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Market Report

Tuesday February 20th, 2018

March 17 corn closed down 2 at $3.65 ½ and July 18 closed down 1 ¼ at $3.81 ½. March soybeans closed up 5 at $10.26 ½ and July closed up 4 ¾ at $10.47.  March wheat closed down 8 ½ at $4.49 ¼ and July 18 closed down 8 ¼ at $4.78 ¼. Crude oil closed up $.36 at $61.56.

The corn market held mixed feature today. Better early, weaker late. The highs were notched shortly after the “day” open and from there, it was a one way street paved with selling. Corn would finish the day lower, and nearly $.05 below the highs of the day. Despite the softer close, traders still estimate the funds were net buyers today, which would put them net long 20k corn heading into tonight. To no surprise, South American weather was the focus coming out of the long weekend. Needed rain fell on important crop areas from central into north-central Buenos Aires during the holiday weekend, but other major growing areas broadly went without.  The next week to ten days are expected to continue a largely dry bias which will maintain pressure on crops. Brazil is having the opposite problem, with too much rain as farmers try to get second crop corn planted. Over the weekend, analysts at Safras pegged the full year Brazilian corn crop at 89.5 mmt, which is significantly behind the USDA’s latest estimate of 95 mmt, and down 16% from last year’s record harvest.

The soybean market opened the overnight session with a gap higher and appeared to be off to the races along with the meal market once again to start the week. Weekend rains in Argentina benefited parts of Buenos Aires as well as some Northern and Western growing areas but the key areas missed out heading into another week of dry conditions. Flat price beans and the spreads weakened throughout the day session and while the close still represents a new 7-month high close, the gap was closed. Cash movement was noted in both old and new crop as futures traded up to 7-month highs and for a moment that was enough to slow our upside momentum.  he mid-day weather outlook showed some better chances for light rains for this coming weekend with another chance for relief the following weekend. The trade has been wary of looking out ahead because similar events have been advertised and largely disappointed this growing season.  Today’s price action does not qualify as a blow off trade but ‘choppy is toppy’ and perhaps cracks are beginning to surface? Elsewhere in the news, an Argentine farm consultant group saw the Argentine soybean crop at 47 mmt compared to the Buenos Aires Grain Exchange at 50 mmt and USDA last 54 mmt.  Many in the trade have been talking 45-47 mmt the past two weeks.  Safras increased their Brazilian soybean crop estimated to a record 115.6 mmt vs. 113.9 mmt est. in December which compares to AgRurual at 116.2 mmt and USDA last at 112 mmt.

The wheat complex started the evening a little better and traded as much as $.06-$.07 higher in both Chicago and KC. The buying returned once the day session started, but it was not as strong and not very lasting. The strength across the soy complex, combined with Russian wheat prices firming another $5.00 week over week may have been behind the early strength. However, rain and snow showers across the HRW belt over the past 24 hours quickly put a ka-bosh on any thoughts of an extended rally. There was one system that developed over eastern Colorado and moved easterly, giving nearly the entire state of Kansas some snow cover. There was also a system that moved up from the Gulf that provided central Oklahoma with much needed precip. The US Dollar continuing its reversal after Friday’s price action and trading a point and a half above Friday’s lows was viewed as a negative to the complex as well. All may have played a role in the HRW and SRW wheat contracts’ reversal today and subsequent settle right off its session’s lows. After the close Egypt announced they were in for wheat. It should not be a Russian dominated market anymore. Thursday and Friday will be the grain outlook conference in which we will get an indication on upcoming acreage intentions.

Anna Kaverman

anna@mercerlandmark.com

Market Report

Friday February 16th, 2018

March 17 corn closed down ¼ at $3.67 ½ and July 18 closed down ¼ at $3.82 ¾. March soybeans closed down 2 ¾ at $10.21 ½ and July closed down 2 ½ at $10.42 ¼. March wheat closed down 4 at $4.57 ¾ and July 18 closed down 3 ½ at $4.86 ½. Crude oil closed up $.38 at $62.37.

FOR THE WEEK ENDED 2-16-18

CORN – Not much has changed fundamentally.  Traders are still concerned over dryness in Argentina, rain delays in safrinha corn planting, fund short covering, and decent demand for the cheapest corn in the world.  The dryness in Argentina has had a bigger impact on soybean prices, but that strength has helped underscore support to corn prices.  Rain has somewhat delayed soybean harvest in Brazil, and those acres are waiting to be planted with corn; thus, the underlying corn support. A shrinking Argentine corn crop has also provided support.   Large speculators have been taking profits from the net short position they have been carrying for months and have now flipped from net short to net long.  While they are not yet net long, their net short position has been cut significantly.  US corn is the cheapest source in the world.  Weekly export sales reflected this fact with the second biggest weekly export sales number.

Weekly corn export sales were larger than anticipated at 77.7 million bushels.  Total commitments at 1.4 billion bushels are 14% behind last year.  This is the smallest year/year deficit this marketing year.  The USDA is projecting this year’s exports at 2.05 billion bushels, a 10.6% year/year decrease.  We need 21.6 million bushels of sales per week to hit the USDA estimate.  Last year from this point through the end of the marketing year, we averaged 19.6 million bushels per week.

Weekly ethanol production fell 41,000 bpd to 1.016 million bpd.  Stocks were 600,000 lower at 22.9 million barrels.  Stocks are still 1.7% higher than last year.  Margins were unchanged for the week at a positive 11 cents per gallon.  Average gasoline demand over the last four weeks is up 6.5% from last year.  The USDA is not expected to increase the corn for ethanol usage line on the March report with production below last year in four of the last seven weeks. Brazil’s first corn crop was 17% harvested as of February 14th versus 15% last

year.  Their safrinha corn in the center south was 19% planted compared to 32% last year.  Mato Grosso was only 37% planted compared to 54% planted last year.  Parana’s corn was just 6% planted versus 23% last year, and MGDS was 7% planted versus 21% last year.  The Brazilian ag minister stated their second crop corn planting was delayed slightly, but “everything is going normally.”  In Argentina, the BAGE said 58% of their corn crop was damaged by drought, but they left their production estimate unchanged at 39 mmt, the same as the USDA’s estimate.  They rated their corn crop at 58% poor/very poor versus 30% two weeks ago, zero percent excellent versus 4% previously, 14% good versus 35% previously, and 28% fair compared to 31% previously.

OUTLOOK:  Corn has gleaned strength from good demand of its own, spillover support from soybeans/meal, and fund short covering.  Large speculators as of February 13th (the latest commitment of traders’ report) showed they are now carrying a net long position of 11,000 contracts.  Further upside may be limited by ample US supplies still to be priced by growers.  How South American weather shapes up will be a major factor in overall direction.  Due to President’s Day, the markets are closed during the day on February 19th.  The night open could be wild, but the direction is unknown.  For the week, March corn closed 5 ½ cents higher at $3.67 ½, July was up 5 ¼ cents at $3.82 ¾, and December corn gained 4 ¾ cents to settle at $3.97 per bushel. The USDA Ag Forum will be held February 22-23.  March options expire February 23rd.  China is on their Lunar Year holiday until February 22 to celebrate the Year of the Dog.

SOYBEANS – The next leg up began on Monday, despite the announced cancellation of 455 tmt of beans to China.  Funds have turned their net short position into a net long on disappointing rainfall in Argentina.  Crop production forecasts for Argentina have been declining.  Last week, the USDA cut their outlook to 54 mmt, which is likely the highest estimate out there.  Argentina is the world’s largest exporter of meal.  With meal buyers caught short, the meal market has taken the lead in the upswing in soybean prices.  Nearby meal rallied to its highest price since July 2016.  There will come a time when we have priced in Argentina’s lower bean production, and lower meal availability, but we haven’t hit it yet.  March soymeal closed higher for 8 sessions in a row, before finally breaking it heading into the weekend.  It also set fresh contract highs for 5 consecutive sessions.

Some traders are leaning toward an Argentine soybean crop of 47 mmt versus the latest USDA forecast of 54 mmt.  The Rosario Grain Exchange believes their soybean production may be capped at 50 mmt.  The Buenos Aires Grain Exchange left their Argentine soybean crop forecast at 50 mmt, after saying 56% of the crop had been damaged by drought.  The BAGE rated their soybeans in the good/excellent category at 11% versus 25% two weeks ago, 33% fair vs. 41% previously, and 56% poor/very poor compared to 37.6% in their last report.  They indicated 75% of the crop is blooming, well behind the 85% average and 46% are setting pods versus 57% on average.  Trying to translate this into how it may affect US meal exports is a riddle.  If Argentine meal supplies become tight, Brazil is likely next in line to be the world’s supplier, then Paraguay.  The US is considered a residual exporter of meal.  The critical pod filling stage for most of Argentina’s soybeans is still ahead.  Safras and Mercado pegged Brazil’s soybean harvest at 9% complete versus the average of 13%.  The main production region of Mato Grosso was 29% harvested versus 28% on average.  Parana was barely started at 2% complete versus 17% average and RGDS had not started versus 16% complete on average.  Safras and Mercado continue to peg Brazil’s soybean crop at 114.6 mmt.  The USDA is at 112 mmt.  Brazil’s ag minster said they could see a repeat of last year’s record 114.1 mmt soybean crop.

Weekly export sales were at the high end of expectations at 23.5 million bushels.  This keeps us at 13% behind last year’s total commitments.  With total commitments of 1.6 billion bushels, we need to average a record 16.5 million bushels of sales per week to hit the USDA 2.1-billion-bushel target.  Last year from now through the balance of the marketing year, we averaged just 11.1 million bushels per week.  The USDA export target equates to a 3.4% decline in year/year exports.  Next week’s sales may be disappointing as well with China on Lunar New Year holiday until February 22nd.  Total export commitments to China are 26.6 mmt versus 33.8 mmt last year at this time.  The US has placed anti-dumping duties on Chinese pipe-fittings.  This is in addition to duties on washing machines and solar panel.

OUTLOOK:  March soybeans pierced the December $10.27 per bushel high this week, but were unable to close above it.  If Argentina gets a soaking rain in the next couple of weeks, all bets are off.  March soybeans closed higher in 4 out of the 5 trading sessions this week, fading on Friday on pre-holiday profit taking.  March beans rallied a very impressive 38 ½ cents this week to settle at $10.21 ½, July soared 38 ¾ cents to $10.42 ¼, and November beans closed 22 cents higher at $10.11 per bushel.  November soybeans came within a nickel of their $10.28 ¾ contract high.  March meal hit a contract high of $379.30 before closing $29.50 higher for the week at $373.30 per ton. Meal broke its string of 8 consecutive higher sessions before easing back into the weekend.  As goes meal, so goes soybeans.

WHEAT – Russia looks to export just over 36 million tons of wheat this year.  They are now the world’s leading wheat exporter.  The last time someone shipped that much wheat was the US doing it in 92/93.  The main focus of traders is the weather in the southern plains.  It continues to be very dry and some private forecasters are decreasing their winter wheat crop estimates.

Anna Kaverman

anna@mercerlandmark.com

Market Report

Thursday February 15th, 2018

March 17 corn closed up ½ at $3.67 ¾ and July 18 closed up ½ at $3.83. March soybeans closed up 7 at $10.24 ¼ and July closed up 7 ¼ at $10.44 ¾. March wheat closed up 6 at $4.61 ¾ and July 18 closed up 6 ¼ at $4.90. Crude oil closed up $.66 at $61.17.

The corn market kept them yawning with another “slightly higher” finish today. Most of the intraday excitement was again reserved for soy and wheat. Heading into Friday, corn is sporting $.06 gains for the week, all but a penny of which was scored Monday.  Managed Money funds were estimated net buyers of about 5,000 corn today, which would leave them net short about 45,000 futures and options. CFTC tomorrow night should be interesting, as buying of late has tended to greatly exceed estimates.  Another strong weekly export sales report easily beat heightened expectations for corn. For the fifth consecutive week, new corn sales topped 1.4 mmt, and in fact, posted the second highest level of the 17/18 marketing year at 1.974 mmt. Japan and “Unknown” accounted for nearly half of total sales, with other traditional buyers (Mex, Colombia, Saudis) making up the balance. The red hot pace of late has narrowed the yr/yr gap between sales + ship to 36 mmt vs. 42 mmt this time last year.

We are heading into another weather weekend. Markets will be closed Monday for holiday, re-opening that night. Argentina weather remained dry, as expected, coming into today, with mercury rising another notch. The next week is expected to bring some limited rains to Argentina, but it is expected to be light and somewhat spotty, potentially missing some of the driest areas. There are better odds looking into early March, but it remains to be seen if that will be too little, too late. The weekly condition report suggested up to 58% of the country’s corn crop had been damaged by drought, but the trade remains more concerned about what will happen to soy product exports out of there.

The soybean market remains supported by the meal market which is a special situation. Crop conditions in Argentina continue to deteriorate and the forecasts don’t show any significant relief over the near term so the uncertainty on soybean production and reduced crush for the world’s number one exporter of meal has sent the market into orbit. Short bought commercial meal users have been forced to scramble and funds are compounding the issue by piling in on the long side of the market. Until we see a change in the weather outlook in Argentina if not actual verification of a pattern change production estimates will continue to decline.

Soybean export sales totaled 837 mt (640 old crop) and slightly better than trade expectations. Old crop sales were down 4% from last week and down 8% from the four week avg. Buyers of note include China (157 all moved from previously announced unknown sales and a 73 tmt cancellation). This is the third report in a row to include Chinese cancellations but the recent 455 mt cancellation was not included this week.

Overnight, the wheat complex battled both sides of unchanged early, but over the latter half of the evening, trade turned a little better. Mpls and KC led the complex, but Chicago was not too far behind. Moving into the day session, the Chicago market struggled to find any footing, By late morning the trend in Chicago reversed, and prices gradually firmed the rest of the day. The complex made its highs late in the session before settling a couple cents off those highs. With the raising of wheat margins now behind us (usually a negative to trade), and the market seemingly now done battling through a poor close after Tuesday’s session, trade’s main focus once again is back to weather. Next week at the outlook conference we will get an indication on acreage, but that data has taken on less importance over the past few years. This morning NOAA updated its drought monitor and outlook and nothing has changed. HRW wheat country is still very dry. Conditions across the HRW wheat belt will take on more significance over the coming four to six weeks. Export sales this morning was very similar to last week, coming in 311 MT with an additional 111 MT of new crop for a combined total of 422 MT. Total sales to date are 776 mil bu vs 879 mil bu last year.

Anna Kaverman

anna@mercerlandmark.com

Market Report

Wednesday February 14th, 2018

March 17 corn closed up ½ at $3.67 ¼ and July 18 closed up ½ at $3.82 ½. March soybeans closed up 5 ½ at $10.17 ¼ and July closed up 5 ½ at $10.37 ½. March wheat closed down 5 at $4.55 ¾ and July 18 closed down 2 at $4.83 ¾. Crude oil closed up $1.48 at $60.51.

The corn market had several excuses to stimulate some excitement today, but just couldn’t decide which story to follow – the continued bull run in meal or the gap lower in wheat. Corn finished fractionally higher in the end, right in the middle of an intraday range. Volumes were much lower than levels observed recently. Managed Money traders were viewed net buyers of about 5,000 contracts, which would put them net short just under 50,000 futures and options. The lack of enthusiasm in corn probably shouldn’t be too difficult to understand, given a second day nearly devoid of any market-moving corn news. The markets remain a little jittery about dry Argentine weather, but as noted here, the story is unfolding more over in meal. Argy is a much more essential player in world soy product trade relative to corn. There is potential for some locally greater rainfall into the weekend, but this rain is expected to be mostly confined to the west and north, which has not been as dry.  Most private Argy corn production estimates are at least 10% below levels predicted earlier this year. Fortunately, Brazil has been in much better shape, though second season corn planting is running a little behind average.

The weekly EIA report proved quite friendly for ethanol, allowing the market to erase two weeks worth of lower corrective action. Traders feel the report had a strong weather-tinge, as a resurgence of cold weather likely tamped down production efficiencies a notch. Indeed, they declined 4% wk/wk, and would utilize 5.45 billion bushels of “just corn” over an entire marketing year. Strong demand (particularly of the export variety) helped stocks see a draw off nearly record-high levels.

The soybean market was able to shrug off modest overnight sell pressure to bounce back and resume the rally into new highs.  The rally continues to be led by meal. There was not a lot of news around today and trade volumes were light. For the soy complex, a mostly dry outlook for Argentina’s prime production areas is enough to keep the rally chuggin’ ahead. The forecast isn’t completely dry but with only limited rains and temps heating up again conditions are very stressful. Until we see a change in the weather outlook if not actual verification of a pattern change production estimates will continue to decline and the rallies should remain intact.

Chicago wheat had a gap lower start to trade, and the entire wheat complex saw defensive price action through much of the night. Mpls battled through the rough start to the night and finished the best, but it also had the poorest performance of the complex on Tuesday. The wheat markets weaker overnight price action should not have come as too much of a surprise after Tuesday’s price action which saw SRW wheat futures rally into new highs for the move, but was unable to sustain that momentum throughout the day before ultimately finishing lower. The lower closer close was technically bad. There have been three other times the Chicago March wheat contract traded into a new high for a move only to finish the day lower, and on each occasion, the following day saw defensive price action. The CME threw another wrinkle into the dynamic of trade after the close Tuesday, raising wheat margins $50, from $950 to $1,000. Remember, raising margins is usually done for a reason – to slow down the movement of trade – and thus is usually negative to price action.

So, the wheat complex had to fend off a couple pieces of negative data to start the day, and it did a good job initially. Chicago was able to close the gap left from the start of the overnight, but soon thereafter reversed and hovered in the lower end of its trading range the rest of the morning. Since the overnight lows held, it sure felt like we had the expected scale down buying under $4.55, giving some support on the break.

The scale down buying support could have come from a couple areas. First, outside of the ebb and flow of the US Dollar, the grain markets, and the wheat complex in general, has mostly distanced itself from following economic news. But with inflationary talks on the rise, and the stock market finally correcting, we seem to be finding some funds moving away from stocks and into commodities again. This morning’s economic data just reiterates the inflationary worries. Should those worries continue, it will eventually be supportive to grains. Also, weather continues to be closely watched. On Tuesday, some wanted to talk up the 6 to 10 day and 8 to 14 day maps increasing the chances for much needed precip over HRW wheat country. However, for now, the maps only look to possibly bring some relief to the eastern half of the HRW wheat belt. SW Kansas and Oklahoma and western Texas looks to remain dry.

Anna Kaverman

anna@mercerlandmark.com

Market Report

Monday February 12th, 2018

March 17 corn closed up 5 at $3.67 and July 18 closed up 5 at $3.82 ½. March soybeans closed up 18 ¾ at $10.01 ¾ and July closed up 18 ½ at $10.22. March wheat closed up 15 at $4.64 and July 18 closed up 14 ¾ at $4.89 ½. Crude oil closed up $.09 at $59.08.

Corn managed to maintain this strength into the day. Futures closed right at the highs of the day, boasting $.05 gains and coming within a freckle of taking out the recent post-report spike trade. Managed Money funds were viewed net buyers of 20,000 corn today, and when factoring in the most recent CFTC surprise, would imply they are only 50,000 net short corn.

Argentina was the subject, as weekend rains generally fell short of expectations. A cool down into Sunday may have helped a little, but a soaker is what is needed, and that did not happen.  There are some more showers in the forecast for the weekend, but they are expected to also fall short of the mark for most. Most expect a turn to better conditions into March, but some permanent damage is expected between now and then.  Before getting too revved up, keep in mind that Argentina is a “residual” supplier of corn to the world. Losing a few million metric tons there is not a game-changer, but no doubt could help US exporters win some more business. South Korea dived into the world corn markets overnight after passing on a tender last week. They cited high prices at the time, but ended up paying close to $10/mt more than they would have originally.

Elsewhere, Brazil weather remains mostly good.  Farmers appear to be dancing around intermittent rains to get first crop corn harvested and second crop corn planted. Recent soil moisture increases in the Gulf of Mexico coast states has improved planting moisture for corn that will begin soon. China soil moisture is also good for early corn planting to begin next month.  The heart of the Corn Belt received big snows over the weekend which will help their situation, too.

The soybean market rallied sharply on Argentina weather or more specifically, disappointment in the weekend rain event – gapping higher in the overnight, closing that gap midday, and firming back near the highs into the close for the biggest one-day rally on March beans since the October 12th crop report.  Meal is the leader due to Argentina’s position as the global leader in meal exports, it also gapped higher on the chart but never came close to closing that gap like beans did. Beans slipped some due to a midday outlook suggesting better rains for the upcoming weekend along with some farmer selling with beans challenging their January highs although the farm selling wasn’t nearly as active in beans as the corn selling was. The trade had been talking the Argentine bean crop size of 50-52 mmt in recent weeks compared to the USDA latest at 54 mmt assuming we got some better relief over the weekend. Now, estimates are slipping to the 45-46 mmt range weather pending. Obviously, things are trending the wrong way in Argentina and widespread rains are needed to help stabilize production potential. Fortunately, Brazil still appears on track for record or near record production.

The story of US soybean demand is one where crush demand is rising and maxing out in order to produce meal but this is not enough to counter waning soybean export demand which has been disappointing due to a low protein US crop, competitive Brazilian supply and an outlook that is likely to get worse before it gets better. In the news, China cancelled 455 mt of US bean purchases in another sign of potential trade retaliation but the fact is they can replace those purchases with cheaper new crop Brazilian beans that don’t appear to have the protein deficit of the US crop. This is a normal seasonal transition so the timing is optimal to rattle sabers with minimal real-world impact on trade or risk.  The USDA did announce new sales of 198 mt old crop and 116 mt new crop to unknown.

After a couple days of trading the crop report data, the wheat markets, and the entire grain complex in general, is back to trading weather. Argentine rains seemed to miss the southern region of that country, sending beans and meal racing higher overnight. For wheat, the negative slant that the crop report data gave us on Thursday, combined with 6 to 10 day and 8 to 14 day maps showing much above precip expected across much of HRW wheat country was enough to help settle futures $.15 off its highs on Friday. However, we saw little moisture this past weekend across the HRW wheat belt. That gave a positive slant to trade for the weather bull. As World wheat prices continue to rise, it is almost a given that US wheat futures will follow along. And we still have a large spec in Chicago that holds a significant short. Many positive spins to a wheat complex today, in which any or all could have been behind today’s strength. Looking forward, depending on how much precip the HRW wheat belt receives this week – or if the rains from the 6 to 10 day and 8 to 14 day even materialize, may go a long way in determining if this early week rally was a wonderful selling opportunity, or just the beginning of another leg up.

Anna Kaverman

anna@mercerlandmark.com

Market Report

Friday February 2nd, 2018

March 17 corn closed down ¼ at $3.61 ½ and July 18 closed down ½ at $3.77 ¼. March soybeans closed down 6 ¼ at $9.78 ¾ and July closed down 6 ¼ at $9.99 ¾. March wheat closed down 4 ¼ at $4.46 ¾ and July 18 closed down 4 ½ at $4.73 ½. Crude oil closed down $.52 at $65.03.

I am going to be out of the office February 5th-9th so there will be market commentary.

Highlights

· The US dollar index was higher today, up 0.510 points at 89.181.

· The DJIA was lower today, down 522 points to 26,663.

· The next USDA WASDE report is scheduled for Thursday, February 8th

Corn

The corn market closed slightly lower today pressured by improving weather in South America, while daily exports and good weekly export numbers provided underlying support. Traders expect the USDA supply and demand report Thursday to show a lower US corn carryout due to higher feed usage and higher ethanol production. Informa estimated the Argentine corn crop at 37 million metric tons, 5 million tonnes lower than previously estimated, and the Brazilian corn crop at 88 million metric tons. Currently the USDA has Argentina’s corn crop at 42 mmt and Brazil at 95 mmt. The March corn contract sees resistance at $3.62 ½ and $3.65 ¼, with support at $3.57 ¼ -$3.54 ¾. Private exporters reported to the USDA export sales of 195,000 metric tons of corn to unknown destinations for the 2017-2018 marketing year. Exporters also sold 170,000 metric tons of corn to Egypt for the 2017-2018 marketing year. In general, corn and soybean basis at interior processors and end users in the US Midwest were flat today as farmer sales are slow after active farmer selling took place in the first half of the week

Oilseeds

The soybean market traded lower today on technical selling and rain forecasts for South America over the weekend and again at the end of next week. On Thursday traders expect a higher bean carry out, because of lower export numbers, an increase in Brazilian production and a decrease in Argentine production, to be reported by the USDA. March soybeans sees support at 9.76 ¾, with resistance at the $10.00 mark once again.  Private exporters sold 108,860 metric tons of soybeans to Mexico for delivery in the 2017-2018 marketing year. Weather in Argentina is expected to be hot and dry for the 1-5 day forecast, but trending wetter in the 6-10 day forecast and the 16-30 day forecast as well. Brazil is looking the opposite with the nearby forecasts wetter and 16-30 day deferred forecasts looking drier. Informa pegged the Argentine soybean crop at 51 million metric tons, 3.5 million tonnes less than the last estimate, and the Brazilian soybean crop at 112.5 million metric tons. USDA currently has Argentine soybean production at 56 million tonnes and Brazilian production at 110 million tonnes.

Wheat

Wheat markets traded lower today as snow is expected to fall in some soft winter wheat areas, providing snow cover to protect the crop as well as moisture. Dryness in hard red winter wheat country gave support to the Kansas City market. In the USDA report Thursday, traders expect US wheat acres to be lower, mainly due to lower hard red winter wheat acres, and higher Canadian and Argentinian production. Russian wheat exports, for the 2017-2018 marketing year, are poised to increase again, aided by warm weather and very few storms to disrupt logistics. Previous estimates pegged the maximum export activity for Russia at 45 million metric tons of wheat, but now analysts have said they expect it to be more than that, with many predicting around 47 mmt, but some saying it could be as much as 50 mmt. Year to date Russia has exported 29.8 mmt of wheat, up 35% from last year at this time. Chicago wheat sees resistance at $4.51 ¾ and $4.58 ¾, with support at $4.42 ½ and $4.32 ¾. Egypt’s state grain buyer, GASC, bought 180,000 metric tons of wheat from Russia in their tender today. Trade expectations for All Wheat Stocks in the SatsCan December 31, 2017 Grain Stocks report on Monday are 23.9 million metric tons of wheat, compared to 24.095 on December 31, 2016. Informa pegged hard red winter wheat acres planted at 23 million, with 17.6 million harvested, 39.1 bushels per acre, and 687 million bushels of production. They estimate soft red winter wheat planting at 5.98 million acres, 4.858 million acres harvested, 66.3 bushels per acre and production at 322 million bushels.

Anna Kaverman

anna@mercerlandmark.com

Market Report

Thursday February 1st, 2018

March 17 corn closed up ¼ at $3.61 ¾ and July 18 closed up ½ at $3.77 ¾. March soybeans closed down 10 ¾ at $9.85 and July closed down 10 ¼ at $10.06. March wheat closed down ¾ at $4.51 and July 18 closed down 1 at $4.78. Crude oil closed up $.99 at $65.55.

Corn made another brave stab at a correction today, though much like Wed, the bear was unable to stick the landing. Corn finished fractionally better, very nearly posting an outside day reversal higher on the daily chart. Managed Money traders were viewed net buyers of 5,000 corn today, which would leave them short close to 190,000 corn futures and options.  CFTC report tomorrow night could offer surprises, given the “two sided” fund activity seen of late. Ideas of an early end to Argentina’s ridge applied some pressure to the markets early in the morning.   Make no mistake, stress will be serious over the next week, with temperature extremes getting well over 100 degrees Fahrenheit for multiple days. Better rainfall and greater cooling in the week of Feb.12 will offer pockets of some improvement, though.  The most recent report from exchanges in the country suggest planting is complete. Early planted corn (which is one-third tasseled) is 28% G-E and 39% P-VP, while the late-planted stuff is 50% G-E and 21% P-VP. Brazil remains in much better shape overall, though overall production potentials will still depend on how many safrinha acres end up getting planted.  Time will tell there.

Back at home, export sales were quite strong for corn for a third week running. Net new corn sales of 1,850,600 MT for 17/18 were up 28% from the prior week. One-quarter of the business went to unknown, along with usual suspects Mexico, Japan, Colombia, and South Korea. Shipments for the week were a marketing year high, surprisingly enough, which is probably more of an indictment on how awful the export pace has been to date.  The report takes total sold + shipped to 32.25 mmt for the current marketing year versus 40.25 mmt in the year ago period.

The soybean market continued to ease off it recent highs as an improved weather forecast for Argentina has been noticed. The mid-day GFS model reduced the rains in the second week of the forecast for Argentina. There is still rain showing but totals were reduced as the model continues to oscillate. Weekly export sales report fell short of expectations for soybeans. The meal and oil exports both came in well above trade estimates at 468 mt and 59 mt respectively. Soybean exports totaled just 410 mt (359 old crop) which was a disappointment relative to even modest trade expectations. Sales were -42% from a week ago and -50% from the 4-week avg. Buyers of note include China (457 including 198 moved from prev. announced unknown sales and a -126 tmt cancellation). Soybean sales on the books trail last year’s pace by -46 mb while soybean shipments trail last year’s pace by a whopping -203 mb.  The USDA currently is projecting sales to come up short of last year by -14 mb.  The seasonal window for stronger US export trade is closing as Brazilian harvest advances.

Price action throughout the night saw Mpls trading much better than Chicago or KC, and that trend continued throughout the day. Mpls would finish the day almost a nickel higher, but once again the KC market was the star of the show. Trade in the HRW wheat contract saw an impressive finish to the day, settling $.10 off its early lows. In Chicago wheat had a solid day today as well, despite its slightly lower finish, as it settled $.08 off its lows. Weather may have been partly responsible for the overnight and early weakness as light showers showed on radar screens across northern Kansas this morning. But trade continues to show its resiliency, finishing the day strong. Egypt’s GASC announced after the close they were in for wheat for the March 5th thru 15th time frame.  Their last purchase was back on January 16 when they bought five cargoes of Russian. Average freight for the Russian wheat was $.85 cheaper than their previous tender. The USDA weekly export sales report this morning was expected to show a week of sales similar to last week, but the data was a little disappointing as sales came in at only 289 MT. Total sales to date are 750 MB vs 841 MB last year.

Anna Kaverman

anna@mercerlandmark.com

Market Report

Tuesday January 30th, 2018

March 17 corn closed up 2 ¾ at $3.61 ½ and July 18 closed up 2 ½ at $3.77 ½. March soybeans closed up 8 ¾ at $10.00 ¼ and July closed up 8 ½ at $10.21. March wheat closed up 8 at $4.57 ¼ and July 18 closed up 9 at $4.83 ½. Crude oil closed down $1.04 at $64.35.

The corn market held firm for a second day, buoyed this time by strength in wheat. Futures were steady/better overnight, stayed on the plus side of the ledger all day, and closed near session highs. The funds were viewed net buyers of just over 5,000 corn today, which would leave them short just over 200,000 combined futures and options.

Most of the intraday news excitement was reserved for wheat, which benefitted from weaker-than-expected state condition reports Monday night. In all honesty, fund buying and short-covering is likely the main driver of corn price action of late.  In the background, there remains some concern over Argentine corn. Private analysts are backing up production estimates by several percent. Crop stress there is growing amid another “hot and dry” week. The ridge is expected to break down by Feb 10th, though that could be too late for areas that did not have enough subsoil moisture heading into this week.  Brazil is the toggle and generally has more good areas than bad.  Far northern growing areas in Brazil may receive “too much” rain for the moment.

Elsewhere, the USDA reported another couple cargos of US corn sold abroad this morning to a non-traditional customer, this time to Spain. US Dollar trade remains choppy at three year lows, and overall remains a net positive to US export prospects.  Several news services running articles about new corn ethanol projects in Brazil, which makes sense, given the seasonal nature of cane ethanol production (they are inactive five months out of the year).

The soybean market resumed its rally establishing a new high close for the move. The market was bid up from the start but extended to session highs after the GFS mid-day weather update removed rains from the second week of the Argentina weather forecast. The combination of dry conditions for much of the C/S of Argentina, lack of rains over the next couple of week and hot temps will have analysts further trimming production potential.

World supplies will tighten some as Brazil’s stronger than forecasted production likely won’t offset Argentina’s shortfall.  The US has plenty of supply and as our export window starts to close ahead of Brazil’s gut slot harvest we could be counting on fill in export business to stimulate what has been a very underwhelming trade to date due to strong old crop competition from Brazil and a low protein crop. Maybe an Argentine shortfall helps with that but considering they hold around 13 mmt of old crop supply and Brazil is knocking on the door of another record crop, don’t expect a miracle.

There was not a whole lot of fresh fundamental news around but the broader grain complex rally continued as fund short covering and fresh money inflows support the markets.  Funds continue to short cover, today they were estimated buyers of 11,000 beans.  The next round of soybean sales likely shows in the $10.10 to $10.15 area basis March.

Cordonnier raised his Brazilian soybean production estimate by 1 mmt to 112 mmt and lowered his Argentine soybean estimate by 1 mmt to 51 mmt – USDA last is 110 mmt and 56 mmt respectively.  His corn estimate in Brazil is unchanged at 88 mmt and Argentina was off 1 mmt to 39 mmt – USDA last is 95 mmt and 42 mmt respectively.

Back to back gap higher starts for the wheat market. Today’s move was a direct result from the state by state winter wheat condition report from the USDA released Monday afternoon. The report showed marked deterioration, especially in Kansas and Oklahoma – which had the lowest ever rating for this time of year. Over the past 11 years, only the winter wheat season of 2013 started more poorly than this year. This season started around 42%, while in 2013 the season started around 22%. Yet, as of the end of January, the HRW wheat states this year have regressed so much that we are now trending very similarly to 2013. The crop by no means is lost. We have seen before how resilient wheat can be. The amount of rains come March through April could easily bring the crop back to life in most areas, but those rains will need to be abundant. The drought in the central and southern plains did not just start yesterday. It has been developing for the last two months. There has been plenty of conversation about loss of hard wheat acres. Even if it did get shelved for a couple of weeks when the USDA showed more hard wheat planted than the trade was expecting.

With Friday’s price action a technical element was added to trade today. That is what led to the gap higher start to Monday’s trade. A US Dollar falling into multi year lows only contributed to the recent rally across the wheat complex, and we cannot forget about the large spec, which the COT report on Friday showed them holding 24% of the open interest in Chicago and short around 166,000 contracts. Chicago is still where most of the shorts reside, but KC could continue to gain as concern about quality wheat is confirmed.

Below is a recap of winter wheat conditions from the USDA over the past three months from several states.

North Carolina wheat conditions were similar to last month, coming in at 73% G&E in Jan vs 7% in Dec and 86% in Nov and P&VP was 3% in Jan vs 4% in Dec and 1% in Nov.

Illinois wheat conditions fell to 38% G&E in Jan vs 56% in Dec and 62% in Nov and P&VP rose to 18% in Jan vs 15% vs in Dec and 11% in Nov.

Colorado wheat conditions fell to 37% G&E in Jan vs 48% in Dec and 66% in Nov and P&VP rose to 28% in Jan vs 21% in Dec and 7% in Nov.

Kansas wheat conditions fell to only 14% G&E in Jan vs 37% in Dec and 51% in Nov and P&VP jumped to 44% in Jan vs 22% in Dec and 14% in Nov.

Nebraska wheat conditions fell to 48% G&E in Jan vs 64% in Dec and 59% in Nov and P&VP rose slightly to 8% in Jan vs 7% in Dec and 10% in Nov.

Anna Kaverman

anna@mercerlandmark.com

Market Report

Friday January 26th, 2018

March 17 corn closed up 1 ¼ at $3.56 ½ and July 18 closed up 1 ½ at $3.73 ¼. March soybeans closed down 6 ¾ at $9.85 ½ and July closed down 6 ¾ at $10.06 ½. March wheat closed up 6 ½ at $4.41 and July 18 closed up 6 ¾ at $4.66 ½. Crude oil closed up $.60 at $65.97.

FOR THE WEEK ENDED 1-26-18

CORN – Corn pushed into the upper third of the trading range thanks to a big mid-week rally. March corn posted its highest weekly close since early December.  However, it’s still stuck in the same range it’s traded since November 10th.  Fresh news for corn wasn’t prominent, but a weaker dollar, South American weather concerns, a strong soybean market, and good exports lent underlying support to the corn market.  The US dollar fell to its lowest level since December 2014 this past week.  Comments from the US Treasury Secretary that a weak US dollar would benefit the US pushed the dollar lower.  US corn is currently the cheapest source in the world.  There is talk about rains delaying early soybean harvest in Brazil.  The reason it affects corn is related to the planting of the safrinha corn crop.  If bean harvest is delayed, corn planting could also be pushed back.

The US attaché in Argentina lowered their corn production outlook to 40 mmt compared to the USDA’s 42 mmt forecast.  Brazil’s state agricultural institute, pegged Mato Grosso’s safrinha corn crop at 7.1% planted versus 10.2% last year and 4.1% on average.  They are also predicting a 10% decline in safrinha acreage, down 5 mmt from last year.  Weekly export sales were surprisingly large at 56.9 million bushels.  Sales are running 22% behind last year when the USDA is predicting a 16% decline in year/year exports at 1.925 billion bushels.  Weekly ethanol production was up 1,000 barrels at 1.062 million barrels.  Stocks were an all-time high at 23.8 million barrels, jumping 1.057 million barrels for the week that ended January 19th.

Speculators cut their net corn position on the latest COT report as of January 23rd.  They were net short 248,000 contracts.  The record short is 265,000 contracts.

OUTLOOK:  For the week, March corn moved 4 cents higher to $3.56 ½, July gained 4 ¼ cents to $3.73 ¼, and December corn was 3 ¾ cents higher at $3.89 ½ per bushel.  It’s been hard to get excited about much when the trading range has extended from the contract low of $3.45 ½ to $3.60 ½ since early November.  The magnitude of the speculator net short position makes sellers cautious, as does concern over possible delays in Brazil’s safrinha planting.  On the balance, there are ample supplies of corn in the world that overshadow any big rally potential.  If speculators decide to cover and/or South American weather prompts further production cuts, another dime to fifteen cents to the upside could be a possibility; if not, we stay likely stay anchored in the current trading range.

SOYBEANS – The $10 area came to pass this week, topping out at $10.02 per bushel.  March soybeans traded unchanged or higher for 9 consecutive sessions before settling lower ahead of the weekend.  This was the first lower close since the January 12th USDA reports.  Fund short covering continued as traders want perfect conditions in Argentina.  There have been rains, but it seems everyone wants more.

Mato Grosso, Brazil soybean harvest pace picked up this week to 12.4% complete compared to last year’s record pace of 16.4% and the average of 11.4%.  Nationally, Brazilian soybean harvest is 3.8% complete versus 4.3% last year.  The Brazilian real was up 1.6% during the week, slowing down grower sales, after former President Lula da Silva’s corruption sentence was upheld by the appeals court.

Weekly export sales were the third lowest of the marketing year at 22.6 million bushels.  Total export commitments are 13% behind last year.  The USDA is anticipating less than a 1% decline in year/year exports at 2.16 billion bushels.  Usually we have 88% of the year’s exports on the books by now.  This year, we’re at 74%.  China has only bought 25.8 mmt of US beans this year versus 32.7 mmt last year.  Even if our weekly export match the 2011/2012 record level of 14.7 million bushels from this date forward, our exports would only end up at approximately 2.035 billion bushels.  We need to average 18.6 million bushels/week to hit the USDA’s export forecast.   This would mean weekly sales must be 52% stronger than last year, and 27% stronger than the all-time record, for the rest of the marketing year.

The possibility of a cut in the export category on future balance sheets could have a significant impact on sending our ending stocks toward the 500-million-bushel level, or beyond.  US soybeans are presently a 20-25 cent/bushel premium to Brazilian origin into China.  China has committed to 25.8 mmt of US soybeans, down 6.9 mmt from last year.  For calendar year 2017, China imported 95.5 mmt of soybeans.  Of the total, Brazil accounted for 50.9 mmt or 53% of the total.  The US held 32.9 mmt of the business or 34%, the lowest percentage since 2006 and the second lowest on record.  Argentina captured 7% of China’s business.

OUTLOOK:  For the week, March and July soybeans each rallied 8 ¼ cents to $9.85 ½ and $10.06 ½ respectively.  New crop November soybeans were up 6 ¾ cents at $10.02 ¾ per bushel.  It’s a balancing act between how weather is impacting South American production and ideas that US ending stocks will climb on subsequent USDA reports.  The $10.02 level will need to be breached on a closing basis before moving resistance levels higher.  The short-term trend is slightly higher.

Wheat

Russian wheat exports are moving along at a rapid pace.  Exports at running 35% more year on year at 22.6 million tons.  The new Trans Pacific Partnership agreement that the US chose to leave, could have a harmful effect on wheat exports.  The agreement would make it more viable for Aussie and Canadian wheat to go to places like Japan when a $65/ton tariff is removed.  The new Trans Pacific Partnership agreement that the US chose to leave, could have a harmful effect on wheat exports.  The agreement would make it more viable for Aussie and Canadian wheat to go to places like Japan when a $65/ton tariff is removed.

Anna Kaverman

anna@mercerlandmark.com

Market Report

Thursday January 25th, 2018

March 17 corn closed down 1 ¼ at $3.55 ¼ and July 18 closed down 1 ¼ at $3.71 ¾. March soybeans closed unchanged at $9.92 ¼ and July closed down ¼ at $10.13 ¼. March wheat closed up 1 ½ at $4.34 ½ and July 18 closed up 1 ½ at $4.59 ¾. Crude oil closed up $.01 at $65.3.

The corn market took another breather today, following Wed’s eye-opening rally with a more subdued performance today. March futures actually traded to a near two month high early as part of a broad-based commodity rally, but the early pop found sellers. Indecisive trade set in thereafter, flipping between fractional gains and losses intraday. Managed Money traders were viewed pretty close to flat on the day, as they hang with a 230,000 contract net short in the market. The story broadly remains the same on the weather-front. Trade is watching to see if another round of “just in time” rains bail out another hot and dry week in Argentina. Exchanges there found farmers planted just 1% of the corn last week, taking the total to 92.4%. The stuff in the ground is reportedly rated over 40% Poor-Very Poor.  Northern Brazil is dry, while the center and south are rainy, delaying soy offtake (and thus second crop corn planting). The south is expected to dry down for a couple weeks. Brazil rains will become less widespread February 1-9 and fieldwork should increase in some central areas, but early indications suggest key crop areas will remain wet. Mexico said to be joining US/Canada in the “trending dry” club, completing the North American set.

The first half of the session today featured the bean and meal markets extending their rallies with front month beans pushing above $10 to $10.02 and front month meal challenging its December highs and nearing the $350 market. Farm selling of beans has picked up on the rally although volumes have not been not huge so far. Then, the rug was pulled out with the mid-day weather update where the GFS showed an improved and badly needed precip outlook for Argentina for week 1 and most notably week 2.  The selling took beans lower but didn’t last however as some may doubt this first look at the change in weather pattern and want to see how future models look. The market finally ended the day sharply unchanged in beans while meal ended its 9-session winning streak with a reversal trade $8 off the high. This becomes a game of verification now. Does the outlook hold and the rains materialize or not? Expect more price volatility as we find out. Another factor is the currency movement where the dollar has fallen out of bed from roughly 95 in November to a new low today to 88.25 before reversing back to higher on the day, settlement pending on sticking the reversal trade. The weakness has been supportive to commodities in general and as the market bounced off its lows you could see struggles in the energies, the metals and the soybean market too. The Brazilian real closed into a new contract high and the recent strength in the currency has offset most of the recent gains in beans to the Brazilian farmer.

The wheat complex, especially Chicago, was all set up to see additional short covering and have another strong day of trade, but when the day session started, it wasn’t the buy button the funds hit it was the sell button. Hard to explain where all the selling came from, but it was seen across the entire grain complex, not just the wheat markets. After the early break stabilized, the rest of the day was spent between unchanged and $.04 higher before settling a couple better across the board. As we look ahead to Friday’s trade, how we settle could be very important. The overnight move in Chicago took values above its 2018 highs (which had previously been $4.37), but we probably need a settle above that level to spark additional short covering. The USDA delayed its weekly export sales report until Friday because of the federal gov’t shutdown. Last week sales were once again at the low end of expectations coming in at 153 MT, with an additional 38 MT of new crop for combined sales of around 190 TMT. Sales should have a better week this week. Look for between 250 and 350 MT.

Anna Kaverman

anna@nercerlandmark.com