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Archive for January, 2018

Market Report

Tuesday January 30th, 2018

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Anna Kaverman

anna@mercerlandmark.com

Market Report

Friday January 26th, 2018

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

FOR THE WEEK ENDED 1-26-18

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

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

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

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

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

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

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

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

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

Wheat

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

Anna Kaverman

anna@mercerlandmark.com

Market Report

Thursday January 25th, 2018

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

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

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

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

Anna Kaverman

anna@nercerlandmark.com

Market Report

Wednesday January 24th, 2018

March 17 corn closed up 5 ¼ at $3.56 ½ and July 18 closed up 5 at $3.89 ½. March soybeans closed up 6 at $9.92 ¼ and July closed up 5 ¾ at $10.07 ½. March wheat closed up 11 ½ at $4.33 and July 18 closed up 10 ¼ at $4.58 ¼. Crude oil closed up $1.05 at $65.36.

The grain markets had a bit of a pulse today, unlike Monday, corn was able to capitalize on an overnight rally. This was only the second time in two months that the market has been able to rally $.05. The funds were viewed net buyers of about 25,000 corn today, which would leave them net short roughly 230,000 futures and options. Corn trade actually started lower overnight, briefly dipping back below the magic $3.50 level.  The appearance of some Chinese corn boats can be credited with the turnaround, potentially confirming some old rumors of export business done. It also doesn’t hurt that the US Dollar is into new lows, which should help US corn continue to flow into Asia over the second half of our marketing year. Note, the weekly export sales data was delayed a day due to the shutdown, and will be released Friday morning.  Mid-day, it was revealed that a 125,000 metric ton reported bean sale to “unknown” this morning was actually a corn sale instead. The weekly EIA data was more bearish than expected. Seasonally weak demand and steady production did ethanol inventory no favor. South American weather remains a rather neutral input; not worrying enough to buy, yet just compelling enough not to completely dismiss.  Argentina’s drier bias during the second week of the outlook puts more pressure on rainfall at the end of this week to bolster soil moisture. 

Soybeans got a boost from the dollar today as the currency dropped to a three-year low lending broader macro support to commodities ranging from grains to metals to energies. Flows of money into commodities has been obvious in the other sectors but funds have been locked into short grains since last summer and more recently short soybeans since December so it will be interesting to see if that negative bias is changing. The weakness in the dollar makes our exports more attractive and at the same time the Brazilian real has rallied to a 4-month high which makes Brazilian corn and beans less valuable to the farmer putting a stop to fresh farm selling down there. It is estimated that farmers in Brazil have only sold 30% of new crop soybean compared with 34.4% a year earlier and 5-year average of 38.2% due to the strength in the real and disappointing prices.  China reportedly bought 11 cargoes of beans last week, mostly Brazilian origin for Feb-March. This morning the USDA reported a 125 mt bean sale to unknown but later corrected that sale to corn.

The wheat complex started the evening slightly lower, but prices began to firm around the time the European markets opened. The modest rally also coincided with the break in the US Dollar, which traded into new contract lows and down to its lowest level since the end of 2014. Keep in mind, a weak US Dollar makes our exports more attractive and therefore is friendly commodities wheat especially. With not a whole lot of other fresh influential news around, the weakness in the Dollar was said to be behind much of the short-covering rally across the wheat complex today. Today’s bounce was much more enthusiastic than the previous few rally attempts.

Anna Kaverman

anna@mercerlandmark.com

Market Report

Tuesday January 23rd, 2018

March 17 corn closed down ¾ at $3.51 ¼ and July 18 closed down 1 at $3.68. March soybeans closed up 2 at $9.86 ¼ and July closed up 2 at $10.07 ¾. March wheat closed down 4 ¼ at $4.21 ½ and July 18 closed down 4 at $4.48. Crude oil closed up $.88 at $64.31.

Overall price action today was the polar opposite of Monday, yet the end result was more or less the same.  Futures were lower to start, did just enough to the downside to run stops below $3.50, and then floated back to finish fractionally lower.  The funds were viewed net sellers of about 10,000 contracts today, which would take their net position in corn back up to around 255,000 net short. Early morning news flow was exceptionally quiet, even for corn in the dead of winter. Export buzz was a major feature again today, though unlike Monday, most of that was to Ukraine.  The USDA did report 256,000 MT of corn sold to “unknown” under daily reporting this morning. Weekly EIA report is expected out at the normal time Wednesday. After surprising with larger ethanol production last week, do not be surprised if the gov’t backs off those projections, likely to the tune of a 1-2% wk/wk pullback. Demand could also back off a touch. South American weather has been put on the back-burner again for a moment not worrying enough to trade, yet just compelling enough not to completely dismiss. Second crop corn can be planted into the end of Feb. Elsewhere, analysts at Informa updated their thoughts on US acres. They expect 89.2 million corn acres vs. 89.7 prior and 90.2 mil planted last year.

Soybeans threatened to end their winning streak in a two-sided performance but rallied back to settle higher for a 7th consecutive session. Meal made a similar trade by shrugging off early sell pressure to close higher. News and trade was quiet today with the market focus remaining on weather primarily.  This is a classic weather scare rally in a longer term oversupplied bear market in beans. Near term forecasts continue to promote overall stressful conditions in Argentina with too much heat and too little rain while Brazil’s harvest could be delayed and susceptible to disease by too much moisture in the outlook. Elsewhere in the news, Informa 2018 acreage estimated soybeans at 91.197 million acres this is a reduction from their previous estimate by .200 in beans.

The wheat complex was under pressure throughout the day and finished the weakest. Very little fresh influential news to talk about, so after testing the market’s pre-report range yesterday and not going anywhere, the recent bullish enthusiasm seemed to run its course. Don’t really know how far the markets can rally anyways. Expect to see selling scale up in Chicago between $4.25 -$4.35. The USDA said that its weekly export sales report will be delayed until Friday because of the federal government shutdown. Informa updated its 2018 acreage estimates this morning. They pegged all wheat acres at 46.1 million, including 32.6 million winter and 11.25 spring. Despite this past week’s disturbances at its ports, Russian grain exports continue to be well ahead of last year’s pace. Just what the country was hoping for after a record grain crop of 134 MMT this past year.

Anna Kaverman

anna@mercerlandmark.com

Market Report

Monday January 22nd, 2018

March 17 corn closed down ½ at $3.52 and July 18 closed unchanged at $3.69. March soybeans closed up 7 at $9.84 ¼ and July closed up 7 ½ at $10.05 ¾. March wheat closed up 3 at $4.25 ¾ and July 18 closed up 3 ¼ at $4.52. Crude oil closed up $.27 at $63.43.

Corn traders were buckling in for an exciting start to the week.  Futures left Friday’s close Sunday night, and finished a couple cents higher heading into the break. Then, the status quo set in. Corn steadily surrendered those gains, briefly traded lower on the day, before stabilizing into the close. The end result was a “sharply unchanged” performance. Managed Money traders were likely small net buyers on the day, which would imply they are heading into tonight net short 240,000 futures and options. The Argentina growing weather continues, thanks to competing periods of “hot and dry” and “just in time” rains. This weekend was particularly confusing, as some areas (mostly north of the major growing regions) received torrential rains, while others went almost completely without. Those that went without generally have enough soil moisture to limp along for a week or so. Some storm potential seen early this week, but the 6-10 day looks dry. Early Brazil soy harvest also running a bit behind normal. But it’s probably too early to worry there, given “optimal” second crop planting period extends for at least another 30-40 days.

Soybeans extended their gains for a 6th consecutive session as production uncertainty in Argentina due to stressful crop conditions and a rough near-term weather forecast has the market pricing in weather risk premium. The USDA is last estimating Argentina’s soybean crop at 56 mmt with some talking production could slip to 50-52 mmt when all is said and done due to the adverse weather and smaller planted acres. Fortunately, Argentina holds significant old crop supplies and Brazil’s new crop may be underestimated as much as 4 mmt by the USDA at 110 mmt last so global inventories are very strong and can handle a production shortfall as long as it doesn’t turn into a disaster.  The job of the market is to get things right and with significant fund short open interest you have the potential to run further than otherwise might be warranted – the weekly chart shows room to the $10.00-$10.15 area next.  Until the forecasts show relief that market is unlikely to lie down.

The wheat complex surprisingly saw firm price action overnight with Chicago leading the way. Last week the rally Chicago began to stall as it neared the area of its pre-report trading range of $4.24-$4.35. Although we may not have seen the selling overnight, during the day there sure seemed to be scale up selling, and trade was unable to extend their overnight gains during the day. Similar to the overnight, Chicago fared the best and finished the day higher. There was not a lot of fresh news over the weekend or throughout the day for the wheat complex so today’s price action was for the most part uneventful. Rains over the coming week continue to miss much of the center and southern plains, and the fear of dry conditions impacting a crop that already seems to have been hit with different adverse weather conditions several times already this season may have kept a bid under the market. Combine that with Russian wheat prices continuing to rise – is said to be at a three-month high – there are some positive signs to trade. However, we are still only a little over a week removed from a crop report that provided not so friendly data. Seasonal trend is neutral to slightly negative for wheat.

Anna Kaverman

anna@mercerlandmark.com

Market Report

Friday January 19th, 2018

March 17 corn closed up 1 at $3.52 ½ and July 18 closed up 1 ¼ at $3.69. March soybeans closed up 4 ¼ at $9.77 ¼ and July closed up 4 ¼ at $9.98 ¼. March wheat closed down 2 ½ at $4.22 ¾ and July 18 closed down 2 ½ at $4.48 ¾. Crude oil closed down $.58 at $63.31.

FOR THE WEEK ENDED 1-19-18

CORN – Corn closed higher in three of the four sessions in the holiday-shortened trading week.  The weekly gain erased the previous week’s loss and closed the week on a strong note, settling slightly above the $3.52 50-day moving average.  For the week, March corn was up 6 ¼ cents at $3.52 ½, July gained 6 ¼ cents at $3.69, and December was up 5 ¼ cents at $3.85 ¾.  Before we get too bulled up, March corn has still only traded a $.15 range from the contract low of $3.45 ½ to $3.60 ½ per bushel since November 10th.  Profit taking by fund shorts and spillover strength from soybeans pushed prices back to the middle of their recent trading range.

Weekly export sales were excellent at 74.3 MB and the second best of the marketing year.  However, total commitments at 1.14 billion bushels are 23% behind last year.  The USDA is expecting exports to be down 16% year on year.  We need to average 23.6 million bushels per week in sales to hit the USDA’s 1.925-billion-bushel target.  US corn is currently the cheapest source of corn in the world.  Weekly ethanol production was up 65,000 bpd at 1.061 million bpd for the week that ended January 12th.  This was the biggest weekly jump on record.

The slow start to the soybean harvest in Mato Grosso, Brazil has raised concern over safrinha acreage.  Most traders anticipate acreage to fall, but the unknown is by how much. However, at least one private consultant in Brazil expects safrinha acreage to be up slightly and is not concerned at this time about rain in Mato Grosso.  As of January 17th, Mato Grosso’s safrinha corn was just 1.4% planted versus 4.6% last year.  Corn acres could be lost in favor of cotton.

OUTLOOK:  Corn bulls find confidence from the huge fund short, spillover strength from soybeans, and South American weather.  I don’t expect much either way for corn in the short run, anticipating it may take a fresh headline to push us out of the $3.45 to $3.60 range.

SOYBEANS – Soybeans returned from the holiday by capitalizing on the key reversal higher seen after the January 12th non-bearish USDA report.  Settling higher every day of the week, March soybeans rallied 16 ¾ cents to $9.77 ¼, July jumped $.17 higher to $9.98 ¼, and November was 12 ½ cents higher at $9.96 per bushel.  Fund short covering, a strong meal market, and the seemingly perpetual concern about South American weather propelled prices to their highest level since the middle of December.

Argentina’s temperatures are forecasted to be above normal for the balance of the month, with the southern part of the country receiving little rain. It was interesting that the USDA staff in Argentina said it was “too early to begin projecting lower (soybean) production.”  Their Argentine bean production estimate at 57 mmt is 1 mmt higher than last week’s USDA number.  Trade chatter has Argentina’s bean crop decreasing to the 52-54 mmt range versus USDA’s 56 mmt figure.  Argentina is a major exporter of soymeal.  If their soybean crop shrinks, it will affect meal supplies for export.  For Brazil, traders are watching early harvest and possible rain delays, and the northeastern areas could use some rain.  In general, Brazil’s weather has been good for soybean development and there is still the possibility for production estimates to move toward last year’s 114.1 mmt record crop.

NOPA’s December soybean crush came in at a December record of 166.4 million bushels.  This was above the trade estimate of 165.4 million bushels.  However, soyoil stocks were higher than expected at 1.54 billion pounds versus 1.38 billion estimated.  Traders are leaning toward a higher crush number on subsequent balance sheets. Weekly export sales were above expectations at 45.6 million bushels and the highest in four weeks.  The USDA is anticipating less than a 1% decline in year on year exports.  We need to average 18.7 million bushels per week in sales to achieve the USDA’s 2.160-billion-bushel export projection.  This would be a 51% increase in weekly sales versus last year.  Brazil is currently the cheapest source of soybeans into China.  The US has sold 25.7 mmt of soybeans to China so far this year.  This is 6.6 mmt less than last year by this date. Strong soymeal sales and a surge in meal prices were a strong supportive factor to this week’s soybean rally.

OUTLOOK:  Bulls will point to uncertain Argentine weather, large fund short, huge surge in meal prices, and competitiveness in the export market as market positives; bears will cite a huge Brazilian bean crop, ample world supplies, and export sales lagging what is needed to hit the USDA target, as market influencers.  Perception is reality, and South American weather concerns and fund short-covering were this past week’s reality.  Unless the funds continue to cover shorts and/or South American weather forecasts turn drier, the upside looks limited.

The wheat market continues to move in a sideways direction.  Traders were hoping for a rally from last week’s acreage report, but that didn’t materialize.  Russia is still the driving force on the world market and they are talking about increasing grain exports again this year.  Russia has been the main supplier for all of the recent Egyptian wheat tenders.

Anna Kaverman

anna@mercerlandmark.com

Market Report

Thursday January 18th, 2018

March 17 corn closed down 1 ½ at $3.51 ½ and July 18 closed down 1 ½ at $3.67 ¾. March soybeans closed up 4 ¼ at $9.73 and July closed up 4 ½ at $9.94. March wheat closed up 3 ¾ at $4.25 ¼ and July 18 closed up 3 ½ at $4.51 ¼. Crude oil closed down $.03 at $63.89.

The corn market returned to form, following up Wednesday’s performance with a lackadaisical penny plus lower Thursday.  Markets tried to push higher early, but found enthusiasm to chase lacking, which should not be surprising given the lack of follow-through in the markets of late. The funds were viewed net sellers of 8,000 corn, which would plump their net position back up to net short 255,000 corn futures and options. News flow remains light. The weekly EIA report was delayed a day due to MLK holiday. The gov’t found a surprisingly quick rebound to “normal” for production, jumping almost 7% wk/wk after bitter cold pushed them to a three month low in the prior report.  Stocks were little changed. Weekly export sales report tomorrow (also delayed due to MLK) should show a little more life post-holiday. New corn business should come in around 600k-700 MT this week, which would be above recent averages. South American weather is mostly in good shape, excepting some regions of central and southern Argentina that may dry out for a moment.

Soybeans extended their gains with leadership from the soybean meal market. The sharp rally in meal began (like beans) with the report day reversal but is being driven by a combination of short bought users forced to chase after the sudden turnaround and funds. The ongoing dryness in Argentina is supportive because they are the world’s number one exporter of meal (2x as much as Brazil and 3x as much as the US approximately). Farm Futures conducted their annual acreage survey among farmers and they are estimating US corn acres this spring at 90.1 million planted (-.1% from 2017), beans 90.1 unchanged from 2017, winter wheat acres 32.6 million (-.3%).

The wheat complex saw slightly higher price action across the board overnight, and that trend continued throughout the day. Despite the gains of the past two days, the rally in both KC and Chicago seems to be lacking much energy. Unfriendly crop report data tends to do that to a market, but there are some impetuses that should be enough to keep the market from breaking down too much either. Earlier in the week we saw the SRW wheat contract drop back down to levels that in early Dec was identified as an area that stimulated SRW wheat movement and export business, and trade quickly bounced out of that area. More importantly, wheat conditions, mainly HRW, has really been under scrutiny of late. The drought monitor and soil moisture index charts were updated overnight and by looking at those charts, that analysis is justified. Despite many traders having a hard time believing the acreage data from the USDA on Friday, we have seen in the past – the USDA data trumps all, so getting back above last week’s highs at this time may be very difficult and it will take a trade above those highs to chase out some of these huge shorts.

Anna Kaverman

anna@mercerlandmark.com

Market Report

Wednesday January 17th, 2018

March 17 corn closed up 4 ¾ at $3.53 and July 18 closed up 4 ¼ at $3.69 ¼. March soybeans closed up ¾ at $9.68 ¾ and July closed up ½ at $9.89 ½. March wheat closed up 5 at $4.21 ½ and July 18 closed up 4 at $4.47 ¾. Crude oil closed up $.25 at $63.92.

The corn market must have eaten their Wheaties this morning.  Fractional overnight gains morphed into a slowly creeping crawl higher throughout the day, ultimately finishing almost $.05 higher in the front month March. Sadly enough, this was the best single day of gains for the market in exactly two months. Funds were viewed net buyers of 13,000 contracts today, which would trim back their net short in the market to 250,000 combined futures and options. There was not a lot of fresh news to discuss today, which made the “rally” all that more remarkable.  There was a little export business around overnight. South Korea was in for a couple cargos of corn. After a brief stab at a recovery effort, the US Dollar faltered, trading to new lows for the move today before climbing back to “slightly better” late.  Shipments continue to lag last year by 50%, but there remains hope for a better pace looking into the second half of the corn marketing year.  South American weather is still in a holding pattern, as traders gauge Argentine precip. Argentina’s continued dryness problems will be focused mostly in the south during the next week with some relief possible again at the end of this month. In the meantime, northern Argentina will get some significant precipitation, easing long term dryness in that part of the nation. Technically, we continue to hold recent lows in corn near $3.46. Initial resistance at $3.50 fell by the wayside, above which we have the next layer at $3.55, then $3.60.

Soybeans didn’t have a whole lot of fresh news around today but the price action was interesting nonetheless. The bean chart closed its gap from yesterday which takes away some of the upside power and momentum that had been building although the reversal trade from last week also suggests we have stabilized our downside for a moment. Parts of Argentina saw a significant rain event overnight with 2+ inch totals seen in S Cordoba which is a key production are that was in need. Forecasts show heat and dryness prevailing for much of the country for the coming week but the second week of the outlook shows a better chance for more rain. South America has its share of weather issues which is typical but overall production looking very strong thanks to favorable growing conditions in Brazil.

Elsewhere around the news, a reduction in Argentina’s port costs by 20-40% was announced yesterday which will help that country’s export competitiveness moving forward. With old crop stocks on hand and an export tax structure that is being lowered monthly we should expect that Argentina will take its share of trade too as the US and Brazil continue to battle for Chinese business.  Chinese demand is robust with total bean imports in 2017 up 14% year over year to a new record 95.5 mmt but the US share of trade has not been as projected leading to US S&D upward revisions that are likely not done being adjusted. Early new crop Brazilian beans are starting to be harvested.

Price action across the complex was slightly better for much of the night, but oddly, the entire complex started the day a little lower. Trade quickly rebounded and moved higher, and remained bid the rest of the day. The Spring wheat market had been the leader of the complex, as talk resurfaced surrounding concern for quality wheat when the calendar shifts to Spring. After Friday’s crop report data, the big fund short does not feel too threatened, but Chicago wheat did move back down to levels that in early Dec was identified as an area that stimulated SRW wheat movement and export business. When you combine that with Egypt paying $4.00 higher on their wheat tender this week, regardless of the reason, it becomes clear that US wheat prices are getting much more competitive. Yesterday we even talked about the recent collapse of the US Dollar. That may work against the wheat market. When the grain markets closed the US Dollar was once again trading into new contract lows, but since that time the Dollar rallied a half point.

Anna Kaverman

anna@mercerlandmark.com

Market Report

Tuesday January 16th, 2018

March 17 corn closed up 2 at $3.48 ¼ and July 18 closed up 2 ¼ at $3.65. March soybeans closed up 7 ½ at $9.68 and July closed up 7 ¾ at $9.89. March wheat closed down 4 at $4.16 ½ and July 18 closed down 2 ¾ at $4.43 ¾. Crude oil closed down $.56 at $63.67.

Solidly “mixed” day of trade in the corn market post-report.  Stronger overnight on the soybean “gap ‘n go”, softer mid-day, and firmer into the close. After all, what’s an extra 26 MB? Funds were viewed net buyers of just over 5,000 corn, which would bring their total back from a record net short of over 260,000 combined futures and options. South American weather over the weekend had a glass half full or empty vibe to it.  Roughly 20% of Argentina received an inch or more over the weekend, but the overnight focus tended to be on the 40% that received less than half-an-inch. Another talking point early was outside markets. The US Dollar was of particular note to grains, as it has fallen completely out of bed over the past couple of weeks, trading to three plus year lows today. We will see if this adds to a more favorable export picture looking out into the second half of the marketing year.

Soybeans are adding back some weather risk premium as Argentine weekend rain coverage was good for some areas but left many areas wanting and forecasts lack any game changing rains so the market is pricing back some risk premium and chasing out some of the recent short open interest that piled in in front of the crop report. Analyst continue to see Brazil’s crops getting bigger and offsetting likely reductions in Argentina. Beans enjoyed some headline demand support with decent export inspections (if you only focus on today’s report vs. expectations and not projections) and a record December crush of 166.3 mb. Perhaps most impressive is the strong technical signals in beans with two shows of power with the outside day reversal out of a new low for the move followed by the gap action. Meal didn’t have the outside day power on Friday but did stick the reversal with the follow through gap.

Price action across the complex was mostly lower before finishing mixed. Data from the Crop Report on Friday was not very friendly for wheat, and trade has since reacted accordingly with double digit losses on Friday, followed by additional weakness today. We already have Tunisia, Algeria and Japan in this week, and over the holiday Egypt was right back in for wheat after buying a couple cargoes last week. The GASC ended up buying five cargoes of Russian wheat today. Regardless, Egypt paying much higher prices for Russian origin wheat makes US wheat prices that much more competitive and should be at least a little encouraging that US wheat futures should not collapse completely. The US Dollar losing two full points over the past three days and moving into new contract lows also should be supportive. A weaker US Dollar is positive for US exports.

Anna Kaverman

anna@mercerlandmark.com