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Market Report

Thursday June 21st, 2018

July corn closed up 2 ¾ at $3.57 and December closed up 2 ½ at $3.78 ¼. July soybeans closed down 9 at $8.80 ½ and November closed down 9 at $9.01 ½.  July wheat closed up 7 at $4.95 ¼ and September closed 7 ½ at $5.06 ¾.  Crude oil closed down $.38 at $64.86.

The corn market was almost boring Thursday. The only excitement was a brief $.05 stab lower overnight. Steady/better was the theme during the day. Managed Money traders were net buyers of about 10,000 corn today. CFTC data tomorrow afternoon will be extremely helpful, given the massive move in the board and pending expiry of July options. Export sales this morning took a breather, dipping below 1 mmt in new sales for the first time since May 3rd. Old crop sales totaled just 165,900 metric tons, as cancellations of 584,700 metric tons to “unknown” (China??) bit into the total. Mexico and Japan were the largest buyers of record.

Weather remains somewhat bearish, though we were a little disappointed in some of the areas missed by rains overnight.  Northern Missouri and Western Illinois continue to go without.  Rains still in the five day maps are expected to greatly favor the Eastern Belt, which will be quite welcome in dry IN/OH, as well as even-drier Kansas. 6-10 & 8-14 day maps turn much hotter, but precip estimates lean wet over that timing as well.  On the world scene, Ukraine corn is expected to get a timely drink this coming week, though Russia stays dry?  South American harvest/maturation weather seen good. Argentina corn moved up to 51% harvested versus 45% average (and well behind normal).

While corn and wheat came up for some air, the soybean market couldn’t tag along and closed nine lower with another late push of selling. It was a much quieter trade than the first part of the week with volume in November beans less than half of what was traded on Tuesday’s high-volume spike trade. What does all that mean? Absolutely nothing other than the market is exhausted and has spent two days trading around after the blow off spike trade. The cloud of trade tariffs remains over the market and likely keeps a lid on rallies until a resolution which opens the floodgate on new crop purchases is reached. The wires this afternoon report the White House National Economic Council is considering high level talks with China before the tariff date on the 6th. The other potential game changer of course could be weather pattern shift but at this point the outlook remains benign.  Some concern over the heavy rains of late with reports of disease in some of these areas but there is nothing in the forecasts that raises any alarm bells with plenty of heat and moisture seen through early July that should continue overall favorable development. With that said, the models are now debating the setup of a ridge in early July and the consensus at this point is a lighter rainfall bias and warm temps where the SW of the corn belt would be most susceptible to crop stress.

Soybean weekly export sales totaled 530 mt of which 302 was old crop which was within expectations.  The old crop sales are -42% from last week, but up 48% 4-week average. Unknown cancelled 204 and China -66. Funds have continued to sell beans going from a net long peak of +156k in mid April to an estimated net short of around -85k as of today.

After a back and forth night that saw wheat prices finish higher across the board, trade was able to maintain most of those gains throughout the day. The entire wheat complex looks to be finally benefiting from some positive news. The first came on talk that the USDA was considering bringing back the CCC to support prices for farmers. If that were to happen, it would be supportive to wheat the most. That was followed by Agritel pegging the Russian wheat crop at 67.4 MMT. And we cannot take our eye off the US Dollar. This morning trade moved into new contract highs and a strong Dollar usually benefits wheat the most. News seems to run in cycles, and right now the wheat market is trying to build a positive one to end the week. The crop report next Friday has the potential to give trade additional positive momentum, with the idea that the USDA will lower harvested acreage estimates in several states. For now, look for buying on breaks. Export sales this morning came in at the high end of expectations at 462 MT. Total sales are now 183 MB vs 277 MB last year.

Anna Kaverman

anna@mercerlandmark.com

Market Report

Wednesday June 20th, 2018

July corn closed up ½ at $3.54 ¼ and December closed up ¼ at $3.75 ¾. July soybeans closed up ½ at $8.89 ½ and November closed down ½ at $9.10 ½.  July wheat closed up 10 ½ at $4.88 ¼ and September closed up 9 ¾ at $4.99 ¼.  Crude oil closed up $.68 at $65.24.

The corn market Wednesday featured both near-thrills and near-spills, as we managed to lop the prior day’s $.20 range in half.  Futures would ultimately finish with fractional gains. Mid-day, the markets had a slippery feel, trading as much as $.06 lower.  Corn battled back to trade as much as $.03 higher shortly before the close. Managed Money traders were believed net sellers of about 5,000 corn today, which netted out could leave that class of trader net short the corn market for the first time since winter. Positive weather developments likely helped limit gains of the day in corn, while “Trade War” headlines tend to be greeted by macro selling. Welcome rains fell along some of the dryer areas of the southern Corn Belt overnight. Forecasts suggest more in store, with good rains seen for all but the extreme Northern Plains. World weather is also in a mostly “non-threatening” posture, with the exception of portions of Ukraine and Russia, which still trend dry. This could have a bearing on corn export availability out of that region next year which could favor US sellers. South Africa also about to start harvesting, with a smaller crop likely relative to the prior year’s bin-buster; 13 mmt vs. 16.8 prior.

The soybean market had a back and forth trade as we look for some stability after our extended break. Modest overnight strength melted away after the break following comments from Commerce Secretary Ross that implied the administration is likely to move forward with the threatened tariffs on China on July the 6th. Ross was quoted as saying that ‘Trump concluded we need more than just talk with China’ and also noted that we are ‘unlikely to succeed unless we make it painful for China’.  President himself Trump later provided a more optimistic slant saying that he expects to announce new trade deals with unspecified countries “rapidly,” with the recent market volatility and sharp losses in the Ag perhaps creating urgency to move negotiations forward. When the market ran some sell stops taking the board lower on the day, it would have been very easy for beans to fold, but instead we held and rallied back for a modest reversal in the front months despite an effort by some determined seller to wreck the settlement with some size hitting the market in the closing seconds. This display of resiliency is an important second step following yesterday’s spike trade in trying to create some confidence along with a bottom.

It was a back and forth day for the wheat complex today, but when all was said and done, it was the wheat complex that finished on top. Price action overnight was quietly higher, but after the European Commission announced this morning that they would begin implementing tariffs on $3.2 billion worth of US imported goods starting on Friday, it seemed to send a negative vibe to trade that washed away the overnight gains and sent trade lower. But the grain complex recovered on the talk of the USDA considering bringing back the CCC to support prices for farmers. If this were to happen, it would benefit wheat prices more than corn and beans. Maybe that is why wheat finished the day the strongest. The crop report next Friday has the potential to give trade additional positive momentum, with the idea that the USDA will lower harvested acreage estimates in several states. Finally seeing some positive news for wheat. For now, look for buying on breaks.

Anna Kaverman

anna@mercerlandmark.com

Market Report

Monday June 18th, 2018

July corn closed down 5 ¼ at $3.56 and December closed down 5 ½ at $3.77 ¼. July soybeans closed up 3 at $9.08 ½ and November closed up 1 at $9.31 ½. July wheat closed down 9 ½ at $4.90 and September closed down 12 at $5.01 ½. Crude oil closed up $.84 at $65.69.

Corn maintained a defensive posture to start the week, with rains in the forecast, longs still suffering, and tariff talk on everyone’s lips. Managed Money were viewed net sellers of about 25,000 contracts today, and by reckoning could be close to “even” when including option deltas. Note, the most recent CFTC reports have established most of the selling in recent weeks as “new spec shorts” and not “long liquidation”.

Crop progress data after the close found a small uptick in US corn ratings.  Good-Excellent ratings improved 1% wk/wk to 78% nationally, which compares to just 67% last week. 4% was rated Poor-Very Poor unchanged from last week, but half of the year ago’s 8%. Notable state-by-state changes included additional slippage in Missouri (-8% G-E) and Texas (-7% G-E), though Iowa improved a whopping 3%, while the Dakotas were up +8% in North and +3% in South.  98% of the crop was emerged, with only Michigan and Pennsylvania significantly behind trend.  First silking report comes out next Monday.

The week ahead is expected to be a fairly good one for US corn growing weather. 5 day maps suggest widespread coverage for most of the Corn Belt.  Temps also cool off along with the stormier front.  6-10 & 8-14 day maps are hotter, but do not set off any alarm bells yet given some moisture still included.  China looks good, while Canada is trending a little dry. South American harvest/maturation forecast looks favorable. FSU/EU still not seeing consistently good weather, but the situation is not nearly as bad as several weeks back.

The soybean market reversed higher out of new lows led by the front months which briefly dipped below $9 after the break.  This is the first time front month soybeans traded below $9 since March of 2016. This afternoon’s crop progress report showed soybean conditions at 73% gte compared to 74% last week and 67% this week last year. Beans are 97% planted vs. 93% last week and 91% avg. For this date this leaves 2.669 MA left to plant which are primarily double crop behind wheat. Soybean emergence is 90% vs. 83% a week ago.

Weekly grain inspections came in stronger than expected with bean shipments at 818 mt vs. 500 mt estimated. This compares to 676 mt last week and just 292 mt this week a year ago. Year to date soybean shipments stand at 48.307 mmt vs. 51.929 mmt this time last year representing a 133 million bushel deficit to last year’s pace as we continue to narrow the gap to the USDA’s export projection of a 109 million bushel deficit. Non-Chinese export activity remains strong. There was a cargo to China off the PNW in the report. They had been shipping two/week of late, this week down to one. Logistical issues that originated with a trucker strike and have moved to freight rate dispute at Brazil’s ports continue to slow load outs which gives the US additional opportunity to pick up some trade. This issue takes on more urgency once Safrinha corn harvest begins and compete for storage space.

July 6th is the new target date for US-Chinese tariffs to be enacted. This can go one of three directions. 1)  Both sides come to the table and work out a deal. In this scenario the market reaction would be positive and likely prints a bottom in prices. 2) Tariffs are delayed to allow more time to negotiate and leaves the black cloud of uncertainty over the market. 3)  Tariffs are enacted and both sides see economic losses. In the case of number 3, Sec Ross stated that it is too early to detail what government assistance farmers would receive to offset their losses.

Another start to a week with not a lot of positive news around for the wheat complex, and another Monday that resulted in double digit losses. Today was the sixth consecutive week the wheat market started the week lower, and today it was the KC market that led the declines. As harvest moves along, talk of HRW wheat conditions being better than expected in some areas as well as protein levels being much higher than last year were a couple factors behind today’s poor price action. Russian wheat prices falling more than $3.00 week over week was also a big influence to today’s price action, and with Egypt in for wheat after the close, it won’t take long to see exactly how much they have fallen as we could compare prices to the GASC’s tender from a week ago. Crop progress this afternoon will only weigh on futures further as overall winter wheat conditions came in 1% better. HRW conditions improved the most, up two pct, while SRW wheat conditions fell around two%. Most of the decline in the SRW wheat conditions came from Missouri and Illinois.

After the close Egypt’s GASC announced they were in for wheat for Aug 1 to Aug 10. Their last purchase was just last week when they bought a total of 420 MT of wheat, of which 300 MT was Russian and 120 MT was Romanian. The average price paid was somewhere around $225.32, which was $9.63 cheaper than the avg price paid on May 15.

Anna Kaverman

anna@mercerlandmark.com

Market Report

Thursday June 14th, 2018

July corn closed down 13 at $3.63 and December closed down 12 ½ at $3.84 ½. July soybeans closed down 8 ¾ at $9.27 ¼ and November closed down 8 ¾ at $9.50. July wheat closed down 15 at $5.01 ½ and September closed down 15 ½ at $5.17 ¼. Crude oil closed up $.217 at $66.69.

The bear returned with a vengeance, pushing the market lower overnight and kept the pressure on during the day. Futures would end right near the lows of the day, notching $.13 losses. The day’s low was within a $.01 of the July contract (lifetime) lows made back in January. Heading into Friday, the corn market is sporting another $.15 decline for the week, the third such down week in a row. Funds were viewed net sellers of at least 35,000 corn today, which will leave funds net long well under 100,000 combined futures and options for the first time since this winter.

Large spec capitulation remains the name of the game in corn.  A souring technical picture, ensuing margin calls, and a difficult-to-quantify “tariff war” story has the long racing for the exit. The trigger today is no doubt the looming Friday “deadline” imposed by the Trump administration on issuing new Chinese tariffs. Trade continue to be a little confused as to why corn is taking the brunt of this damage. While China could potentially be a massive future market for US corn, they have imported less than 1 million metric tons each of the past three years.

Make no mistake, though, early year conditions in corn have gotten off to a tremendous start. Beneficial rains fell overnight in most of Iowa, applying early pressure to the corn market. Much of the Midwest has favorable soil conditions today, but remain surprised the market is not putting some “risk premium” back in, given prospects for rather erratic rains over the next two weeks?  It gets pretty hot, too, this weekend, which will dry things down more quickly.  Rains advertised one-two weeks out (June 23-28) will be closely watched. Contrary to market price action, crops are not made just yet. On the world scene, despite some showers this week, Europe and the FSU are still trending a little too dry and could use a broader drink.  Argy corn harvest moved up to 45% complete.

It was corn’s turn in the “tariff barrel today”, as the bean complex managed to get off with just a light whacking. Beans extended the decline, pushing to new lows for the year in most actively-traded contracts. Meal finished $4 lower, while Oil actually closed higher, posting an encouraging bounce after trading to new lows of its own. Managed Money continues to aggressively liquidate length in meal and beans. The sea of bearishness continues to weigh on prices as favorable growing conditions, the absence of a weather threat, fund liquidation, tech sellers, panic sellers and lack of a Chinese trade deal all contribute to the selling. The dollar is trading sharply higher, to boot. Markets will be watching the news tonight and tomorrow for more details on the tariffs expected to be issued by the US and China.  No doubt China will retaliate, and beans could be in the crosshairs.

Three consecutive sessions with at least a $.15 move makes for an exhausting week, and we still have one more day to go. The defensive price action started overnight with Chicago lower. During the opening hour of the day, twice we saw trade make a run below $5.00, but each time that level held. A late morning rally across the entire grain floor gave the wheat market a spark. We probably began to see those who bought the market post-report start exiting their position today, but more so it sure feels like we are seeing funds exit their long position across all commodities as so to limit their exposure with Friday being the deadline on whether tariff’s will be imposed by the US on China. The thinking this morning was psychologically, the $5.00 level should provide support for July wheat, and it did. But if this level cannot hold tomorrow, a test of the May lows would not be too far behind. Iraq buying only Aussie wheat overnight and no US had to be a little disappointing, but not unexpected, and export sales were once again mediocre at best. I know it is a few weeks away, but the June 30 crop report should be favorable to wheat – especially KC, as we will probably see a big reduction in acres in Kansas, and a slight reduction in Oklahoma, Texas and Colorado. That will finally give us the drop production estimates that everyone is looking for. But until we get a little closer to that report, positive influential data might be hard to come by. Maybe the rhetoric surrounding US/China trade relations will ease and we can find a silver lining there.

Anna Kaverman

anna@mercerlandmark.com

Market Report

Wednesday June 13th, 2018

July corn closed down 1 ½ at $3.76 and December closed down 1 ¼ at $3.97. July soybeans closed down 18 at $9.36 and November closed down 15 ¾ at $9.58 ¾. July wheat closed down 18 at $5.16 ½ and September closed down 17 ¼ at $5.32 ¾. Crude oil closed up $.24 at $66.52.

Corn prices slumped slightly on spillover weakness from other grains, although losses were mostly minimized. Corn basis bids were steady to mixed Wednesday, accounting for regional variances in supply and demand. Bids trended as much as 6 cents higher and 2 cents lower across Midwestern locations. Informa Economics has lowered its latest 2018 U.S. corn acre estimates from 89.0 million acres last month to 88.706 million acres. Ahead of Thursday morning’s USDA export report, trade analysts expect the agency to report between 31.5 million bushels and 51.2 million bushels in corn export sales for the week ending June 7. French consultancy FranceAgriMer says the country’s 2017/18 corn stocks are up slightly to 110 million bushels – up 3.7% from a month ago.

The soybean market resumed its break, unable to build upon yesterday’s reversal as a modestly higher overnight opening trade turned into another sharply lower settlement and another new low for the move. Favorable growing conditions, the absence of a weather threat, fund liquidation, tech sellers, panic sellers and lack of a Chinese trade deal are all weighing on prices.

The US is preparing a list of tariffs that is scheduled to be published on Friday, the tariffs can legally be enacted at that point or thereafter. If the 25% tariff on $50 billion of Chinese imports is enacted, it is expected that China would immediately retaliate with tariffs on US goods including agriculture. This has been a black cloud hanging over the soybean market since the trade talks began but we are now approaching a critical timing where either China makes a deal or we take the trade war to a new and more painful level for both sides.

China cannot source its soybean needs on South American production alone and it is safe to say they will not disrupt their people’s diets by just going without. The US has the benefit of supporting farmers with government assistance in the case of economic loss due to a tariff situation as the administration has already stated. When a deal is made you will likely see a significant sales intention headline accompanying it for new crop beans among other agricultural products. On a near term basis, China is struggling with too much supply from their aggressive purchases of Brazilian beans but that backlog will work its way through and fourth quarter needs still have to be covered. Even though China has been largely absent from our market (which is seasonally normal for this time of year), other export demand has been quietly decent and we are bridging the gap in USDA export projections and our pace of shipments.  Everyone sees the record crush and overall soybean demand is strong as was reflected in yesterday’s crop report. Elsewhere in the news, Informa acres – corn 88.7 beans 89.9 compared to the USDA last at 88.0 and 89.0 respectively.

Price action tried to follow up Tuesday’s explosive trade with early gains overnight, but the rally quickly fizzled and the markets spent the rest of the night trading lower. The selling continued once we moved into the day session, with prices gradually weakening throughout the day. The bleeding seemed to finally stop during the final hour of the day, but futures remained in the lower end of the day’s range through the close. There was really no story to justify today’s price action, similarly to yesterday when there was no story to justify Tuesday’s post-report move.

It was all about the crop report yesterday, and as we have been saying for the past 24 hours, the data from the report did not justify a rally. Trade wants to talk about US ending stocks being lowered 9 MB. Well, that came on the heels of a 25 mil increase in exports, and there are some that want to talk about the USDA raising that figure a couple more times this year. But, we could not meet our expectations on exports this past year, and the start of the new year and foreseeable future is not very promising. Why the increase then? Maybe because trade wants to talk about World production being lowered. Granted the Russian wheat crop reduction was a big surprise, but most of the other World reductions were expected, and World ending stocks for this year and next year were raised and remain enormously large. Not to mention here in the US, production was increased in all three classes, with the HRW wheat increase probably the biggest surprise of the report. Don’t know what was behind the strong price action Tuesday post-report, but was not surprised at all to see trade give most of that rally back today. Looking ahead to the rest of the week, a big export number in the morning would go a long way to justifying why the USDA raised exports 25 mil yesterday. Nothing over the past ten days leads me to believe we will see one. Friday is the deadline on whether tariff’s will be imposed by the US on China.

Anna Kaverman

anna@mercerlandmark.com

Market Report

Monday June 11th, 2018

July corn closed down 10 ½ at $3.67 ¼ and December closed down 9 ¾ at $3.88 ¼. July soybeans closed down 15 ½ at $9.53 ¾ and November closed down 16 at $9.73 ¾. July wheat closed down 5 ½ at $5.14 ½ and September closed down 6 at $5.30 ¾. Crude oil closed down $.06 at $66.03.

The corn bulls likely breathed a small sigh of relief when the corn market traded steady/better after a wet weekend. That relief proved short-lived. Corn went “full red” into the dawn, and retreated all day long, eventually closing more than $.10 lower for the day in the July contract. Since peaking at the end of May, July has quickly surrendered $.45 off that high.  Managed Money funds were estimated net sellers of 35,000 today.

Crop Progress data after the close likely did not raise too many eyebrows, at least when glancing at the national ratings. US corn Good-Excellent down ticked for a second week, falling -1% G-E to 77% G-E. Poor-Very Poor up-ticked by 1% to +4% P-VP.  This compares to 67% G-E and 8% P-VP seen this time last year.  There were a lot of states with small declines, a few with rather large drops, and only a few net gainers. Traders were a little surprised the national average didn’t dip further.  Notable was the 11% G-E declines in Missouri, 13% in North Carolina, and 7% in South Dakota. Only MN and KS were up 2% G-E, while IL/MI/OH, were each up 1% G-E?  Emergence moved up to 94%; only Michigan and Pennsylvania are significantly behind average.  As noted in the opener, rains were pretty good over the weekend, significantly improving soil moisture in Eastern Iowa and indeed most of the Eastern Belt. Southern Corn Belt areas (KS/NE/MO) tended to dry out. Not all perfect, but there is more than enough good to offset the bad.

The weekly grain inspections report mid-day remained consistently good for corn. 1.41 mmt of corn were shipped for the week ended 6/7, which compares to 1.56 mmt last week, and 1.07 mmt in the year ago week. Shipments are rapidly catching up with year ago levels. Total YTD just under 41 mmt versus last year at 45.4 mmt. Maintaining the current pace for the balance of the marketing year will easily reach current USDA sales projections, and we have more than enough outstanding sales on the books to do exactly that.

Elsewhere, it was a rather rough day in the meats, with both hogs and cattle finishing $1 lower. Macros and “Trade War” watchers will be watching for progress out of the North Korea-US summit tomorrow. Dairy and ethanol were both lower as well, the latter tracking the corn decline. USDA monthly S&D is due out tomorrow. The June report is usually not a market-mover, as there will be no “real” production data. It is not unheard of for the USDA to adjust yields based on crop conditions, though we note they already started quite high. Further downgrades are likely on world crops, most notably Brazil and possibly EU/Ukraine/Russia.  The average analyst guess going in is for very small declines in both US and world carryout from the prior report in May.

The soybean market extended its collapse with July beans falling more than $.15 to a 10-month low. The weakness can be tied to a combination of factors from China trade selling to weather selling to fund liquidation to tech selling to panic selling; you name it and it is here and lined up for the bear. Crop conditions this afternoon should show soybean conditions steady to better with the remaining unplanted acres limited to double crop.

Tomorrow we get the USDA crop report and while the trade is not anticipating any major adjustments to the balance sheet, crop reports have the potential to calm the panic by refocusing on the stats.  The avg. trade estimates show a slight 8 mb tightening of old crop beans stocks to 522 mb and a 2 mb increase for the new crop to 417 mb.  In the world numbers the old crop carryout tightens by less than 1 mmt to 91.35 mmt while new crop holds about steady at 86.74 mmt.   A reduction of Argentina’s soybean crop of 1.1 mmt is partly offset by a .4 mmt increase for Brazil.

Weekly beans inspected for shipment totaled 644 mt compared to 573 mt last week and 512 mt this week last year. Year to date shipments stand at 47.5 mmt vs. 51.6 mmt this time last year representing a 151 million bushel deficit to last year’s pace while the USDA most recently projected a 109 million bushel deficit for this year. The deficit has been tightening so despite limited Chinese trade our export activity is quietly stronger to other destinations as we try to narrow the gap to the USDA projection. Weekend rains were heavy in parts of IA/IL/IN including 4-5 inches in some spots (some localized 8 inch totals) while 75% of the corn belt received a good drink.  Plenty of moisture for most crops for the next two weeks along with above normal temps. The midday maps were somewhat drier for the Midwest but also showed less heat.

Considering how much the corn market and soy complex struggled, the wheat complex held up rather well today. There was plenty of positive news around for the wheat complex as it headed into morning trade, but with corn and soy trending lower, it was hard to imagine wheat extending gains much. Crop progress-condition reports this afternoon showed SRW wheat conditions improving, while HRW wheat conditions fell slightly. This should give the KC/Chicago spread a boost overnight, but the crop report Tuesday morning will eventually take precedence over everything.

Crop Report Tuesday morning. ** MINOR ADJUSTMENTS **  It is usually a minor one for wheat as the bigger report comes at the end of the month, but we will see some surprises in the state by state breakdown for both production and yield. Kansas, Oklahoma, Montana and South Dakota all have the potential to see lower production estimates as either harvested acres or yield or both were just simply too high last month. But there will be improvements in the White winter wheat states that could offset the reductions some. Last month we thought several SRW wheat states projected yields were just too high as well, but over the past month that crop has improved and the USDA looks to be accurate, if not too low in some of the SRW wheat states. Look for 2018/19 winter wheat production to be very similar to last month’s 1.191 bil bu estimate.

Look for HRW wheat to come in around 639 mil bu vs 647 mil bu last month, look for SRW wheat to come in around 320 MB vs 315 MB  last month and look for White winter wheat to come in around 232 MB vs 229 mil bu last month. Traders are expecting some minor upward revisions in 17/18 and 18/19 US ending stocks. Look for 17/18 US ending stocks to come in somewhere around 1.080 BB vs 1.070 BB last month. 18/19 US ending stocks should come in around 960 mil bu vs 955 mil bu last month. With recent weather problems around the globe, World wheat ending stocks should be lower than last month. Look for 17/18 Global wheat stocks to be sub 268 MMT vs 270.46 MMT in May and 18/19 world wheat ending stocks should see an even a bigger decline, maybe as much as 4 MMT below May’s 264.33 MMT estimate. In the S&D’s, do not be surprised if they take exports down 25.

Anna Kaverman

anna@mercerlandmark.com

FOR THE WEEK ENDED 6-8-18

CORN – July corn tumbled to its lowest level since February, and December since March, as it searched for bullish news, but found very little.  Losses mirrored the previous week’s decline.  This week, July corn dropped 13 ¾ cents to $3.77 ¾ per bushel.  It has fallen 28 ¼ cents in the last two weeks.  December corn skated 13 ¾ cents lower to $3.98 per bushel.  New crop corn has lost 27 cents in the last two weeks.  Demand for corn remains its strongest proponent, but it fought an uphill battle with favorable crop conditions and fund liquidation.  It’s estimated South Korea bought 1 mmt of US corn during the week.  Support from weather issues has abandoned it, at least for the time being.  Trade issues have had a negative tone. Argentina’s corn is the cheapest in the world for our September/October gut slot period.   Most growers are hoping someone, other than themselves, has a hot, dry spell.  The next round of hope for a rally is the June 12th WASDE report.

Weekly export sales were very good at 33 million bushels.  Total old crop commitments of 2.18 billion bushels are up 2% from last year.  The USDA’s export projection of 2.225 billion bushels is a year on year decline of 3%. The export forecast may need to be increased on the June WASDE report. New crop sales were excellent at 16.5 million bushels, bringing total commitments to 121 million bushels.  Last year we were at just 107.9 million bushels.  The USDA’s last outlook for 2018/2019 was for a 5.6% decline in exports.  Weekly ethanol production was steady at 1.041 million bpd.  Stocks were up 634,000 barrels at 21.9 million barrels.  Margins were unchanged at 14 cents per gallon.

Mexico is enacting a 10% tariff until July 5th, then a 20% tariff on pork products beginning July 5th, but until then there is a first come, first serve duty-free quota for 350,000 tons of pork leg and shoulder cuts open to any origin.  Where do NAFTA negotiations stand?  Your guess is probably as good as anyone else.  It’s suggested President Trump may try to negotiate separate agreements with Mexico and Canada.  However, the news changes constantly, so it’s worthless to try and predict where we go from here.

US corn ratings were 1% lower to 78% good/excellent as of June 3rd.  While off to a terrific start, there is no correlation between early crop conditions and the final yield.  Corn emergence was 86% compared to 83% on average.  IKAR slashed their Russian corn production forecast from 13.5 mmt to 12.8 mmt.  This is sharply lower than the USDA’s 19 mmt outlook.

The average trade estimates for the June 12th reports: 2017/2018 US ending stocks of 2.162 billion bushels versus 2.182 billion last month; 2018/2019 US ending stocks at 1.65 billion bushels versus 1.682 billion last month; 2017/2018 world ending stocks 193.7 mmt versus 194.9 mmt previously; 2018/2019 world ending stocks 157 mmt versus 159.2 mmt previously; Brazil’s corn 83.8 mmt versus 87.0 mmt last month; Argentina’s corn at 32.4 mmt versus 33 mmt previously.

OUTLOOK: Many are looking to the June 12th monthly crop report to provide a spark to the market, based on the expectation for lower US and world carryout numbers.  The crop is far from made, but it’s too early to kill it.  Varying weather forecasts will keep traders on their toes, just like usual for this time of year.  Political turns and weather forecasts will dominate price direction.

SOYBEANS – Wow, soybeans rolled over in style this week as weather cooperated for crop development, funds liquidated, and nothing bullish was gleaned from the world of politics.  July soybeans traded to their lowest level since last August and November beans since January as beans were down every day this week.  July soybeans plunged 52 cents lower for the week to $9.69 ¼ and November crashed 48 cents lower to $9.89 ¾ per bushel.  In the last two weeks, July beans have lost 72 ¼ cents and November 63 ¾ cents. July meal tumbled $16.40 this week to $357.80 per ton and soyoil pulled back 67 ticks to $.3052 per pound.  Brazil’s currency hit a two-year low this week, making it attractive for growers there to sell both this and next year’s crops.  Argentina’s currency downtrend has led to more talk about acreage expansion next year.

China imported 9.69 mmt of soybeans in May, a May record and the second largest for any month ever.  They have imported 60.26 mmt in this marketing year, up from 59.19 mmt in the same period last year.  Based on this rate of purchase, their soybean imports would reach 96.5 mmt, which is in line with the USDA’s 97 mmt forecast.  For the calendar year, they have imported 36.12 mmt, down 2.6% for the same period last year.  China’s bean stocks reached a record 8.18 mmt this week.  This is approximately one month’s demand. China is set to begin domestic soybean auctions from reserves June 14th. It will offer 300 tmt of 2012 and 2013 reserves in the first auction.  Brazil shipped China 9.76 mmt of beans in May.  This equated to nearly 80% of Brazil’s 12.35 mmt May soybean exports.  Brazil’s May bean exports were a record for any month.  The Rosario Grain Exchange cut Argentina’s bean crop estimate 2 mmt to 35 mmt.  This compares to the USDA’s last forecast of 39 mmt.

Weekly export sales were the third lowest of the marketing year at 6.1 million bushels.  Old crop commitments are down 5% from last year at 2.04 billion bushels.  The USDA’s is forecasting a year on year decrease of 5% in exports to 2.065 billion bushels for 2017/2018.  New crop sales were only 1.3 million bushels.  Total new crop sales at 233.8 million bushels are still well ahead of last year’s 114.7-million-bushel pace.  The USDA is predicting a year on year export increase of nearly 11% for 2018/2019.

The initial soybean crop rating of the year as of June 3rd was 75% good/excellent, tying 2010 as the best start ever.  Planting was 87% complete versus the 75% average.  Emergence was 68% versus 52% on average.

The average trade estimates for the June 12th report:  2017/2018 US ending stocks at 520 million bushels vs. 530 million last month; 2018/2019 US ending stocks at 423 million bushels vs. 415 million last month; 2017/2018 world ending stocks 91.3 mmt vs. 92.2 mmt previously; 2018/2019 world ending stocks 87.7 mmt vs. 86.7 mmt last time; 2017/2018 Brazilian production at 117.4 mmt vs. 117.0 mmt last month; 2017/2018 Argentine production at 37.6 mmt vs. 39.0 mmt last month.

OUTLOOK: There were reports this week that the US and China had reached an agreement to ease sanctions on ZTE, a Chinese technology company.  ZTE would pay a $1 billion fine and pay for an in-house compliance team staffed by US exports, but there was no confirmation that China had agreed to make additional commodity purchases.  Continue to monitor weather, crop conditions, world political events, and fund liquidation.  The price decline may have been overdone prior to the June 12th report.  Be ready to play catch up on rallies or at least to place some downside protection.

The wheat market has been very volatile.  World-wide weather has been the driver of the markets with Canada, Australia, Russia, and the US all dry. The world can easily absorb a small reduction in one country but when multiple countries appear to have issues the markets are now very quick to react.  Even though July wheat futures had a 35 cent range this week the overall change was only a small loss of 3.25 cents for the week. HRW harvest should start to really start to ramp up next week as the hot and dry weather has accelerated the maturity of the crop.

Anna Kaverman

anna@mercerlandmark.com

Market Report

Thursday June 7th, 2018

July corn closed down 2 at $3.76 ¼ and December closed down 3 at $3.96 ¾. July soybeans closed down 20 at $$9.74 ¼ and November closed down 18 ¾ at $9.94 ¾. July wheat closed up 7 at $5.26 ¾ and September closed up 6 ¾ at $5.44 ¼. Crude oil closed up $1.19 at $65.89.

No rest for corn, as futures eroded again today. Heading into Friday, corn is sporting $.15 losses, and the July contract is trading more than $.36 off the highs made just two short weeks ago. Corn tried to be firmer early but found itself weighed down by a 20+ cent break in beans. Managed Money traders continued to hit the sell button today, selling another 15,000 corn.  By some estimates, this could leave them net long less than 100,000 combined futures and options. CFTC data tomorrow night will be extremely helpful to try and tighten these estimates down.

The weekly export sales report maintained recent trends, with combined old and new crop sales topping 1 mmt. 838,600 metric tons (mt) for 17/18 and 418,300 mt for 18/19.  Mexico and Vietnam were the top buyers in old crop, while nearly half of the 18/19 sales were to “unknown”. South Korea continues on a tear, with additional export interest noted for US corn for summer and beyond. Some of this business should hit the next weekly report. Though exports remain a positive story, it has not been a particularly market-moving one. Corn continues to be driven by long liquidation (technicals, “Trade War” fears) and a favorable start to the U.S. growing season.

Speaking of the devil, timely rain fell on portions of Iowa Wednesday, kicking off what should be five days of good weather and rains across most of the Midwest. Some concerns that the precip could be a little erratic. The Plains could trend hot and dry. GFS model runs are warm and wet, while the Euro model continues to trend a little dryer overall. In other words, not a lot of change from Wednesday, except perhaps a little more heat in the forward outlook. World weather watchers still most concerned with Europe and Russia drying. Northern China also trending a little dry after mostly good growing weather this year. Brazil harvest will expand later this month, while Argentina’s first crop harvest crawls along at its usual sluggish pace.

The soybean market collapsed as a combination of favorable early growing conditions, disappointing export activity, trade uncertainty, technical selling and fund liquidation.  All of this negative influence has pushed prices down to a 5-month low on July and a 4-month low on November in a high volume trade.   The July contract has been leading the break all along reflecting weak export activity and also because this is where the fund length is parked. Managed money funds continue to liquidate length in beans and meal which was parked up front in the July contract. There is plenty of moisture in 5-day GFS outlook, 6-10 day and 8-14 day maps also include rains for most of the corn belt which will help the crops endure the rising seasonal temps and continue to develop favorably. The forecast lacks a threat.

Soybean weekly export sales totaled just 200 mt with 165 mt of that being old crop which is off 40% from last week and 5% from the 4-week average. The most important takeaway from this report is in the fine print where soybean shipments to date total 46.604 mmt vs. 51.475 mmt this time last year. The deficit in exports relative to last year’s pace equals 179 million bushels where the USDA is currently projecting a 109 million bushel reduction year over year. The US needs to pick up the pace in order to close that 70 million bushel gap otherwise it will flow directly into the bottom line inflating our ending stocks which are currently projected at a hefty 530 million bushels. This will be a real challenge because China reportedly has already covered 95% of their soybean import needs for July, 80% for August and 40% for September with the resumption of Chinese interest dependent on a trade dispute resolution and at that point new business would likely fall into new crop timings. The Brazilian real also works against us here with the currency falling to new lows again today which incentivizes more aggressive selling of beans in that country.

The wheat complex posted modest gains today as day two of the liquidation in the wheat/corn spreads once again took center stage. There are still some concerns over FSU and EU wheat production, but don’t think that has been driving trade. Over the past two days Chicago wheat has rallied $.17 and the European wheat contract is unchanged. If trade was so concerned about the Russian and Kazakhstan wheat crops, the Matif market would be the one leading. Keep in mind, beans are down $.27 and corn is down more than $.07 over the past couple of days and rarely do you see the wheat market distance itself from corn and beans.

Anna Kaverman

anna@mercerlandmark.com

Market Report

Wednesday June 6th, 2018

July corn closed down 5 ½ at $3.78 ¼ and December closed down 4 ¼ at $3.99 ¾. July soybeans closed down 6 at $9.94 ¼ and November closed down 7 at $10.13 ½. July wheat closed up 9 ¾ at $5.19 ¾ and September closed up 10 at $5.37 ½. Crude oil closed down $.76 at $64.70.

After a Tuesday breather, the bear took charge of the corn market again, pushing values down to new lows. The declines were somewhat impressive, given double-digit gains in some wheat contracts, though some suspect the corn weakness was tied to “get me out” of “long corn, short wheat” seasonal trades.  Either way, July Corn is now $.34 below the high from May 24th.  Managed Money traders were viewed net sellers of 20,000 corn, which would leave them still net long about 110,000 combined futures and options.

Welcome to summer weather markets.  A slightly improved weather outlook likely gets the credit for the corn knock out today, though no doubt in aggregate the market simply suffers from too many longs. The five day outlook is suggesting widespread coverage for most of the Midwest, headlined by three plus inch locally-heavy precip totals for Central Iowa. The outlook past that point remains somewhat up in the air, though it seems the wetter GFS model is beginning to get a little more play than the dryer Euro one. The southern reaches of the Belt are expected to dry out next week, which will bear some watching. Not much weather premium left in the markets. World weather watchers mostly focusing on Eastern Europe and Russia, where it is dry with only some chances for rain relief in the short-run. Brazil harvest will expand later this month, while Argentina’s first crop harvest crawls along at its usual sluggish pace.

Ethanol was an active topic of discussion today. The Trump camp apparently abandoned their most recent stab at biofuel policy reform. The “RIN-for-export-gallon” component of the plan received near-unanimous criticism from both farm and ethanol interests. Though an RVP Waiver would have been nice, the issue pales in comparison to what the ethanol crowd would have had to surrender to get it. The weekly EIA report today found the expected “steady” week for production. A 1.04 mil bbl/day ethanol production rate contributes to a marketing year average ethanol grind of 5.62 billion. Unfortunately for ethanol, the EIA “re-discovered” the ethanol stocks “lost” last week. The 3% build applied pressure to ethanol, with futures trading to two month lows.

The soybean market extended its break to a new low with an outside day lower in both old and new crop. No news is not good news in the case of the struggling soybean market where fresh export sales announcements are lacking and trade negotiations with China keep the black cloud of uncertainty hovering over the bean demand going forward. Funds are estimated to be holding around 53k soybean longs. There is plenty of moisture in 5-day GFS outlook, 6-10 day and 8-14 day maps also include rains for most of the corn belt which will help the crops endure the rising temps and develop favorably.

Meal is oversold technically and coming into a count so some caution is advised in pressing the market here. Meal has a story that will play out longer term but for now money flows are driving the show. Funds hold around 90k meal long and now the Goldman Roll is starting which pressure the nearby contracts where the index funds park their positions. In trade news, nothing new to report with China. The market is watching to see what the White House does with yesterday’s $70 billion proposal by China. June 15th is currently scheduled as the date to enact the $50 billion in tariffs on China. It should be an interesting 10 days in front of us.

It is difficult to figure when a specific trade finally gets to a point in time or gets to a specific level in which a trader just does not want to lose any more money, and throw in the towel and give up on it. That sure seemed to look like what happened today for wheat. The seasonal trade recommendation from a couple weeks ago, buying corn and selling wheat, looked to have a mass exodus this morning after the spread raced out to almost twenty cents higher during the opening hour of the day.

Oklahoma hard wheat harvest is basically done as combines are now moving into Kansas. Oklahoma yields are said to be around 15 bpa in the west, and 20-40 bpa in the center of the state. Early yield talk out of South Central Kansas is ranging between 30-35 bpa, but it is too early to know the Southwest part of the state. Combines are making great progress due to a lot of abandoned fields. Soft wheat harvest is moving along more slowly. Quality seems to be good and yields are normal. Domestic basis levels firming here even as export bids are showing signs of weakening.

Anna Kaverman

anna@mercerlandmark.com

Market Report

Monday June 4th, 2018

July corn closed down 10 ¾ at $3.80 ¾ and December closed down 10 ½ at $4.01 ¼. July soybeans closed down 19 ½ at $10.01 ¾ and November closed down 18 ¼ at $10.19 ½. July wheat closed down 18 at $5.05 ¼ and September closed down 18 at $5.22 ¾. Crude oil closed down $1.09 at $64.68.

The writing was on the wall already Sunday night, and the bear kept consistent pressure on the markets all day long, too. Corn futures would finish right down against their lows, posting net losses in 2018-dated contracts. Today marked the lowest close since February for the July contract, which has broken over $.30 off their highs in less than two weeks’ time. Managed Money traders were viewed net sellers of 35,000 futures, though no doubt sliding through a number of option strikes will greatly increase that total when factoring in options. That could leave them net long just 120,000 combined futures and options heading into tonight.

Crop Progress data after the close likely played out very close to expectations. Corn condition ratings dipped slightly, as it is difficult to improve on “perfection”. National Good-Excellent ratings slipped 1% wk/wk, while Poor-Very Poor was unchanged.  G-E of 78% and P-VP of 3% compares to 68% G-E and 6% P-VP seen this week in 2017. The USDA pegged planting at 97% complete, implying 2.6 million acres remained heading into this weekend.  Over half of the total was found in four states: Michigan (450k), Ohio (345k), PA (343k), and WI (424k). The next week is not particularly threatening (some rain in the Heart of the Belt), though we note both the 6-10 & 8-14 day maps trend “hot” and “mixed” for precip. More than a few areas starting to trend a little dry in the early-going. Mid-day runs were generally a little dryer in the extended forecast, though the market did not seem to care. Argentina’s corn harvest continues to crawl along, though a recent upswing in farm selling there could motivate them to speed up a little.  Brazil may be swinging to a little “too much” rain in the short-run as analysts still struggle to quantify that second crop harvest. There were rumors early the Trump administration would publish a public comment tied to the most recent biofuel policy summit, but we did not see anything official as we went to press.  Monthly Grain Crushing report found 445 MB of corn went into the ethanol grind in April, up from 432 MB last year.

The soybean market continued its flush lower today taking July beans for another test of $10 and closing the recent upside gap created off the positive trade deal vibes a couple weeks ago.  Today’s trade vibe is the opposite as the harsh realities of negotiations put the market in a foul mood. Compounding the selling is favorable early season weather and fund liquidation led by the fronts. The weather forecasts are wetter for the near term than they were going home on Friday with another round of rain seen for later this week before a drier and more normal precip with above normal temps in the 6-10 day and 8-14 day outlook. The crop progress report this afternoon showed corn planting is 97% complete which is 2% ahead of the 5 yr avg. The states with the most acres unplanted are MI (450), WI (424), OH (345) and PN (343) – total acres unplanted stands at 2.6 million.

In trade news, over the weekend China and the United States held another round of trade talks in Beijing that reportedly included ‘positive and concrete progress in agriculture and energy’ according to a statement released at the conclusion of the meeting by Chinese media. Importantly, the statement emphasized that the results achieved between China and the US should be based on the condition that the two sides meet each other halfway and agree not to engage in a trade war. If the US introduces trade sanctions, specifically the threatened tariffs, all the economic and trade achievements negotiated by the two sides will not take effect which is what the market is keyed in on. US tariffs are scheduled to be implemented on or shortly after June 15th. Elsewhere in the news, The USDA flashed 114 tmt of new crop beans to Mexico.  All export demand is welcomed but until we come to a resolution with China there will be a black cloud hanging over the market.

It was a rough start to the week for the wheat complex, with trade posting double digit losses. A big harvest weekend, combined with continued trade war talk with China were a couple of the bigger reasons behind the weakness in trade, but the commitment of trader’s report Friday afternoon showing the large spec (funds) and managed money holding a larger long position in wheat than expected was also a factor, especially as futures continued to break down. What can get the wheat market out of its recent funk? First, crop progress/condition reports. Overall expectations were for winter wheat conditions to be unchanged week over week, but they fell 1% and it could have been more. Winter wheat conditions came in at 37% G&E and 35% P&VP vs last week when they were 38% G&E and 34% P&VP. Both HRW and SRW wheat classes each fell slightly. HRW wheat conditions dropped to only 19% G&E vs 20% last week and SRW wheat fell to 67% G&E vs 68% last week.

Anna Kaverman

anna@mercerlandmark.com