1-2% increase trade was expecting. A 1.028 mil bbl/day rate would utilize 5.53 billion bushels of corn over a marketing year, which is slightly below the YTD average. USDA Sec Perdue testified to Congress today that the rule-making necessary to allow E-15 ethanol sales year-round may not be complete in time for summer driving season due to the gov’t shutdown. He also noted that if it is late, they “could compensate by declining to enforce the current summer-time ban.”  Not likely to inspire retailer confidence?

The markets will get their first “regular” up-to-date look at weekly sales tomorrow in a couple months. It is likely to find something close to 1 million metric tons of new corn business, but it would not surprise us to see it come in well under that mark. Competition has been fierce, and will not go away anytime soon, especially as we get closer to summer and South America’s “gut slot” corn export period. The recent futures break reawakened South Korea.

The soybean market was unable to hold its early gains and closed a tick lower up front and a couple ticks high in the new crop.  It was a very quiet trade and outside of the roll, trade volume was abysmal. While anticipation of export confirmations to China and the potential for a larger trade agreement with China continues to underpin futures, the lack of a confirm so far this week on the 10 mmt promised from last week and some hawkish testimony from US Trade Rep Lighthizer prevented beans from holding its attempt to bounce back out of technical support today.

Lighthizer’s comments in a nutshell were somewhat sobering to the trade bulls as he reiterated that there will be no deal made that fails to address the structural reforms and enforcement.  He also said that purchases of US goods alone were not enough to resolve the dispute. Keep in mind Lighthizer is the trade hawk/bad cop and don’t be surprised if Mnuchin or somebody else surfaces in the news at some point here with some more positive rhetoric to play the good cop as has been the pattern for months. With 1 day left in the month/calculation period for crop insurance, the avg. price of new crop beans this month has been $9.54 ¼ and corn $4.00 on the nose. The new crop bean/corn ration settled at a new high today of nearly 2.41%.

The overnight wheat rally was unable to carry into the day, and prices moved aimlessly lower throughout the session before settling slightly better in old crop, and slightly lower in new crop. Third time in the past two days that the markets tried to rally off what looked to be profit taking and maybe even some bargain hunters taking a shot at being long wheat at these suppressed prices, only to run into a brick wall of resistance and a market telling those that the break may not be over.

Yesterday’s commitment of trader’s report, which is now only a few weeks out from being current, showed managed money in Chicago wheat are only holding a short position of around 16,000 contracts. Even if you add in the selling of the past few weeks, they are nowhere close to their record short position, which comes in at over 162,000 contracts. If the funds want, they still have plenty of ammo (resources) to pound Chicago wheat prices down even further.

We have an export sales report in the morning. Last week’s culmination report of six weeks came in much larger than expected at 3.574 MMT, with an additional 244 TMT of new crop for a combined sales number of 3.819 MMT. Tomorrow’s data is for just one week, but it nevertheless will be an interesting report. It is impossible to tell if all the sales from a couple weeks ago made last week’s report. The Nigerian tender looked to be there as they were one of the bigger surprises last week. The two cargoes of SRW wheat to Egypt was there, as was the Korean business, but we also had a couple HRW wheat cargoes to Egypt that was not expected, so was that there in error? And what about all the Unknown business?

Anna Kaverman

anna@mercerlandmark.com