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Market Report

Thursday May 17th, 2018

July corn closed down 4 at $3.95 ¼ and December closed down 4 at $4.13. July soybeans closed down 4 ¾ at $9.95 and November closed down 4 ¾ at $10.04 ¼. July wheat closed up 3 ¼ at $4.97 ½ and September closed up 3 ¼ at $5.13 ½. Crude oil closed up $.01 at $71.57.

The corn market maintained a defensive posture again, finishing lower in the end. Corn actually re-opened after the AM break a couple cents higher, spent most of the day just fractionally lower, and saw selling pick up some steam after the noon hour.  The market finished at a three week low. Heading into Friday, corn is sporting five cent gains, all by virtue of the hand-off from May futures to July. Managed Money traders were viewed net sellers of about 10,000 corn today, which would take their net long in the market back down to around 200,000 net long.

Export sales this morning were fairly good after a couple of disappointing weekly showings. Net new sales of 985,700 MT for 17/18 and 129,200 for 18/19, were toward the very high-end of expectations. Japan was the big buyer of record (400k), with mixed Asian and Latin interest in for the balance. “No news” was apparently not “good news”, and the absence of positive headlines coming out of the meetings likely helped contribute to the market’s late break. Weather is in a holding pattern. U.S. planting progress is likely advancing some today and Friday in front of more weekend storms. There are another two weeks to get Northern Plains acres planted before “Final Planting Dates” start kicking in, which could negatively impact the corn acreage mix. Brazil safrinha did get some rain relief, but it proved disappointing and will take some time to ascertain yield losses, or lack thereof. The final full year corn production number out of Brazil should be in the 80′s “somewhere” versus 97 last year.  Argentina is finally getting a dryer weather pattern which will help them get their crop harvested. They were only 34% harvested heading in.

The soybean market continued its slide as overnight strength melted away in the day trade. A promising start just could not fight off the bear. The main drivers continue to be trade deal uncertainty, ideas of larger US acreage and disappointing export activity despite a flash sale announcement of 132 mt old crop beans to unknown early on. It feels like funds are liquidating at the same time with estimates that funds were sellers of 7,000 beans today after dumping 15,000 yesterday leaving them long 90,000 or so. Trade talks had a very pessimistic tone today with President Trump saying he ‘doubts the China trade talks will be successful’ and that China has become ‘very spoiled’ on trade.  The President is scheduled to meet directly with Chinese rep Liu behind closed doors this afternoon. NAFTA isn’t going much better with no date set for the next round of talks but likely will not take place until after the July 1 Mexican election. There was a silver lining though as Trudeau says that NAFTA talks are down to the final few sticking points which appear to be Mexico & Canada’s reluctance to accept language on the sunset clause and arbitration.  To me, that means we are closer to an agreement than what some of the other headlines suggest.

The strong overnight gains tried to carry into the day, but prices began to sell off. That setback gave back much of its earlier gains, but a late morning rally pushed values back towards their highs. Once again trade was unable to sustain the move. The weakness in corn and soy weighed on wheat futures as it traded into the close. Pictures and stories of hail and wind damage across western Kansas from their recent storms filtered throughout the marketplace, and that may have been behind the move today. There was already a very good chance we were going to see the Kansas crop come down, and this will only add fuel to that thought process. A 37 yield and harvested acres of 7.3 mil is just too high for a crop that has struggled throughout the growing season. After a 65+ cent break in KC and 50+ cent break in Chicago, the markets had been due a little bit of a correction. Today’s gains were also not very convincing, and it will now probably take a settle above today’s highs to get the bull enthused again. Export sales this morning came in at the low end of expectations, and besides weather there is not a whole lot of other news that is influential to the markets. Australia remains dry, and there is some talk that private weather forecasters have taken out some of the expected precip for the dry areas across the Black Sea. That, along with a continued strong US Dollar, caused the Matif wheat to gap higher overnight and eventually settle right off its highs. A strong US Dollar should limit rallies here in the US, but a strong European wheat market may provide some support. The tug of war is on.

Anna Kaverman

anna@mercerlandmark.com

Market Report

Monday May 14th, 2018

July corn closed unchanged at $3.96 ½ and December closed down ¼ at $4.14 ¼. July soybeans closed up 14 ½ at $10.17 ¾ and November closed up 9 at $10.23 ¼. July wheat closed down 7 ½ at $4.91 ¼ and September closed down 7 ¾ at $5.08. Crude oil closed up $.31 at $70.99.

The corn market was quiet today, a statement evidenced by the unchanged close, $.03 intraday range, and below-average volume.  Markets were lower overnight and into the early morning, but found their bearings and flitted within a penny either way of unchanged for the balance of the day. Managed Money traders were viewed small net buyers today, as they tentatively defend a 200,000 plus contract net long in the market.

Crop progress data after the close confirmed more “catch-up” fieldwork by U.S. farmers. The USDA reported 62% of the corn crop is now planted, which is greater than the 59% average analyst guess, and is very nearly caught up with the five year average of 63%. Illinois was the headliner for the “planted” camp, bumping up to 90% complete. Minnesota and South Dakota continued to lag well behind and will be the areas to watch going forward. Just 40% of MN was planted versus 77% last year and 65% average. 21% of South Dakota corn was planted versus 71% last year and 61% average. Five day precip maps suggest Minnesota may get enough of a break from the rain to get stuff planted, but South Dakota could get an inch or better. 6-10 day maps are blessedly dry for the Northern Plains, though the 8-14 day shows some moisture. Temps are expected to be average to above.

Mid-Day Grain Inspections have become “consistently good” of late, a trend we expect to continue well into early summer. US exporters shipped 1.55 MMT of corn. While this was down from the 1.92 mmt shipped last week, it was above the 1.42 mmt shipped in the year ago week. This takes total YTD corn shipments to 34.75 mmt versus 40.77 mmt this time last year. Some of the intraday rebound in the markets was attributed to China. Rumors of a “side deal” between the Trump camp and China sparked ideas of a broader trade deal, but for now, it seems to be isolated just to the issue at hand. That deal is a for a “bailout” of troubled China electronics supplier ZTE for unspecified relief on U.S. ag products (which China needs). Expect more details to filter out overnight, though we note claims of this deal being struck have been slowly walked back into the afternoon.

The soybean market bounced smartly off its initial test of $10.00 in a reversal trade that should help stabilize the slide for the near term. Soybean meal also reversed sharply as deteriorating conditions on Argentina’s unharvested soybean crop (67% harvested as of Thursday) has analysts lowering their Argentine meal production ideas further. Fortunately, Argentina’s weather forecast is entering a drier bias but weeks of persistently wet conditions likely have taken their toll and will be realized in the coming day/weeks. Trade factored heavily in today’s strength both from a decent export inspections report to an increase in rhetoric and speculation on trade negotiations between the US and China. Expect more headline volatility as both side work towards a deal. Nothing positive to report on NAFTA negotiations as Friday’s US deadline for a vote by the current Congress apparently will not be met. The weekly grain inspections totaled 688 mt for beans which surpassed expectations of 550 mt. Soybean planting progress came in at 28% complete vs. 8% last week and 29% this week last year and 26% avg. Soybeans emergence is 10% compared to 7% last year this time.

The wheat complex saw slightly lower price action throughout the night and that trend continued into the day. Friday afternoon’s COT report looked to be the driving force overnight, but rains across the western plains, as well as across Russia and Ukraine may have been just as influential. After a six-week absence, Egypt is back in for wheat. Look for offers to be around $5.00 higher than their previous tender back in late March. Conditions this afternoon came in better than expectations. Spring wheat planting at 58% complete was above expectations as well. The wheat complex continues to search for positive news. State by state wheat condition ratings were out this afternoon. Overall expectations were for conditions to be unchanged to improve slightly week over week. Winter wheat conditions came in at 36% G&E and 36 P&VP vs last week when they were 34% G&E and 37% P&VP. Both HRW and SRW wheat classes saw an uptick of about 1%. Spring wheat planting came in at 58% complete vs 30% last week and the long term avg of 67%.

Anna Kaverman

anna@mercerlandmark.com

Market Report

Friday May 11th, 2018

July corn closed down 5 ½ at $3.96 ½ and December closed down 5 at $4.14 ½. July soybeans closed down 18 at $10.03 ¼ and November closed down 16 ¾ at $10.14 ¼. July wheat closed down 7 ¾ at $4.98 ¾ and September closed down 7 ¼ at $5.15 ¾. Crude oil closed down $.63 at $70.68.

FOR THE WEEK ENDED 5-11-18

CORN – Corn began the week with a defensive tone as growers hit the fields running.  The July contract continued to respect the $4.00 price level with funds willing to defend their long positions ahead of the USDA report.  Trading action in the first half of the week appeared to be a prelude to the May 10th WASDE report.  However, when the market didn’t find new buyers in the wake of a neutral to friendly report, profit taking ensued. July corn closed lower for the final three sessions of the week, settling the week at $3.94 ½, down 9 ¾ cents per bushel.  The December contract closed at $4.19 ½ per bushel Tuesday through Thursday, before tumbling to a weekly settlement at $4.14 ½, down 6 ½ cents per bushel for the week. Corn planting as of May 6th was 39% complete, marginally behind the 44% completion average.  The average planting progress for May 13th is 63% complete.

The USDA report did hold a couple of surprises for the market.  The 2017/2018 balance sheet was entirely untouched with ending stocks at 2.182 billion bushels.  This was very close to the pre-report estimate of 2.178 billion bushels.  Our first official 2018/2019 balance sheet used the prospective planting report 88 million planted acres and a trendline yield of 174 BPA.  Production of 14.04 BB is a year on year decline of 564 MB.  Other year on year changes included: feed/residual down 125 million bushels, FSI up 75 million, ethanol up 50 million at 5.625 billion bushels, exports down 125 million (5.6%) at 2.1 billion bushels, and ending stocks of 1.682 billion bushels.  The ending stocks number was 54 million bushels higher than the trade estimate but is down 500 million bushels year on year.  The stocks to use ratio for 2018/2019 is 11.5% versus 14.8% for 2017/2018.

The world ending stocks number for 2018/2019 of 159.2 mmt was well under the 186.4 mmt forecast.  The 2017/2018 figure of 194.9 mmt was close to the 195.2 mmt estimate.  This is a huge 35.7 mmt cut in stocks from crop year to crop year.  Of the decrease, 19 mmt is from China’s balance sheet and 13 mmt from the US.  If the 2018/2019 is true, it would be the lowest ending stocks number in the last six years and the second lowest on record going back to 1975/1976.   Brazil’s corn crop was lowered from 92 mmt to 87 mmt.  This was not a surprise, but early in the day Conab had increased their Brazilian corn number to 89.2 mmt!

Weekly export sales were a disappointment, which shouldn’t have been a shock with nothing announced on the daily export reports.  Old crop sales were at the low end of estimates at 27.4 million bushels.  Total old crop commitments are 2.03 billion bushels, down just 1% from last year.  However, total shipments are down 14% from last year.  The USDA is predicting a 3% decline in year on year exports to 2.225 billion bushels.  New crop sales were also on the low side at 3.5 million bushels.  Total new crop commitments are 82.7 million bushels versus 90.7 million last year.  The 2018/2019 export forecast is 2.1 billion bushels.

OUTLOOK: In general, the market feels we don’t have a lot of wiggle room on the balance sheets for problems with the US crop this year, but that didn’t stop it from posting a weekly loss.   Weather will become increasingly important element moving forward, just as it always is at this time of year.  The average weekly planting progress for May 13th is 63%, and we shouldn’t be more than 5%-10% behind.  If you are looking for downside protection for unsold new crop bushels, consider standard options and short-dated new crop options, if they fit into your risk profile.  These would provide downside protection for a known premium, consider it insurance.  The market will be watching the forecasts for any bumps in the crop development.  Brazil’s safrinha crop is expected to receive needed rain May 15th-20th.  If they don’t, the market may find a reason to limit further downside.  Weather in the US and South America, politics, and fund activity are the drivers of price direction for now.  Have we turned a corner and put in a short-term top?  We haven’t seen any daily export sales announcements in corn or beans this month, funds are still long, and technicals finished the week on a negative note.  However, weather and politics can turn things around quickly, be cautious.

SOYBEANS – Soybeans took a huge hit when traders returned from the weekend, and took another slap in the face to end the week.  Let’s face it, coming off a nice planting weekend, we were just killing time until the USDA report. After the sharp Monday sell-off, prices meandered higher into the WASDE May report. Post-report gains were short-lived, and ensuing profit taking sent prices plunging into the weekend. Friday saw heavy fund selling push prices to the low for the week at $10.02 per bushel in the July contract and $10.12 ¾ per bushel in the November contract.

The May 10th report was viewed as supportive to both old and new crop soybeans.  The 2017/2018 balance sheet’s only change was an increase in the crush of 20 million bushels.  This translated directly to a cut in ending stocks to 530 million bushels.  The trade’s estimate was 541 million bushels and we were at 550 million bushels in April.  The biggest shock was left for the 2018/2019 balance sheet with ending stocks of 415 million bushels.  This was 120 million bushels below the average trade estimate of 535 million bushels and a year on year decrease of 115 million bushels.  The USDA used 89 million planted acres with a yield of 48.5 BPA to come up with production of 4.28 billion bushels.  Other year on year changes for 2018/2019 included: crush up 5 million bushels to a record 1.995 billion bushels and exports up a tremendous 225 million to a record 2.29 billion bushels.  Total demand is forecasted at a record 4.42 billion bushels.  The ending stocks to use ratio for 18/19 is 9.4% versus 12.7% for 2017/2018.  It looked like the USDA did not assume any hiccup in the US/Chinese trade relationship.

The world balance sheets also were a surprise with 2018/2019 ending stocks at 86.7 mmt versus estimates for 90.52 mmt.  The 2017/2018 ending stocks number of 92.2 mmt was higher than the average estimate of 89.9 mmt.  All in all, world ending stocks are expected to fall 5.5 mmt from this year to next year.  Brazil’s soybean production was raised 2 mmt to 117 mmt, which is the same as Conab’s refreshed estimate.  For 2018/2019, Brazil’s bean crop was again projected at 117 mmt, which based on their recent history, may be too low.  Argentina’s 2017/2018 crop came in at 39 mmt and 56 mmt for 2018/2019.  The USDA left China’s soybean imports for this year at 97 mmt, but was aggressive in forecasting bean imports at a record 103 mmt next year.  China’s ag ministry this week said they would see a yearly decline in soybean imports next year for the first time in 15 years, pegging imports at just 95.65 mmt.  They are predicting soybean acres will be up nearly 9% this year.  This year from January through April, China has imported a total of 26.49 mmt, down nearly 4% from last year.  China’s soybean and meal purchases from everywhere have slowed recently.  Negative domestic feeding margins and earlier purchases were cited as factors.

Weekly export sales were dismal at 13 million bushels for old crop and 10.2 million bushels for new crop.  Old crop total commitments are running 3% behind last year, the USDA is forecasting a 5% decline, and shipments are down 12% from last year.  A big question mark is how many sales to China may be delayed until the next crop year, or won’t get shipped at all.

OUTLOOK: Now that the monthly crop report is behind us, attention will increasingly return to weather, US/Chinese trade relations, and fund action.  A trade delegation is expected to be in the US the week of May 14th for further trade talks.  Nothing is expected to result from the meeting, except to agree to another meeting.  Argentina should dry out this coming week, allowing for a better look at quality and quantity of the remaining one-third of unharvested acres.

At risk of being repetitious, the wheat markets were lower again today as KC HRW saw double digit losses to nearly 50 cents off last Friday’s highs. Chicago July filled a chart gap from April 25. The 100 and 200 day MAs are converging below at $4.81 and $4.82 respectively. The US HRW and HRS crop still experience dry conditions from Canada to Texas, but quite large stocks/use ratios act as an anchor for now.

Market Report

Thursday May 10th, 2018

July corn closed down ¾ at $4.02 and December closed unchanged at $4.19 ½. July soybeans closed up 5 ½ at $10.21 ¼ and November closed up 6 ¾ at $10.31. July wheat closed down 4 at $5.06 ½ and September closed down 4 ¼ at $5.23. Crude oil closed up $.26 at $71.31.

While there was certainly nothing bearish in the report for corn, futures still ended up stumbling a little, finishing fractionally lower on the day. Markets were lower in the run-up to the report as traders likely lightened positions a little, popped a little in the immediate aftermath, then proceeded to sell back off late. Managed Money traders were viewed small net sellers of the day, and are likely heading into tonight long roughly 200,000 combined corn futures and options.

The May WASDE will go down in history as a bullish report, though the results were not surprising enough to impact a market that was already leaning long. As broadly expected, 18/19 carryout forecasts for both U.S. and world represented sharp reductions from a little changed 17/18 balance sheet. The USDA’s first glance at 18/19 uncovered a 1.682 BB domestic carryout.  The average analyst guess ahead of the report was 1.628 billion.  The production side was largely pre-determined 174 bpa “trend line” yield with the 88 million acres from intentions. The USDA took considerable liberty with demand. Despite rising animal numbers and expanding ethanol capacity, they reduced total domestic demand 50 MB from 17/18.  They also trimmed 18/19 exports back to 2.1 bil from an unadjusted 2.225 billion this year (17/18).

The world S&D was perhaps a little more eye-opening. The first stab at 18/19 world carryout was 159 mmt, which was a whopping 35 mmt reduction from prior. The stats were heavily-influenced by China de-stocking in corn. The USDA has trimmed China corn ending stocks from 100 mmt two years ago to 80 in 17/18 to 60 in 18/19. Many argue the USDA needs to double their estimates of China corn ending stocks. The USDA is expecting large “reversion to the mean” increases for major world corn producers in 18/19 – time will tell. For 17/18, the USDA took Brazil’s full year corn to 87 mmt from 92 mmt prior. They left Argentina unchanged at 33 mmt (private analysts in the 31-32 mmt area).

The soybean market closed higher on a day that included a myriad of fresh data points to digest from CONAB to weekly export sales to USDA crop report/WASDE and more. With all the information out there, we had few real surprises and at the end of the day the market was supported by the lower US and world supply outlook for next year.

US old crop soybean carryout seen at 530 mb down from 550 mb last month – trade est. was 540 mb. This came on a 20 mb increase in crush to 1.990. The new crop soybean carryout is projected at 415 mb compared to the trade est. for 535 mb. They took exports up by 225 mb to 2.290 bb and increased crush by 5 mb to 1.995 bb.

In the world numbers, the old crop soybean carryout increased 1.3 mmt to 92.16 mmt while the new crop tightens to 86.7 mmt which was nearly 5 mmt below trade estimates. China soybean imports were projected up 6 mmt from 97 to 103 mmt. Argentina’s crop was lowered by 1 mmt to 39 mmt while Brazil’s crop was increased by 2 to 117 mmt. Weather forecast is warm and wet for the next couple of weeks where some planting delays in the upper Midwest should be expected. USDA weekly export sales came in on the low end of expectations for corn and beans (no China cancellations but unknown cancelled 45 mt old crop).

The wheat complex did not have the start to the day that it was hoping for after the export sales data this morning came in at 83 MT. We have reiterated all week how much the US has moved away from being competitive with the rest of the World, and this just re-iterates that idea. Price action was two-sided heading into the report, not too surprising consider the break the complex has been on. Coming into the report, expectations for US all wheat production varied greatly depending on who you talked to. We did not think the US was going to be as aggressive as many others, and that is what we thought was going to be the surprise of the report. The USDA obliged with that thought process, and the markets reacted with a flush to the downside. The initial break may have been worse if not for a strong soy complex and firm corn market post-report, but as those markets weakened, wheat prices drifted back to their lows. The $5.00 level in Chicago July held several times post-report and prices firmed a little over the final hour of the day.

What the crop report said: The USDA gave us an all winter wheat production estimate of 1.191 BB. Not too surprising as most did not think the USDA was going to be as aggressive. The USDA would give an all wheat production estimate of 1.821 BB, which was at the high end of expectations, but admittedly, some were worried that this number might be even larger. From this number one can imply a Spring wheat production number of around 630 MB.

On a side note. The USDA gave us their first look at state by state harvested, yield and production estimates. Of the top HRW wheat states, Kansas is the most baffling. In Kansas, they planted 7.7 MA, yet despite all the problems in western Kansas this year, the USDA thinks they are going to harvest 7.3 MA and have a 37 yield. One of those numbers must go down. In fact, look for Kansas, Montana and South Dakota production estimates to eventually fall as the USDA is just too high on either harvested acres or yield or both. Which brings us to yields. Several SRW wheat states projected yields are just too high – Arkansas, Illinois, Indiana and Michigan. Does anyone know when the last time Michigan had a winter wheat yield of 93? Keep guessing, because it has never happened. The highest was 89 a couple years ago. It was nice to be on the right side of the crop report, but as you can see, there will be some adjusting in the coming months that could easily take HRW wheat production to 600 MB or below and SRW wheat production lower as well.

That brings us to carryout. As most expected, there was very little change from April to the 2017/18 carryout, 1.070 BB vs 1.065 BB. USDA took old crop exports off 15 to 910 MB. May have a little more room to the down side. They took mill grind up 8 to 963 MB so that ending stocks were only up 6. The USDA also gave us our first outlook at 2018/19 carryout. There were some wild range of guesses for this number, but we thought the average analysts’ estimate was just a touch low.

Anna Kaverman

anna@mercerlandmark.com

Bullish beans:

World 18/19 bean carryout at 86.7 mmt vs. 90.52 est.

US 18/19 bean carryout 415 vs. 535 est.

World corn numbers friendly, US neutral

World 18/19 corn carryout 159.2 vs. 186.35 est.

US 17/18 corn carryout 2.182, 18/19 1.682

Market Report

Tuesday May 8th, 2018

July corn closed up 2 ½ at $4.03 ¼ and December closed up 3 at $4.19 ½. July soybeans closed up 8 ¾ at $10.20 ¼ and November closed up 7 ¼ at $10.25 ¼. July wheat closed up 3 at $5.14 ½ and September closed up 2 ¾ at $5.31 ½. Crude oil closed down $1.65 at $68.97.

“Turnaround Tuesday” was the theme of the day, with some markets faring better than others. Corn posted $.02-$.03 gains and made up for roughly half of the prior day’s declines. Corn tried to soften a touch overnight, going stop-hunting below $4 in the July, but the market quickly bounced back into the dawn and never really faltered from that point on. Managed Money traders were viewed net buyers of about 5,000 corn today, and will head into tonight net long about 215,000 combined futures and options.

“Fake News” was abundant today, with everyone trying their best to tweet and twit ahead of biofuel policy meetings and the Iran nuke deal press conference. Today’s biofuel meeting attempted to maintain the “win win” cheerleading for ethanol and refining interests, though once again, the ethanol camp does not appear to be feeling particularly victorious. Instead of focusing on a “RIN price cap”, the refiner boys are now calling for ethanol exports to be counted in some fashion toward domestic biofuel mandates. In exchange, the ethanol camp will get their RVP waiver that would allow year-round sales of E-15 (they are currently heavily restricted in the summer). The EPA/USDA have also been tasked with investigating some of the “small refiner hardship exemptions” issued of late that have pressured RIN prices.  Ethanol did not react much to the deal.

Weather influences are viewed mixed to leaning bearish.  Northern hemisphere farmers should have a nice mix of rain and sunshine to plant crops, particularly toward the middle of this month.  Yesterday’s report found U.S. corn was at least 39% planted heading into this week, which is not too far away from 44% average. A wetter pattern this week will disrupt progress for a time, but better conditions are expected into next week.  Traders are in a holding pattern on South America, with better weather expected later this week and late next week.  Argentina is supposed to dry out, while dry southern Brazil safrinha crop areas could finally see some rain relief?

Traders are positioning ahead of the May WASDE, due Thursday.  The focus of the report will be the USDA’s first look at the 18/19 balance sheet. With that in mind, it is difficult to envision a bearish report for new crop corn, when plugging, in “trend-line” yields and the planting intentions number of 88 million. That being said, the market “sees” it, with an average 18/19 U.S. carryout forecast of 1.63 billion heading in. The range is quite wide – 1.467 bil to 1.907 bil, so there is certainly some disagreement. World corn carryout is expected to downtick another notch, mostly due to South American production adjustments.

The soybean and meal markets stabilized the sharp break from yesterday with a bounce back turnaround Tuesday performance.   The bean and meal charts both flirted with key support levels that held allowing for a technical recovery trade although there is room for debate on just how convincing that recovery effort was. Fundamentally, the key news was that Chinese trade representatives will be in Washington next week to resume trade discussions. Presidents Xi and Trump spoke on the phone expressing mutual interest in resolving the trade dispute and this helped the market regain its footing. It has been an interesting week already with plenty to look forward to still with the crop report on Thursday. Weather forecasts feature plenty of moisture for the coming week that will slow down planting efforts with the states of concern being the Dakotas and MN.  Fortunately, a drier bias evolves for those states in the 6-10 day ad 8-14 day outlook with plenty of warmth that should allow crops to get put into the ground.

The wheat complex battled back from lower price action throughout much of the night and traded higher throughout the day. There continues to be limited friendly news around for wheat. Granted we saw a minor bounce today, but with the US Dollar steadily rising, Russian weather said to be better than what is being reported, US wheat prices nowhere near competitive with the rest of the World and overall winter wheat conditions that have not shown any further deterioration week over week in almost a month, it will make rallies difficult to hold. At least until the crop report Thursday morning. Look for the choppy trade and possibly more of the same inter-wheat market type spreading to continue leading up to the report.

Keep an eye on a couple issues that may develop down the road in wheat. The HRW wheat crop is certainly lower than when we started the crop last fall. At this time, it is very difficult to predict the acreage abandonment. There is a great deal of concern that most of the remaining old crop is sub 10.5 protein and minimum 58-pound test weight. The new crop may develop a higher protein based on lack of tillering and fewer heads to fill. However, the stress on this crop is capable of creating a lower test weight that is certainly less desirable.

Expectations for US all wheat production varies greatly depending on who you talk to. Many groups do not like predicting what the government is going to say, instead opting to predict what the final total will be and adjust throughout the year. The USDA already surprised trade with a larger than expected Spring wheat planting acreage number in the March report, and in the April report World wheat production and carryout increased for a second consecutive month, into new record highs. So, what will the USDA surprise us with Thursday’s report.

Anna Kaverman

anna@mercerlandmark.com

Market Report

Monday May 7th, 2018

July corn closed down 5 ½ at $4.00 ¾ and December closed down 4 ½ at $4.16 ½. July soybeans closed down 25 ¼ at $10.11 ½ and November closed down 19 ¼ at $10.18. July wheat closed down 14 ¾ at $5.11 ½ and September closed down 13 at $5.28 ¾. Crude oil closed up $1.04 at $70.62.

The corn market struggled for a second day on ideas of strong northern planting progress and a potentially favorable turn in South American weather. Futures opened lower Sunday night and maintained weakness throughout the day. Fund traders were viewed net sellers of 15,000 corn today, which would pare their net length in the market back to roughly 210,000 combined futures and options.

USDA Crop Progress data after the close found the expected corn planting rate. U.S. farmers were viewed 39% planted on corn, which was close to 45% planted last year and 44% in the five year average. Emergence moved up to 8% from 14% average.  Planting likely continued to advance in much of the Midwest during the weekend into today before another round of storms blow through early-mid week. 6-10 & 8-14 day maps continue to hint at very good planting conditions mid-month for those who do not hustle in front of the current system?  There are reasons to be friendly on corn, but this sure doesn’t seem to be one of them!

Weekend weather maps brought a potential change in South American weather into clearer focus. The outlook now suggests more rain for Brazil’s safrinha crop and less rain disruptions for Argentina’s harvest. Topsoil moisture has been largely depleted in Brazil, so rain in coming weeks will be extremely important, particularly heading into pollination.  Interestingly, Agrural early Monday downgraded their outlook of Brazil second crop corn, reducing it 4.5% from April estimates to 57.2 mmt. This would take the full year crop to 83.9 mmt versus the latest USDA projection above 90 mmt. There is a very good chance the USDA may be forced to address this in Thursday’s WASDE report. Corn export inspections returned to form today. According to the USDA, exporters shipped 1.92 MMT of corn for the week ended.  This compares to 1.48 mmt last week and just 0.86 mmt shipped out the prior year week. This takes total corn shipments to date to 33.2 mmt versus 39.4 mmt this time last year.

Soybean prices took a bearish turn Friday and doubled down on it Monday, shedding another 2.2% on slim exports with bleak prospects from China a real threat moving forward until the current U.S.-China trade spat is resolved. Analysts estimate 13% of the soybean crop has been planted as of May 6, versus 5% a week ago and 14% a year ago. Soybean export inspections reached 19.6 million bushels, which by some accounts could be seen as relatively positive – moderately higher than this week a year ago (13.6 million bushels) and on the high end of the average trade guess between 13 million and 23 million bushels. It did not meet the weekly rate needed to reach USDA forecasts, however. Germany was the No. 1 destination for U.S. soybean export inspections, with 3.1 million bushels. Brazilian advisory AgRural estimates the country’s 2017/18 soybean production is up fractionally (around 0.17%) from April to May, for a total of 4.380 billion bushels.

There was not a lot going on for the wheat complex heading into the day today, and price action reacted accordingly. Trade struggled throughout the session. First and fore-most the tenders and business that closed over the weekend showed us that the US is nowhere close to being competitive to the rest of the World. Combine that with a US Dollar that continues to gradually firm, Russian weather that is said to be better than what is being reported. With a condition report this afternoon that was expected to show maybe an uptick in conditions and a spring wheat planting number of somewhere north of 30%, it makes it difficult for trade to muster any type of rally. It is very easy to look at all the negatives around the marketplace and join in, but be careful. We have already seen a 25+ cent break over the past two sessions, and the recent trend has been to avoid buying strength and/or selling weakness. We do have a crop report Thursday morning, and conditions this afternoon were pretty much in line with expectations.

Anna Kaverman

anna@mercerlandmark.com

Market Report

Friday May 4th, 2018

July corn closed down 1 ¾ at $4.06 ¼ and December closed down 1 ¼ at $4.21. July soybeans closed down 16 ½ at $10.36 ¾ and November closed down 12 ¼ at $10.37 ¼. July wheat closed down 11 ¾ at $5.26 ¼ and September closed down 11 at $5.41 ¾. Crude oil closed up $1.32 at $69.58.

FOR THE WEEK ENDED 5-4-18

CORN – Corn action this week was driven by US and South American weather, while beans were tied to weather and politics.  Corn gapped higher from the previous week’s close and really never looked back.  US planting progress was only 17% complete as of April 29th, well behind the 27% average.  The average for May 6th is 44% complete.  Prior to the report, the trade is anticipating progress to hit 35%-37% complete.  Dryness in southern Brazil is affecting their safrinha corn crop in a negative way as they enter pollination.  They have some rain in the forecast for around May 10th, but the trade wants to see it happen. It’s estimated that half of Brazil’s safrinha crop has had less than half of its normal rainfall over the last 30 days.  The USDA’s most recent total Brazilian corn production estimate was 92 mmt.  Private estimates have been coming in around 86 mmt.  Conab will update their numbers on May 10th, hours before the May10th WASDE report.  Their last estimate was 88.6 mmt.  For reference, it’s generally accepted that Brazil’s first corn crop this year was around 26.5 mmt, with the balance safrinha.  Roughly 70% of their corn crop comes from the safrinha crop.  Reductions in Brazil’s corn crop will be reflected in their corn exports.  As their corn exports decrease, US exports should increase.  Excess rainfall in Argentina is delaying their corn harvest. Their corn harvest was 37% complete, as of May 3rd.  It wasn’t too long ago that dryness in Argentina was the problem.  They just haven’t been able to get on the right side of Mother Nature this crop season.

Weekly export sales were near the top of expectations at 40.2 million bushels, bringing total commitments to 2 billion bushels.  This is down 2% from last year, but keeps us on pace to hit the USDA’s 2.225-billion-bushel export target.  We have sold 90% of the USDA’s projection compared to 88% on average. The USDA’s number indicates a 3% decline in year on year exports.   We need sales to average 11 million bushels per week to hit the projection. New crop sales this week were 2 million bushels. Total new crop commitments are 79.2 million bushels, down from last year’s 93 million bushels.

OUTLOOK: Weather and politics should provide corn with support for now. The funds also want to continue to be long corn and look at setbacks as buying opportunities. If we push hard and narrow the planting progress gap, additional acres may be expected to be planted.  The average planting progress for May 6th is 44% complete. The trade will be watching how the USDA treats the Brazilian corn production number on the May 10th WASDE report.  Private estimates are coming in closer to 86 mmt versus the USDA’s last estimate of 92 mmt.  In the last three years, December corn has had a difficult time spending much time above the $4.00 level.  This year with December corn above $4.20, we are about $.30 higher than we usually are in early May.  For the week, July corn rallied $.07 ¾ to $4.06 ¼ and the December contract gained $.06 ½  to $4.21 per bushel.  In the last three years, December corn averaged $3.82 ½ on May 4th.  While we could see higher prices with any crop problem, we are trading nearly 40 cents over that this year.  Something to think about as you make your marketing plans.  The contract high in the December 2018 contract is $4.29 ½ per bushel.

SOYBEANS – Soybeans continue to have the dark cloud of uncertainty surrounding possible implementation of Chinese soybean tariffs loom over them.  A US trade delegation met with Chinese officials May 3-4.  A strange thing happened near the conclusion of the talks.  It was reported near the close on May 3rd that the US and China would have an announcement on May 4th concerning an agreement.  However, this proved to be a premature announcement.  The only thing they agreed to was to continue to talk about their trade issues.  A few sticking points are the US request for China to cut the bilateral trade deficit by $200 billion by 2020, reduce tariffs, and cut subsidies for emerging industries.  In reaction, soybeans gave back the $.15 Thursday rally, and more, during Friday’s session.  Going into the talks, China had said they were not going to make any big concessions to the US.  China has “unofficially” stopped buying US soybeans in recent weeks, instead increasing purchases from South America.  The uneasiness of the situation has raised worries over whether China’s purchases from the US already on the books will be executed.  If so, and the 25% import tariffs goes into effect, would they be grandfathered in and exempt from the tariff?  These unknowns will likely keep a cap on any upside potential for the time being.  The most many were hoping for out of this initial meeting was an agreement to keep talking, which is what we got.

The July soymeal market broke the $400 level this week, trading as high as $406.50 per ton before finding pressure.  Argentina bought more US beans this week, lending credence to their need to source beans to crush.  If they fall short of needed meal to export, business should be pushed to the US. Trade chatter suggests China has covered 70% of their June soybean needs and covered 50% of their July bean needs. China’s soybean crush margins reportedly fell into the red this week for the first time since February.  Also, out of China were reports calling for an emergency campaign to increase soybean production.  The numbers being talked about are a drop in the bucket compared to their total soybean imports.  The early talk was an increase in production in their highest producing province of 22 million bushels.  They import close to 3.5 billion bushels.

Weekly export sales were at the high end of expectations at 15.3 million bushels for new crop and 17.2 million bushels for new crop.  It was noted that the previous week’s old crop sales were revised down 2 million bushels to 11.6 million bushels.  China also cancelled 134 tmt of old crop purchases, which is not unusual for this time of year.  New crop sales included 190 tmt of sales to Argentina.  Total old crop commitments at 2.01 billion bushels are down just 3% from last year.  The USDA is anticipating a 5% drop in year on year exports to 2.065 billion bushels.  Total sales are 98% of the USDA’s forecast compared to 96% on average.  The January-April period saw a 5.4% increase in soybean exports compared to last year and the highest in history for that time frame.  Since the beginning of January, the Brazilian real is down 9% and the Argentine peso is down 23%.

Argentina’s soybean harvest was 53% complete as of May 3rd, according to the BAGE.  Their crop production estimate was left unchanged from last week at 38 mmt.  US soybean planting was 5% complete as of April 29th.  The average for May 6th is 13% complete.

OUTLOOK: The May 10th WASDE may hold surprises for the market.  The Argentine soybean carryout number will hold interest for many as will the Brazilian corn crop forecast.  Will Argentina’s carryout really be 19 mmt as the USDA is saying now, or closer to Oil World’s 7 mmt forecast?  The Argentine soybean crop estimate was 40 mmt last month.  The overriding concern in soybeans is currently the state of affairs with China.  If planting weather is favorable next week, and we hear nothing on China, prices could slip into the May 10th report.  For the week, July soybeans tumbled 19 ½ cents lower to $10.36 ¾ per bushel.  The November contract pulled back 9 ¾ cents to $10.37 ¼ per bushel.  In the last five years, November soybeans have averaged $10.38 per bushel on May 4th, and this year is no different.  The May seasonal for November soybeans is slightly higher in the first third of the month, then lower.  The contract high in the November 2018 contract is $10.60 per bushel.

The HRW wheat tour was conducted this week.  It put the Kansas HRW wheat yield at 37 BPA with a crop size of 243 million bushels.  This puts the crop 27% lower than last year and the smallest since 1989.  The May 10th WASDE report will include the first 2018-2019 balance sheets. The next WASDE report will be released May 10th.  Beginning with this report, the USDA will add a new line to the world wheat and rice balance sheets to show beginning stocks, production, imports, domestic use, exports and ending stocks, after subtracting China’s numbers.  This is being done to better reflect the world situation.  On the April WASDE report, world wheat ending stocks were forecasted at 271 mmt, an all-time high.  China’s ending wheat stocks were forecasted at 127 mmt, nearly half of the total.

Anna Kaverman

anna@mercerlandmark.com

By~Brian Mitchem
First two pictures below shows a virus disease, likely Barley Yellow Dwarf. The straight line below is a variety difference.

Virus’ are vectored by aphids typically in the fall. Bird Cherry Oat aphids are grass feeders and carry the virus in their saliva as they suck out plant juice.

Including insecticide on wheat seed helps to prevent the disease. By a wide margin, ROI for insecticide is best on wheat followed by corn and is costly replant insurance on beans.

Yield loss is commonly 50% and higher depending on when the disease sets in. Nothing can be done now to help.

Below shows some septoria starting in the lower canopy. Wet and cool this week will increase incidence. Thicker canopy, more risk. Any of the Strob based fungicides provide good control of early season diseases.

Late planted wheat has improved but still looks rougher than I like. Very consistent across my area. Early planted wheat has improved much over the last few weeks. Seeing some sulfur deficiencies showing up as well.

By~Brian Mitchem
Great progress for most this week on planting. Extreme rain in the north for the area Thursday hurts. Route 6 3+”.

Biggest issue – beans planted, no herbicide applied- ppo herbicides (Valor/Envive/Trivence) are labeled to be applied no later than 3 days from planting.

All ppo family herbicides can cause seedling injury and stand loss if we experience heavy rain and cool temps following application.

If you have beans planted with no residual applied consider Prefix herbicide (fomesafen(flexstar)+metolacholar(Dual). This has some residual for grasses plus some broadleaves such as Waterhemp. 1qt per acre of Prefix. By far the best performance and cost option.

IF Beans are NOT emerged you can and should add a product like Canopy Blend and/or a brand of metribuzen for additional weed control and resistance management.

Please contact me for any/all questions about herbicides and planting. This remains our main issue with crop success. We simply can’t catch up with gly only tolerant beans if we miss the residual.

Below – proof of concept is the first part of research. The pictures below were taken tonight – 5/4 of beans I planted 3/26.

I placed 1/2 of the beans in a wet paper towel to absorb water for 24 hours before planting inside at room temp and the other half was planted normal/raw treated beans for each planting date.

I am very surprised there is no significant difference in emergence between the two options. Appx 12 hours difference in favor of the moist beans.

Also planted beans April 21 but no emergence as yet.