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Archive for January, 2018

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

Market Report

Friday January 12th, 2018

March 17 corn closed down 2 ½ at $3.46 ¼ and July 18 closed down 2 ¼ at $3.62 ¾. March soybeans closed up 10 ½ at $9.60 ½ and July closed up 10 ¾ at $9.81 ¼. March wheat closed down 12 ¾ at $4.20 ½ and July 18 closed down 12 ¼ at $4.46 ½. Crude oil closed up $.55 at $64.23.

FOR THE WEEK ENDED 1-12-18

CORN – Corn came within ¼ cent of setting a new contract low when traders returned from the weekend, and action in the week leading up to the USDA reports was dull.  Improving weather in South America and more fund selling set the tone, but there really wasn’t much fresh news to drive prices.  Corn then spent the middle of the week trying to regain Monday’s losses.  It was unable to close above the psychological $3.50 mark.  Once the reports were released, corn followed wheat lower and set a new contract low in the process at $3.45 ½ per bushel.

On the US balance sheet, planted acres were cut 200,000 to 90.2 million acres, with harvested acres down 400,000 at 82.7 million acres.  The corn yield was raised 1.2 BPA to a record 176.6 BPA.  The trade was predicting the yield to stay at 175.4 BPA.  This put production up 26 million bushels at 14.6 billion bushels compared to 14.579 billion projected.  This broke a string of 4 years in a row where production was reduced.  On the demand side of the ledger, feed usage was lowered 25 million bushels, FSI increased 10 million, and exports were left alone at 1.925 billion bushels.  Ending stocks at 2.477 billion bushels were up 40 million bushels.  Ending stocks to use went from 16.8% to 17.1%.

December 1 corn stocks were a record at 12.516 billion bushels and larger than the trade guess.  World ending stocks were 206.6 mmt, much higher than the 202.9 mmt forecast.  Brazil’s corn crop was pegged at 95.0 mmt, unchanged from last month, but larger than the 94.13 mmt estimate.  Argentina’s corn crop came in unchanged from last month at 42.0 mmt.  The trade was expecting a small cut to 41.5 mmt.

Weekly export sales were within expectations, but were a disappointment nonetheless.  At just 17.2 mb we’re still 25% behind last year when the USDA is still anticipating a 16% decline in exports year/year.  Sales were also the third lowest of this marketing year. Total export commitments are 1.067 bb.  Weekly ethanol production dropped 36,000 barrels per day to 1.032 million bpd.  This completed the largest two week decline on record.  Severe cold and low margins were likely culprits in the production decrease.

OUTLOOK: We have another short trading week ahead of us as the CBOT grain market is closed in observance of Martin Luther King, Jr. Day on January 15th.  In general, the corn reports were neutral to bearish and the sharp sell-off in wheat spilled over into corn.  It’s hard to get fired up about corn staging a quick comeback.  Attention will focus once again on rain events, or the forecast for them, in Argentina and Brazil, and demand.  Technically, corn put in a poor show for the week.  March corn set a new contract low at $3.45 ½ per bushel in post-report trading.  The gap on the continuous chart when the December 2017 contract expired at $3.38 is the next support level.  The first resistance level is seen at $3.50 per bushel.  For the week, March corn fell a nickel at $3.46 ¼, July was off 4 ¾ cents at $3.62 ¾, and December 2018 dropped 4 cents to $3.80 ½ per bushel.  Except for the large fund short, and possible weather changes in South America, it’s difficult to see why any significant rally will occur in the short term.

SOYBEANS – Beneficial rain to crops in South America began a four-day slide lower in soybeans to levels not traded since late August.  Additional fund selling, a declining meal market, and a sharply lower Argentine peso added to the negativity.  The January 12th USDA reports resulted in a questionable rally, and beans still closed lower on the week.  The trade was leaning lower into the report, the numbers were neutral to bearish, and it felt like short covering/profit-taking drove the rally into the weekend.  Soybeans posted a key reversal higher to end the week, which could be extended if weekend rains in South America are a disappointment.

On the US balance sheet, planted acres were reduced 100,000 to 90.1 million acres.  The yield was surprisingly cut 0.4 BPA to 49.1 BPA. The trade was expecting the yield to remain unchanged. Production was 33 million bushels lower than last month at 4.392 billion bushels versus estimates for 4.425 billion bushels.  US soybean production extended its trend of showing lower soybean production on the January report to 4 years.  The crush was raised 10 million bushels, residual fell 2 million, and exports were slashed 65 million bushels to 2.16 billion bushels.  The year on year decline in exports is now just 0.64%.  Ending stocks at 470 million bushels didn’t quite hit the 479-million-bushel trade guess.

December 1 soybean stocks were a record 3.157 billion bushels compared to estimates for 3.186 billion bushels.  World ending stocks at 98.6 mmt were slightly below the 99.1 mmt estimate.  Brazil’s soybean production was raised as expected from 108 mmt to 110 mmt.  Argentina’s soybean crop was lowered 1 mmt to 56 mmt.  Combining both countries figures, soybean production showed a net increase of 1 mmt.

There was a wide range of non-USDA South American crop estimates this week.  Conab, the Brazilian government’s agency, pegged their soybean crop at 110.4 mmt.  Private estimates included 114.1 mmt from Agroconsult, Celeres at 111.8 mmt, Safras & Mercado at 114.6 mmt, and AgRural at 114 mmt.  This compares to the USDA’s updated Brazilian forecast for 110 mmt.  In Argentina, the Rosario Grain Exchange cut their soybean production forecast by 2.5 mmt to 52 mmt.

Weekly export sales were poor at 22.3 mb and the second lowest total of the marketing year.  The number would have been lower at 14.2 mb except last week’s export figure was revised, pushing 8 million bushels into this week’s total.  Last week’s export sales should have been 12.4 million bushels, not the 20.4 million bushels reported.

OUTLOOK:  Thanks to the post-report rally, March soybeans only closed 10 ¼ cents lower for the week at $9.60 ½, July down 9 ¾ cents at $9.81 ¼, and November lost just 1 ¾ cents at $9.83 ½ per bushel.  Funds were big buyers into the weekend, but I wouldn’t term the USDA numbers really any better than neutral to slightly friendly.  When the market resumes after the holiday, attention was again focus on weather events in South America.  Without sustained threats to their crop, it may be difficult to extend the rally beyond the previous week’s high of $9.77 per bushel.

The most surprising aspect of the January 12th reports was the winter wheat seedings number at 32.6 million bushels.  This is down from last year’s 32.696 million acres, but the trade was looking for a cut to 31.3 million acres.  This is still the smallest wheat number since 1909!  We have plenty of wheat with world ending stocks at 268 mmt, coming in right on the estimate.  US ending stocks were 989 million bushels versus 956 million estimated.  Quarterly stocks in the US were slightly above the forecast at 1.874 billion bushels.

Anna Kaverman

anna@mercerlandmark.com

Market Report

Tuesday January 9th, 2018

March 17 corn closed up 1 ¾ at $3.49 and July 18 closed up 1 ¾ at $3.65 ½. March soybeans closed down 3 at $9.63 ¾ and July closed down 3 ½ at $9.83 ¾. March wheat closed up 4 ½ at $4.32 ¼ and July 18 closed up 4 ½ at $4.57 ½. Crude oil closed up $1.15 at $62.87.

The corn market established a classic “Turnaround Tuesday” bounce, spending the entire day in positive territory and closing almost two cents higher. It is very possible the large increase in open interest from yesterday’s sell-off was enough to convince some weaker shorts to “abandon ship”. Managed Money traders were believed net buyers of about 10,000 corn today, which would pare their net short back to roughly 255,000 contracts. Fresh corn news was almost non-existent this morning.  The absence of any real fundamental change likely made new shorts from the prior day. Light index fund liquidation was noted on the close, much like yesterday. The market absorbed it well, but for today at least, it may have kept corn from extending gains much into the close. The hottest debate continues to be seen regarding Argentina weather. Most acknowledge the potential for positive rain coverage this weekend into early next week, but there seems to be no universal consensus on how much or how widespread such rain will be. No doubt, this is going to be extremely important for crops down there that are tasseling. Brazil conditions remain near perfect, which is of greater interest to soybeans.

Soybeans are struggling in front of the crop report as they should. Trade is expecting US soybean carryout to increase by about 17 mb on avg. due to a reduction in exports while World stocks increase by 740 mt on larger US and Brazilian supply and production more than offsetting a cut in Argentina’s crop.  Ultimately whether it is this report or in future reports, the current pace of export activity suggests a more significant cut to exports and signs of a possible turnaround before South American new crop arrives are not encouraging. For now, soybean remain within their recent range with resistance in the $9.70 to $9.75 March area and support against $9.55.

Wheat saw mixed price action throughout the night, but leading up to the morning pause prices weakened and trade finished slightly lower across the board. Uncertainty around the Egyptian tender overnight initially leading to no offers from Monday afternoon’s GASC tender may have been behind the weakness. By the time the markets re-opened, news surfaced that Egyptian officials had talks with the selling firms leading to several offers. There will be a lot of data to absorb in Friday’s report, as it includes an estimate of winter wheat acres. For wheat, winter wheat acres will be watched the closest.

Anna Kaverman

anna@mercerlandmark.com

Market Report

Monday January 8th, 2018

March 17 corn closed down 4 at $3.47 ¼ and July 18 closed down 3 ¾ at $3.63 ¾. March soybeans closed down 4 at $9.66 ¾ and July closed down 3 ¾ at $9.87 ¼. March wheat closed down 3 at $4.27 ¾ and July 18 closed down 2 ¾ at $4.53. Crude oil closed up $.31 at $61.72.

The corn market opened the week on the defensive, finishing lower. Some of the selling may have been in anticipation of index fund lightening of length, which commenced without feature near the close. Another 25,000-30,000 contracts are expected to be sold by them over the next week or so. Fund traders were net sellers of at least 10,000 corn, which would take them at or perhaps above 250,000 net short futures and options. South American weather “tweaking” likely stimulated much of the mid-day selling as well. Confidence appears to be increasing of a major rain event for Argentina looking out to the weekend. Some model runs suggest locally-heavy 3-5 inch totals over this timing. Brazil remains mostly favorable.  he verification of the rains will likely be the next “item of interest” for the markets after the USDA annual update is issued Friday.

Corn shipments picked up a little steam into the new year, with 849,226 MT reported shipped. This takes the total YTD shipments to 11.4 mmt vs. 17.9 mmt on the books this time last year.  When including outstanding sales from the other weekly report, US corn exports stand at 55% of the USDA sales goal versus the five year average for the date at 58%. There was a little export business around overnight and into the morning.

Grain analysts are forecasting Friday’s USDA quarterly grain stocks report to show as of December 1, 2017 Corn stockpiles at 12.43 BB, that compares to the 2.295 BB as of Sept 1, 2017 and the 12.386 BB in the year ago period. Grain analysts in survey are forecasting this Friday’s monthly USDA crop report to show final 2017 US corn production at 14.579 BB, that compares to the 14.578 MB recorded in the November report. 2017 yields are seen at 175.4 bpa unchanged from November’s report, while final harvested acres are expected at 83.10 mln down from 83.12 mln published in November’s report.

Better weather put pressure on the market today as soybeans trended lower along with the products. Export inspections today were 1.18 tonnes, within trade expectations. Grain analysts are forecasting Friday’s USDA quarterly grain stocks report to show as of December 1, 2017 Soybean stockpiles at 3.18 BB, that compares to the 0.301 BB as of Sept 1, 2017 and the 2.898 BB in the year ago period. Grain analysts in survey are forecasting this Friday’s monthly USDA crop report to show final 2017 US soybean production at 4.427 BB, that compares to the 4.425 MB recorded in the November report.  2017 yields are seen at 49.5 bpa unchanged from November’s report, while final harvested acres are expected at 89.50 mln up slightly from 89.47 mln published in November’s report.

Wheat finished the day lower across the complex, but not before a couple of rally attempts that briefly took trade higher. An early morning surprise from Morocco seemed to spark the run. There were 315 MT of US soft wheat licenses awarded as part of an annual preferential-tariff quota. They had been seeking as much as 363,636 mt. It was widely believed the EU was going to win the business, and may have been behind the rebound in Chicago. Looking ahead to tomorrow, the GASC announced after the close today they were in for wheat. Unless we see a drastic change from two weeks ago, results should not be very influential.

There will be a lot of data to absorb in Friday’s report, as it includes final corn and bean production, quarterly stocks for Dec 1, as well as an estimate of winter wheat acres. Reading more and more estimates that have total planted wheat acres coming in below last year’s 32.7 mil, and some estimates of possibly as low as 30 million. Look for HRW acres to be off around one million from last year to 22.4 million. Harvest acres will drop more as some of the Texas, Okla and SW Kansas acres were planted as forage for cattle. SRW acres are estimated around 5.5 million vs 5.735 million last year. Grain analysts are forecasting Friday’s USDA quarterly grain stocks report to show as of December 1, 2017 US Wheat stockpiles at 1.850 BB, that compares to the 2.25 BB as of Sept 1, 2017 and the 2.077 BB in the year ago period.

Anna Kaverman

anna@mercerlandmark.com

Market Report

Friday January 5th, 2018

March 17 corn closed up ¼ at $3.51 ¼ and July 18 closed down ¼ at $3.67 ½. March soybeans closed up 3 at $9.70 ¾ and July closed up 3 at $9.91. March wheat closed down 3 ¼ at $4.30 ¾ and July 18 closed down 3 ½ at $4.55 ¾. Crude oil closed down $.49 at $61.41.

FOR THE WEEK ENDED 1-5-18

CORN – Another short trading week as everyone returned from their holidays, and no one seemed very interested.  Since news this week was severely lacking, let’s take a look back at 2017.  On the continuous corn chart, nearby corn traded a small $.66 range for the year from $3.28 ½ to $3.94 ½ per bushel.  On a year to year closing basis, nearby corn closed out 2016 at $3.52 per bushel and settled 2017 at $3.50 ¾ per bushel, down 1 ¼ cents per bushel.  The 2018 calendar year began on a slow note, trading from $3.50 ¼ to $3.54 ¾ per bushel this week.  It has only traded from $3.50 to $3.54 ¾ per bushel since December 22nd!  It’s no small wonder that grower sales have been slow and many are sitting on the sidelines hoping the WASDE January 12th report will provide some tradeable action.

Weekly export sales were the lowest of the marketing year at a dismal 4 million bushels!  This is horrible even for a holiday week.  We remained 25% behind last year’s total commitments.  We have sold 1.05 billion bushels or 55% of the target versus 1.4 billion bushels last year (61% of the final) and compared to the USDA’s 1.925 billion bushel target.  The USDA’s number is a 16% decline in year on year exports.  We’re going to need to average about 25 million bushels of sales per week to achieve the current USDA number.

Weekly ethanol production fell by 58,000 bpd to 1.032 million bpd, the largest weekly decline since at least 2010.  Ethanol stocks were up 600,000 barrels to 22.6 million barrels, the first increase in a month.  Margins recovered a nickel to a positive 2 cents per gallon.  Most traders are penciling in a slightly higher ethanol usage number for the January report; however, a slightly larger production figure may balance it out.

There was renewed chatter in the market this week about a delay to Brazil’s soybean harvest.  It’s expected they may only have 1% of their soybeans harvested in Mato Grosso by January 20th, compared to 5% last year.  Why is this important to corn?  Much of the early harvested soybean acres in this region get planted to corn.  If soybean harvest is slower, there is the possibility of intended corn acres switching to cotton.

OUTLOOK:  At the end of the week, some wondered why we even bothered to trade corn this week.  For the week, March corn was up ½ cent at $3.51 ¼, July eked out a ¼ cent gain at $3.67 ½, and December was ½ cent higher at $3.84 ½ per bushel. Another slow week ahead of the January 12th may be expected with March corn confined to a rough $3.45 to $3.55 per bushel range.  Funds remain net short, which may provide support, but South American weather will be the hot topic.  Poor exports and higher ethanol stocks may limit any upside.

SOYBEANS – Without the supportive concern stemming from dryness in areas of Argentina, I’m not sure what we would have traded this week.  March soybeans have rallied off their December 29th low of $9.54 ¾ per bushel to this week’s high of $9.77 per bushel, driven mainly by South America’s changing weather forecasts.  Argentina did receive rain before the weekend, with another round expected January 11-12.  Areas of concern have shrunk, but the trade wants more reassurance.  Overall, Brazil’s conditions look fine.  Some reports put forth the possibility that Brazil’s crop could surpass last year’s record 114.1 mmt crop.  The average estimate is currently 110.2 mmt compared to the current USDA estimate of 108 mmt.

The Buenos Aires Grain Exchange estimates that 2.25 million hectares or 5.56 million acres of soybeans still need to be planted of the 18.1-million-hectare estimate.  Argentina’s soybeans are 87% planted compared to 89% on average.  Argentina’s export tax on soybeans was cut 0.5% to 29.5% as of January 1st and will be reduced an additional 0.5% per month for the next two years.  One private consultant put two-thirds of Brazil’s soybeans in the blooming stage and 30% setting or filling pods.  Brazil’s soybean exports in December were estimated at a new monthly record at 2.3 mmt.

Weekly export sales, like in corn, were a marketing year low at just 20.4 million bushels.  With 1.5 billion bushels of sales on the books, we are 14% behind last year’s pace.  The USDA is projecting a 2.3% increase in export this year at 2.225 billion bushels.  We need to average a record high 21.1 million bushels of sales per week to hit the USDA’s figure.  Last year, we averaged 13.1 million bushels from this date forward.  This puts in play for a 25-50 million bushel cut (or more) in exports on future USDA reports.  With the new 1% FM standard for US beans into China, without additional testing/conditioning, we are losing business to Brazil.  China reported that from January through November, the US only supplied 31% of the 86.9 mmt of soybean imports into that country.  For comparison, last year we accounted for 34%.

OUTLOOK:  For the week, March soybeans were 9 cents higher at $9.70 ¾, July gained 7 ¾ cents to $9.91, and November soybeans jumped 9 ½ cents to $9.85 ¼ per bushel.   This week, March soybeans traded from $9.58 ¾ to $9.77 per bushel.  Recapping the 2017 calendar year on the continuous soybean chart:  the trading range was from a low of $9.00 ¼ to a high of $10.80 per bushel; it closed 2016 at $9.96 ½ and 2017 at $9.51 ¾ per bushel for a decline of 44 ¾ cents.

Argentina’s actual and forecasted weather will stay in the headlines as we approach the January 12th WASDE report.  Expectations for the report will likely lean toward a bigger carryout by cutting exports.  The December low in March soybeans at $9.54 ¾ is seen as first support, but bets will be off if South American forecasts turn wetter.  First resistance is seen from $9.80 to $9.90 per bushel, but again, weather will be the determinate.

Anna Kaverman

anna@mercerlandmark.com

Market Report

Thursday January 4th, 2018

March 17 corn closed down 2 at $3.51 and July 18 closed down 1 ¾ at $3.67 ¾. March soybeans closed down 1 at $9.67 ¾ and July closed down 1 ¼ at $9.88. March wheat closed down 2 at $4.34 and July 18 closed down 1 ½ at $4.59 ¼. Crude oil closed up $.35 at $61.90.

Up, down, and everything-in-between, has been the trend for corn in this holiday-shortened week. Today, the corn market finished two cents lower, and heading into Friday is unchanged for the week. Managed Money traders were viewed small net sellers again of the day, and could be heading into tonight net short close to 245,000 contracts, futures and options combined. News flow remained sluggish this morning, but we at least had some gov’t reports to lean on for talking points. Export sales report tomorrow is expected to be subdued due to the holiday timing.  Look for 600k to 800k in new corn business. There was little change in South American weather prospects today. Argentina crop stress is expected to be significant over the next ten days, despite some showers today and Friday. Rain advertised for January 13-17 will be extremely important. The latest Buenos Aires Grain Exchange report found corn planting progress at 77%, advancing 7% wk/wk, but well behind normal. Over 40% of the early planted corn said to be tasseling, further reinforcing the need for those mid-month rains.

The headlines will show soybeans ended their three-day rally with a lower close but the ability for the market to bounce off the session low was the more interesting takeaway. That takeaway is that the market continues to consolidate, not ready to break down just yet but also not able to must much of a rally, nothing changes. Meal helped lead beans back today with the meal chart sticking an outside day higher after stabbing into a new low for the move. There is not a lot of fresh news around the grains today with most of the action over in the equity markets where stocks are into new all-time highs trading above 25,000 on the Dow Jones following another strong jobs report and crude oil into a new high trading over $62 with support from a friendly EIA stocks report. In the news, the Buenos Aires Grain Exchange estimates Argy soybean planting at 87.5% complete up from 81.9% last week. Soybean conditions are 52.6% good to excellent and 9.1% poor verp poor.

After a mixed start to the evening, price action overnight was mostly a little lower, with additional weakness seen as we moved closer towards the morning break. As has been the case over the past week, KC was stronger than Chicago. Picking up on more and more wires that a lack of snow cover in Western Europe, Ukraine and southern Russia puts wheat at risk when extreme cold returns. Interesting that temps ten degrees above normal in the Black Sea have kept shipping lanes open longer than normal this winter. Crop report next Friday. There will be a lot of data to absorb as the report includes final corn and bean production, quarterly stocks for Dec 1, as well as an estimate of winter wheat acres. Planted acres should be around one mil below last year’s 32.7 mil. HRW acres are estimated off 700 thou at 22,700 mil.

Anna Kaverman

anna@mercerlandmark.com