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Archive for December, 2017

Market Report

Thursday December 28th, 2017

March 17 corn closed down 1 ¾ at $3.52 and July 18 closed down 1 ½ at $3.69. January 18 soybeans closed down 9 ¾ at $9.45 ¾ and March 18 closed down 10 ¾ at $9.56 ¾. March wheat closed down ¼ at $4.27 ¾ and July 18 closed down ¼ at $4.54 ¼. Crude oil closed up $.18 at $59.87.

The streak had to end sometime. Though the words “overbought” and “corn” don’t seem synonymous of late, the corn market was indeed trending a little overbought after posting seven days of gains. “Correction Day” found the corn market finishing two cents lower. In a case, perhaps of “stairs up, escalator down”, on the mid-day lows, futures had surrendered nearly half of that seven day advance in a matter of hours. Managed Money funds were viewed back on the sell side today, selling out an estimated 5,000 corn, which would leave them net short 245,000 heading into tonight. With South American weather on the back-burner for the moment, the few remaining souls left to trade grain commercially were discussing the bitterly cold temps impacting the US Midwest & Plains this week. Wintry cold offers a mixed bag of variables, which usually trend “slightly better” to daily price direction; increased feed demand, logistics delays, and, of course, wheat winterkill chatter. This likely helped sustain buying into today, but was not able to hold amid a hard double-digit down-day in the soybeans.

Soybeans collapsed to a four-month low as buyers kept their hands in their pockets and let bear fundamentals and lack of a weather story take over which inspired sellers to pile in as we head into the New Year. The recent improvements in parts of Argentina and S Brazil along with the uncertainty from the export FM inspections to China are the new inputs this week.  The ongoing themes of excess supply and disappointing export activity continue. The old saying that the bull eats his for Thanksgiving and bear gets his for Christmas certainly has applied this year. The products were not immune to the selling either with both meal and oil under pressure but soybean oil made a trade into new lows. On the schedule, we’ll get the ethanol report tomorrow, January deliveries, export sales and CFTC data on Friday. Markets will be closed on Monday for New Year’s with a hard opening Tuesday morning similar to this week.  Beyond that we’ll get another crop report Jan 12th.

It has been an up and down week for the wheat complex, with trade struggling to put together back to back strong performances, but trade also not stringing together back to back poor performances either. The most disappointing aspect of the trade, is that the market has had an opportunity to extend gains and maybe make a really good trade, yet it has not taken that step. A couple of weeks ago during the December 11-13 time frame trade had drifted into new lows, but by doing so we uncovered an area that stimulated trade, thus causing a small short covering bounce. However, over the past five days Chicago wheat has traded in only a $.08 range. The market is back testing the upper end of that recent range, and is within a few cents of possibly igniting more of a short covering run. The increased export business at levels not too far below where the markets are trading now, combined with bitterly and dangerous cold temperatures across the upper Midwest and northern plains brought about ideas of possibly the funds covering some of their massively short position before year end. Yet that has not materialized yet.

Anna Kaverman

anna@mercerlandmark.com

Market Report

Wednesday December 27th, 2017

March 17 corn closed up 1 at $3.53 ¾ and July 18 closed up 1 at $3.70 ½. January 18 soybeans closed down 3 ¾ at $9.55 ½ and March 18 closed down 3 at $9.67 ½. March wheat closed up 5 ¾ at $4.28 and July 18 closed up 6 at $4.54 ½.  Crude oil closed down $.31 at $59.69.

The corn market continued to rack up small gains in another quiet, holiday-tinged session. Futures tacked on another $.01, rallying for seven consecutive trading days. Granted, that sounds more impressive than reality. It has only amounted to a net $.07 gain (+2%). The fund traders remained small net buyers, and we estimate they will head into tonight net short close to 240,000 combined futures and options. By and large, it was a very quiet news day. At least tomorrow, we will have ethanol to talk about. Tomorrow’s weekly EIA report – delayed for the holiday is expected to be rather benign. On the weather front, short-run conditions in South America generally appear favorable, though a dryer trend is expected to return to Argentina after the weekend, which will bear watching into yet another long weekend. Recent rains should help promote planting of the last one-third of the Argy corn crop. Brazil conditions still look good.  US Midwest and Plains are quite chilly; this prompted some short-covering in wheat of the day, which helped corn a little.

Soybeans traded higher in the overnight session with ideas of extending its recovery trade but were unable to sustain the bid after the break and reversed lower along with the products.  Volume was slightly better than yesterday but it continues to be a thin environment. Soybean meal fought off severe sell pressure mid-day to prevent a breakdown of its fall support shelf and an outside day lower. This recovery in meal could have been related to reports of an explosion at an Argentine crush/export facility in Rosario. December markets are notoriously difficult to trade with thin participation, end of year positioning and choppy action that can be full of false signals and head fakes. In the news, the USDA flashed 110 mt of beans sold to China for 17/18.  Whether the new rules on foreign material percent will affect unloading of US soybean shipment to China from next Jan remains to be seen but some crushers have slowed down due to this uncertainty. Reuters reports that half of US soybean exported to China so far this year would not pass the new FM requirements rule for 2018. South American weather in general turns from a few weeks of improving conditions for the dry areas of Argentina and S Brazil to a little hotter and a little drier again – certainly not ideal but not a major crop problem either.  In a La Nina environment, the market is likely to be more respectful of drying conditions and a little more cautious.

Price action overnight across the wheat complex was very similar to what we saw during much of the day Tuesday. As we moved into the day session, price action turned into the exact opposite of what we saw Tuesday. If you recall, during yesterday’s trade the wheat complex had every opportunity to rally as trade in the soy complex was strong and there was a lot of talk about the extreme cold temps in the center of the country with many areas seeing sub-zero readings. Yet, wheat struggled to find a bid and ended its streak of seeing higher highs at seven consecutive days. Today, the soy complex unraveled after its firm start to the day, and the weather situation did not change, yet prices across the wheat complex steadily firmed throughout the session. Granted it is very early in the winter season, but temps in some areas across Nebraska were -10 to -15. Much of Iowa was -5 to -10. There was very light snow cover to protect some of the hard wheat areas and the soft wheat areas had 1-2 inches so this may have protected some winter wheat. Estimates put 10-15% of the hard wheat belt at risk, and this cold spell is expected to last for the next week. Only two trading days left in the year, and funds in wheat hold an extremely short position. The short covering rally may not be done.

Anna Kaverman

anna@mercerlandmark.com

Market Report

Tuesday December 26th, 2017

March 17 corn closed up ¾ at $3.52 ¾ and July 18 closed up ¾ at $3.69 ½. January 18 soybeans closed up 9 ¾ at $9.59 ¼ and March 18 closed up 10 ¼ at $9.70 ½. March wheat closed down 2 ½ at $4.22 ¼ and July 18 closed down 1 ½ at $4.48 ½.  Crude oil closed up $1.46 at $60.00.

The corn market was quietly mixed today, trading both sides of unchanged. The market ultimately finished less than a $.01 higher, with less than 100,000 contracts traded, even when including spreads. The funds were viewed small net buyers today, as they hang with a net short of over 240,000 combined futures and options. Some speculate they may be looking to trade some of those in toward year’s end as bonus season approaches?  Cash trade was similarly quiet, with many taking an extra day off. South American weather was mostly beneficial over the weekend, though the probable return to “hot and dry” in Argentina next week likely helped keep the bears at bay. The “heart” of Argentine growing areas received the forecasted inch plus, but the outlying northern and southern rump areas generally went without. A little more follow-up is expected for the SW of Argentina yet this week, but that could be “it” for a moment as a dryer trend prevails into next week.

Soybeans saw their overdue corrective rally today after a multi week $.68 slide from the December high to low. That break left the daily charts deeply oversold and due for a clean-up trade particularly in light of the CFTC data showing funds were heavy sellers and vulnerable to short covering.  Trade volumes were very light. Fresh fundamental news of significance was lighter. In South American weather, weekend rainfall totals were solid including broad 1.5 to 2.0 inch rains across Southern Brazil and a nice shot of 1.0 inch+ rains in Cordoba stretching up into parts of the NW with lighter totals elsewhere. A drier and hotter outlook is seen for this week although we don’t completely turn off the spigot with additional rains seen over the coming weekend but the overall pattern appears to be turning more stressful. The feature trade was the rally in soybean oil which finally appears to be showing some stability against its fall low along with the oil share spread which firmed into a new multi-week recovery high. Soybean oil was following the lead of palm oil where we stuck a 2% rally to build off last Friday’s reversal trade which suggests we have fallen far enough for now.

The wheat complex came back from its long Holiday break with a slightly better start to another abbreviated week. The gains were not very lasting. Late in the day when corn prices moved into new highs values in wheat tried to firm, but trade was unable to come all the way back and weakened into the close. The early strength in both the SRW and HRW wheat markets was not enough to take out last Friday’s highs, thus the streak of posting higher highs ended today at seven straight days. News overnight/this morning was mostly non-influential, however the huge Indian wheat crop continues to impress. Egypt’s GASC announced after today’s close they were in for wheat for Feb 1-10 shipment. Their last purchase was back on Dec 12 when they bought five cargoes (4 Russian and 1 Romanian).

Anna Kaverman

anna@mercerlandmark.com

Market Report

Friday December 22nd, 2017

March 17 corn closed up 1 at $3.52 ¼ and July 18 closed up 1 ¼ at $3.69. January 18 soybeans closed up 1 ½ at $9.50 ¼ and March 18 closed up 1 ¾ at $9.60 ¾. March wheat closed down 2 at $4.25 and July 18 closed down 1 ¾ at $4.50.  Crude oil closed up $.06 at $58.46.

A happy and safe holiday season to all of you and your families.

FOR THE WEEK ENDED 12-22-17

CORN – After setting a new contract low on the previous Friday at $3.46 ½ per bushel, corn proceeded to match that level on both Monday and Tuesday; in fact, Tuesday’s trading range was identical to Monday’s.  The triple-bottom at $3.46 ½ was able to fend off sellers for the balance of the holiday-type trading week.  March corn closed at its highest level since December 8th.  Fund short-covering was likely a feature for this week’s upswing.  Keep in mind there is an old adage that “triple bottoms (or tops) never hold.”  It’s not out of the realm of possibilities that March corn drifts toward the December 2017 low of $3.35 ¼ per bushel.  Corn volumes during the week were the smallest seen in at least a year as traders lacked interest and headed home for an early start to the holidays.

Weekly export sales exceeded expectations at 61.3 million bushels and was the best in six weeks.  This was the third best weekly sales number in this marketing year.  We are, however, lagging last year by 26%, while the USDA is anticipating a 16% decline in year/year exports.  Corn inspections are down 40% from last year.  The USDA’s export target is 2.925 billion bushels and we are at 997 million bushels.   US corn is the cheapest source of corn on the global scene.  Sorghum export sales were the largest of the year!  Mexico continues to lead the pack on US sorghum purchases.  In related news, grain inspection fees at two of Argentina’s southern ports will drop by 40% under a deal between private port management and local workers.  This should make their corn more competitive in the export arena. Weekly ethanol production at 1.077 million bpd was the third highest ever, even though it was slightly lower week on week.  The year to date grind is up 3.2% from last year, but the USDA is predicting at 1.6% increase in use.

OUTLOOK:  Corn has moved into a sideways, higher pattern after establishing a new contract low, at least for now.  Fund short covering prior to year-end may inspire additional upside, but any upside may be limited by the spillover weakness in soybeans and burdensome corn supplies.  It’s not a stretch to imagine March corn trending toward the December 2017 contract low of $3.35 ¼ per bushel.  In the short run, we could see a pop in prices on fund short covering, but it likely won’t be as much as growers want to see.  For the week, March, July, and December corn all gained 4 ¾ cents to $3.52 ¼, $3.69, and $3.84 ¾ per bushel respectively. More chatter is popping up about the new crop soybean/corn ratio.  It currently sits at 2.53.  This type of number doesn’t really inspire a move out of corn, although the lower cost of planting soybeans plays a role in the decision.  If soybean prices continue to fall and the ratio moves in favor of corn planting, this doesn’t help us solve the oversupply of world corn.  The result could be disappointing corn prices for an extended time.

SOYBEANS – Improving weather conditions in both Argentina and Brazil put the skids on soybean prices again this week.  Strong weekly export sales were a bright spot to the week, but they were unable to overcome fund long liquidation and diminishing South American weather concerns.  Soybeans fell to a three-month low as soybeans closed lower in 11 out of the last 13 trading sessions. It broke a string of six consecutive lower closes with a small bounce into the Christmas weekend.  Funds moved from a net long position to a net short position.  Adding to the negative tone, China announced that effective January 1st, US soybean shipments into the country with foreign material (FM) of less than 1% would receive expedited treatment at unload.  Shipments with FM more than 1% would be subject to additional inspection and/or cleaning.  The new restrictions seemingly only apply to US shipments.  The finding of weed seeds in US cargoes was mentioned as a concern. This may add expense for US shippers and just makes it more difficult to do business.

Production estimates for Brazil aren’t falling.  Abiove, Brazil’s soybean association, left their forecast unchanged at 109.5 mmt.  Safras cut their estimate from 114.7 mmt to 114.6 mmt, but it’s still a huge number. The USDA’s latest estimate was 108 mmt.  Conab is projecting a 109.2 mmt crop.  Last year’s production was a record 114.1 mmt. Argentina passed pension reform this week, driving the peso to an all-time low.  Retirement age for men went from 65 years old to 70 years old, and for women from 60 years old to 63 years old.  Riots and strikes resulted as the pubic expressed their displeasure.   The lower peso usually prompts grower selling and makes their products more competitive.  Weekly export sales were at the high end of expectations at 64 million bushels. China accounted for 90.5% of the total weekly sales. We remain 16% behind last year’s pace.  The USDA is projecting total exports at 2.225 billion bushels and we are at 1.453 billion bushels. This would be a 2.3% increase in year/year exports.  We have 65% of the USDA’s export target on the books, compared to 81% of final exports sold on average by this date.  Soybean inspections year to date are down 13% from last year.  The trade will be expecting a decent sized cut to US soybean exports on the January 12th WASDE report.

OUTLOOK:  The trade should remain thin again this coming week as traders extend their holiday into the new year. Without a weather threat in South America, there is little to prompt buyers to jump into the market. January soybeans touched the September, and marketing year low, of $9.47 ½ per bushel.  March soybeans held above their September low of $9.56 ½, but without food for the bulls, we could make new lows for the move.  On a short-term basis, it will all come down to holiday weather in South America.  For the week, January soybeans were down 17 cents at $9.50 ¼, March fell 17 ¼ cents to $9.60 ¾, July dropped 16 ¾ cents to $9.82 ¼, and November was 14 ½ cents lower at $9.73 ¼ per bushel.

Wheat

Russia believes they will export up to 40 million tons of wheat this year.  This is much larger than the 33 million tons that the USDA is currently expecting.  India is looking to raise taxes on wheat imports.  The raised them from 10% to 20% in November.  This move is trying to support domestic producers. US wheat export sales were outstanding with the best sales total of the year so far. Wheat futures did manage to post a small gain for the week closing 3 ½ cents higher at $3.25

Market Report

Wednesday December 20th, 2017

March 17 corn closed up 1 ¾ at $3.49 ¼ and July 18 closed up 1 ¾ at $3.66. January 18 soybeans closed down 2 at $9.54 and March 18 closed down 2 ¼ at $9.64 ½. March wheat closed up 4 at $4.23 ½ and July 18 closed up 3 ½ at $4.50. Crude oil closed up $.55 at $58.13.

The soybean market established another new low for the move in a two-sided performance as trade volumes remain light. We were unable to sustain modest overnight strength in the absence of any fresh fundamental news and an improving environment for Southern Hemisphere crops. The news that was around has potential bearish implications. After some rumbling China has tightened their requirement on foreign matter (FM) allowed into US soybean shipments from 1-2% down to 1% effective January 1 according to the USDA. Boats that meet the new guideline will receive priority for shipment, while soybeans above 1% may be held back for more cleaning creating bottlenecks at our ports and creating premiums for low FM supply. This rule will not apply to Brazil or Argentina. This is a fairly major development that was sprung on the industry with almost no notice with only 12 days until the new rules take effect. As the primary destination for the bulk of US soybean exports this is a very negative development that may not be fully understood or digested by the market.  This gives Brazil and Argentina a leg up on soybean exports at our expense compounding our export demand deficit and any lost trade likely heads straight to our bottom line carryout.

The wheat complex was under a little pressure for much of the night, and entered the morning break a couple cents lower across the board. Once trade moved into the day session the market seemed to find support. We have seen all too often lately how strength has been unable to carry throughout the day. The fact that trade in Chicago held those gains for much of the day gives optimism that we may trigger additional buying as we head into one many believe will be much lighter traded volumes as we end the week. If nothing else, it is another sign that the market will probably be well supported on breaks. Export sales will be out Thursday. Last week’s sales were at the high end of expectations, coming in at 589 MT with an additional 9 MT of new crop for combined sales of 598 MT. Look for one more strong week of sales before the Holiday trade takes over. Look for sales to come in between 450 and 650 MT.

Anna Kaverman

anna@mercerlandmark.com

Market Report

Tuesday December 19th, 2017

March 17 corn closed up ½ at $3.47 ½ and July 18 closed up ½ at $3.64 ¼. January 18 soybeans closed down 5 ½ at $9.56 and March 18 closed down 5 ¾ at $9.66 ¾. March wheat closed down 1 at $4.19 ½ and July 18 closed down ¼ at $4.46 ½. Crude oil closed up $.35 at $57.58.

The corn market spent most of the day in slightly positive turf, ultimately finishing fractionally higher on continued light volume, “holiday” style trade. The funds were viewed small net buyers as they square up positions into year’s end. They are still net short nearly 240,000 combined corn futures and options. Overall, there were few significant developments today, as traders focus on four main items: weather, index fund rebalancing, ethanol, and exports. As for weather, South America pivoted toward the expected more favorable outlook this weekend, and that story did not change.  Crop moisture stress will continue in northern Argentina for a while, but both that region and the drier areas of Southern Brazil are expected to soon get some needed rain. The best rains are likely to occur over this weekend, which could make for an interesting return from the extended holiday if they do not materialize? Without much new to talk about Tuesday, “index fund rebalancing” was a frequent conversation starter. Most experts believe the “long only” traders will reduce their exposure in corn, despite little yr/yr price change, as they adjust weightings away from corn and to other commodities. Some believe the funds could be net sellers of up to 30,000 corn after the first of the year, though keep in mind, given this is spread out over a week or more, it is unlikely to greatly alter prices of any particular day.

The soybean market continues to shed weather risk premium and extended its slide to settle at its lowest level since late August. Trade volume continues to diminish with just 90k contracts for January traded today which is down by 25k from yesterday as holiday timings take over and that trend likely continues into the new year. The USDA flashed 145 mt of new crop 18/19 beans sold to unknown. The recent rains have been helpful for crops and plantings in Argentina but largely missed the some of the western and northern growing areas in that country and overall dryness remains an issue that will have lingering concerns. There are more rains in the forecast so some relief could be in the cards. Conditions in much of Brazil remain favorable and it appears Brazil’s crop potential gains could offset any potential losses we might see in Argentina.

The wheat complex battled both sides of unchanged overnight, but with a late surge in both Chicago and KC, those markets finished the evening slightly better, while Mpls finished marginally lower. The trend over the past few days has been for the markets to struggle any overnight strength. With both the HRW and SRW wheat contracts hovering around last week’s highs, and in turn trying to make a good trade, it has given optimism to many traders that if those markets can get a settle above those highs last week, maybe it can spark more of a short covering bounce. The commitment of traders report Friday afternoon showed funds nearing record short levels in both the SRW and HRW wheat contracts and from a fundamental perspective, after last week’s announcement from the USDA that Algeria picking up two cargoes of HRW wheat and another two cargoes of SRW were sold to unknown, it hints that US wheat has gotten cheap enough to compete in the feed market. That should keep the markets from breaking down. But we have seen all too often during quiet, holiday-type trade, that it is difficult to make that good trade.

Anna Kaverman

anna@mercerlandmark.com

Market Report

Monday December 18th, 2017

March 17 corn closed down ½ at $3.47 and July 18 closed down ½ at $3.63 ¾. January 18 soybeans closed down 5 ¾ at $9.61 ½ and March 18 closed down 5 ½ at $9.72 ½. March wheat closed up 2 ¼ at $4.20 ½ and July 18 closed up 2 ¾ at $4.46 ¾. Crude oil closed down $.11 at $57.22.

With the heavy fund selling in Friday’s COT, a weaker dollar and a positive overnight trade the corn and soybean markets appeared poised for a short covering rally day. Particularly with only two weeks of trade left in the year where funds may be look to take profits. The USDA even provided a positive demand input with export sales reported of 396 mt of beans sold to China. It was not meant to be however, as the sellers emerged after the break to target beans and meal and dragged the corn market lower too. Funds were estimated sellers of 1.5k corn, 8k beans and 1k wheat. Beans traded down to a 3-month low before finding some late short covering to close off the day’s lows. Corn retested but respected its contract low from Friday where the chart completed its second downside Price Count objective.

Rains fell in Argentina about as expected over the weekend (along with moderated temps) which should help to stabilize crop conditions and encourage the balance of the crop in Argy to get planted which is why we remain under pressure. The forecast this week is drier but the second week of the outlook shows the return of above normal rains. In today’s grain export inspections report weekly corn inspections totaled 594 mt falling short of expectations of around 700 mt, while soybean inspections also surpassed expectations at 1.775 mmt vs. 1.350 estimates.

The wheat complex saw three gains overnight, and in the process was able to move above Friday’s highs. However, price action during the day reverberated back to its form from Thursday and Friday and was unable to extend its overnight strength. Many are optimistic that trade can get a settle above last week’s highs and spark more of a short-covering bounce. However, we have seen all too often any market during holiday themed trade unable to follow through and make a good trade. If you take a look at the fundamental side of the wheat complex trade is surely set up. Thursday and Friday was marked with very active buying of lower protein hard wheat. It is unsure if this buying interest is tied to domestic or export trade. Some suggest it could be tied to blending with spring wheat but this is unlikely. But the two cargos of SRW announced to unknown last week hints that US wheat has gotten cheap enough to compete in the feed market. The best guess on the SRW sales is feed into the Asian market. This low pro hard wheat could be headed into the same direction.

Anna Kaverman

anna@mercerlandmark.com

By~ Brian Mitchem
Crop residue is valuable for maintenance of soil carbon, water infiltration, reducing soil erosion potential and the recycling of nutrients from the residue into the soil.
After grain harvest a typical 200 BPA corn yield leaves about 5 ton of residue per acre. 50 BPA soybeans leaves about 2 ton per acre. It takes about 2.5 ton of residue per year to feed soil microbes and maintain carbon in the soil. One of the consequences of soybeans is that the crop does not leave an adequate amount of residue and thus is a net negative on soil carbon.
Mineral nutrients contained in the residue leach out of the plant residue rather quickly. As soon as corn reaches black layer and there is no longer any way to add nutrients into the kernels the plant starts to leach nutrients from the plant and return to the soil. Even before a mature corn plant is harvested about 50% of the nutrients have leached to the soil.
Corn stover at harvest would contain approximate levels of nutrients per ton as follows: 17# nitrogen, 4# P2O5, 34# K2O and 3# sulfur. Values are approximate as rainfall past black layer influences nutrient leaching from plants.
Soy stover at harvest contains approximately the following levels per ton: 10# N, 4#P2O5, 17# K2O and 2# sulfur.
Soil microbes are the most abundant life form in the soil. One teaspoon of soil contains over 10 billion individual life forms. These are the organisms that help decompose residue and recycle nutrients from organic nutrients contained in the residue to ionorganic forms that are then plant available.
These microbes use the carbon from plant residue for energy and maintenance. Soil humus has a carbon:nitrogen ratio of 10:1. Microbes operate most efficiently with residues at a 24:1 ratio as they need to use the carbon for energy.
The type of plant residue has different C:N ratios, thus impacting the speed at which the residue is decomposed. Materials high in carbon and low in nitrogen take the longest to digest. This process requires N to be added to the residue thus has a net negative impact on N levels in soil. That process is called immobilization of nitrogen. This is why we apply more N per acre in corn following corn as opposed to corn following beans.
Carbon:Nitrogen ratios of common crops

Rye Straw 82:1
Wheat Straw 80:1
Oat Straw 70:1
Corn 57:1
Soy 18:1
Alfalfa 11:1

Market Report

Friday December 15th, 2017

March  corn closed down 1 at $3.47 ½ and July 18 closed down ¾ at $3.64 ¼. January 18 soybeans closed down ½ at $9.67 ¼ and March 18 closed down ¾ at $9.78.  March wheat closed unchanged at $4.18 ¼ and July 18 closed up ½ at $4.44. Crude oil closed up $.25 at $57.33.

FOR THE WEEK ENDED 12-15-17

CORN – A fresh contract low in March corn to begin the week set the tone for corn market, where another fresh contract low was set at $3.46 ½ on Friday.  Welcome to holiday trading!  The December 12th WASDE report only provided a short-lived bounce for the bulls.  South American weather and a lack of buying interest kept corn on the defensive.  If you’re a technician, the 10 and 20-day moving averages represent resistance.  At the end of the week, resistance was seen at $3.50 ½ and $3.52 ¾ per bushel.  The next support in the March contract will be the December 2017 contract low at $3.35 ¼ per bushel.  December 2017 contract expired on the fourteenth at $3.36 ¼ per bushel.

The December WASDE bumped the corn for ethanol usage 50 million bushels higher to 5.525 billion bushels, which fed directly into lowering ending stocks.  The export category was left unchanged, which based on the current pace, was a little surprising.  We’ll know more by the January report.  Ending stocks were cut 50 MB to 2.437 BB.  This was below the average guess for 2.478 BB. Prices bounced in post-report trading; but by the final bell, gains had been erased and we closed lower.  World ending stocks came in above the average guess at 204.1 mmt.  The average estimate was 202.7 mmt and was higher than last month’s forecast of 203.86 mmt.  Brazil’s corn production number was unchanged at 95 mmt, as was Argentina’s at 42 mmt.  The trade was anticipating slight decreases to both crops with Brazil estimated at 93.2 mmt and Argentina at 41.8 mmt.  Conab’s Brazilian corn number was updated this week to 92.2 mmt.  Last year, Brazil produced 97.8 mmt of corn.  China this week lowered their corn import forecast by 500 tmt to 1.0 mmt.  There wasn’t any food for the bulls in these numbers.

Weekly export sales were neutral at 34.1 million bushels.  We are now 28% behind on sales versus last year.  The USDA is predicting only a 16% drop in year on year exports to 1.925 billion bushels.  We normally have 52% of the final exports on the books by now.  This year we are at 49% of the current 1.925-billion-bushel export forecast.  Again, nothing very friendly.

Informa pegged 2018 corn acres at 89.7 million acres.  This is down 754,000 acres from last year’s 90.4 million acres.  For the 2017 crop, they plugged in a yield of 176.6 BPA for a crop of 14.676 billion bushels.  On the December crop report, the USDA used a 175.4 BPA yield for a crop of 14.578 billion bushels.

OUTLOOK:  Corn bulls found coal in their stockings this week (ok, it’s early for that), with new contract lows seen through the September contract.  The December 2018 contract also made a new contract low at $3.79 ¼ per bushel.  At this point, it’s hard to envision the corn market earning its carries.  We could expect choppy, defensive-type trade into the end of the year.  A bright spot for corn could be the fact that funds are carrying a net short position in corn, and may need to do some position squaring prior to the end of the calendar year.  In general, it is not too much of a stretch to expect the March 2018 corn contract to trend toward the December 2017 contract low of $3.35 ¼ per bushel, set two days before the contract expired on December 14th.  For the week, March corn was down 5 ¼ cents at $3.47 ½, July off a nickel at $3.64 ¼, and December 2018 down 5 cents at $3.80 per bushel.

SOYBEANS – Slightly better rainfall over the weekend in South America caused soybeans to “gap and go lower” on Sunday night’s open.  The gap from $9.89 to $9.89 ¾ will act as first resistance in the January contract.  Soybeans continued to fade into the December WASDE report, breaching the 100 and 200-day moving average support levels.  The November low at $9.67 per bushel was breached during the week, setting us up to revisit the October low at $9.63 ¼ per bushel, then the $9.40 area.  There’s nothing magical about that level if South American weather doesn’t threaten the crop. The bears will remain in control with the potential for further downside moves without a forecast change.  January soybeans closed lower in seven out of the last eight trading sessions, as of December 15th.

The December 12th report slashed US exports by 25 million bushels to 2.225 billion bushels, which will likely see further cuts next month due to strong South American competition. We are way behind on our soybean export pace needed to hit the USDA’s target and we are now past our normal peak export season.  The crush, however, was not increased this month, but may be raised next month.  The seed usage line was increased by 5 million bushels, resulting in a decrease in ending stocks of 20 million bushels to 445 million bushels.  This would be the highest ending stocks number since 2006/2007.  The average trade guess was 438 million bushels.  We have plenty of soybeans.

World ending stocks were up from 97.9 mmt in November to a record 98.3 mmt this month.  The average estimate was 97.8 mmt.  The USDA left both Brazil’s and Argentina’s soybean production forecasts unchanged at 108 mmt and 57 mmt, respectively. The trade was expecting a slight increase to Brazil’s production and a slight decrease to Argentina’s production.   Prior to our report, Conab raised their Brazilian soybean number to 109.2 mmt.  Last year, Brazil produced 114.1 mmt of soybeans.  Their deputy ag minister said this week, there is the possibility they could surpass that record this year. Abiove pegged Brazil’s production at 109.5 mmt, with 2018 exports at 65 mmt.  They predicted 2017 soybean exports at a record 67.8 mmt, up from their 66 mmt estimate in November.  China is estimating they will import 95.97 mmt soybeans this year, up 2.7% from last year.

Weekly export sales at 53.4 million bushels for old crop and 4.1 million bushels for new crop were at the lower end of expectations.  We are still running 16% behind last year’s total commitments.  The USDA’s new balance sheets indicate an increase of 2.3% in year on year exports to 2.225 billion bushels.  This deficit is going to be a big hurdle to overcome, or the USDA will need to make further cuts to exports on the next balance sheet.

Informa Economics this week estimated this year’s soybeans yielded 49.7 BPA for a crop of 4.45 billion bushels.  The USDA in December was using 49.5 BPA for a crop of 4.425 billion bushels.  In their outlook for 2018, they projected soybean acres to be up 1.3% or 1.18 million acres to a record 91.4 million acres.  Last year, we planted 90.2 million acres to soybeans.  When their forecasts for 2018 corn and soybeans are combined, it is the largest area ever for the third year in a row.

OUTLOOK:  Mother Nature played the role of the Grinch this week with improved forecasts for needed rain in Argentina and continuing favorable weather in Brazil.  Without a threatened South American crop, rallies will be selling opportunities with the market in a defensive mood.  Our export demand is also a negative factor as we continue to run behind what is needed to hit the USDA’s target.  If South American weather is perceived to be turning drier and hotter, the market could respond to the upside quickly; but currently, that isn’t the case.   While some short-term support in the January contract may be seen at $9.63 per bushel, better support doesn’t come in until the $9.30 to $9.40 area.  Mother Nature is in control and she can be very unpredictable.  For the week, January soybeans plunged 22 ½ cents at $9.67 ¼, March dropped 23 ½ cents at $9.78, July fell 22 cents at $9.99, and November 2018 tumbled 17 cents to $9.87 ¾ per bushel.

Additional comments: Contract changes for the week ended December 15th:  Minneapolis March wheat rallied 8 ¾ to $6.20, Chicago fell ¾ cents to $4.18 ¼, and Kansas City declined ½ cent to $4.17 ½ per bushel.  New contract lows were set in the Chicago and Kansas City markets this week.  The US dollar index was up slightly at 93.934 at mid-afternoon Friday.

Anna Kaverman

anna@mercerlandmark.com

Market Report

Wednesday December 13th, 2017

March 17 corn closed up 1 ¼ at $3.49 and July 18 closed up 1 at $3.65 ½. January 18 soybeans closed up 3 ½ at $9.79 ¼ and March 18 closed up 3 ¼ at $9.90 ½.  March wheat closed up 6 at $4.16 ¾ and July 18 closed up 5 ¼ at $4.42 ½. Crude oil closed down $.57 at $56.59.

The corn market was a snooze-fest from the start today. Futures opened higher, maintained modest $.01-$.02 gains all day long, and closed a penny better. Volumes were extremely light; less than 75,000 March corn traded hands, even when factoring in spreads. The funds were viewed net buyers today, which would leave them short 220,000 corn heading into tonight. Other than a little post-USDA jostling, there was not a lot of market-moving news around today in corn.  As noted yesterday, the December WASDE did not change the narrative of “too much” of practically everything. The “status quo” continues to hold in Argentina; hot (110+ in some spots) and dry, but with reasonable expectations for improvement one week out. Brazil remains mostly in good shape, though many areas there could use a little more rain, too. The weekly EIA ethanol report was much less bearish this week than last, finding a modest decline in production and a small draw on inventory. Production fell back 2% to 1.089 mil bbl/day, which would still easily be the second largest week on record.

The soybean market came up for some air after 5 consecutive days of selling culminating – for the moment – with yesterday’s report and sizeable 28,000 reduction of open interest as bulls threw in the towel. Tuesday’s crop report was important as the USDA acknowledged their export projections were too high with a 25 mb reduction that we see as just the start of a larger adjustment coming in future reports.  There were no fresh export announcements. News and trade volumes were extremely light with a holiday type of feel which can be normal as we get to the second half of December. March soybean volume totaled just 72k contracts compared to 100k+ each of the past two days. Weather in the Southern Hemisphere has two sided of late in a case of have’s and have nots but the near-term forecasts are very promising. The Central and Northern parts of Brazil have enjoyed an excellent start to their growing season while S Brazil and a good portion of Argentina have struggled with heat and dryness.  Rains are moving in and by the middle of next week the heat is moving out which will bring needed relief for the near term for many of those areas in need.

After seven consecutive lower settles, the wheat complex was finally able to post modest gains across the board. There was no fresh news overnight to spark today’s bounce, but we have seen signs over the past few days in which any one of them could have triggered the rebound we saw today. The USDA announcement yesterday of 120 MT of HRW wheat to Algeria, along with offers in the GASC tender coming in a little higher than its previous tender despite a much lower board showed us that US SRW offers are competitive to a lot of markets if interest for lower class wheat surfaces. Same in HRW as evidenced by the sale to Algeria. Yes, the crop report data may have been a little negative, but that is now behind us and trade is quickly delving into “holiday type” volumes. Keep an eye on the US Dollar. That market sold off almost a full point AFTER the grain markets settled. If nothing else it may give the wheat market a little support.

Anna Kaverman

anna@mercerlandmark.com