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Archive for July, 2018

Market Report

Friday July 27th, 2018

September corn closed up ½ at $3.62 and December closed up ½ at $3.76 ¼. August soybeans closed up 9 ¼ at $8.70 ½ and November closed up 9 ¼ at $8.85 ¼. September wheat closed down 6 at $5.30 ½ and July 19 closed down 3 at $5.73 ½. Crude oil closed down $.70 at $67.73.

FOR THE WEEK ENDED 7-27-18

CORN – Last week, we posed the question, “Have we finally turned a corner in corn?”  Based on this week’s price action, it does in fact look like we’ve found a short-term bottom.  Corn closed higher in nine out of the last ten sessions.  The contract low in December corn set July 12th at $3.50 ¼ per bushel brought end user pricing to the market, along with a modicum of fund short covering.  Demand for corn continues to be firm, while talk of a 180 BPA national corn average has lost steam.  Most still anticipate an increase from the current USDA 174 BPA outlook on the August 10th WASDE report, but chatter suggests the average trade estimate for the report won’t reach 180 BPA.

Trade news was more favorable this week with the US and the European Union making nice.  The EU promises to buy more US soybeans and import more LNG’s, and the US promised not to tax luxury car imports.  This was viewed as favorable for corn as a spillover effect.  The EU has a 25% tariff on US corn imports.  Could these overtures open the door for the corn tariff to be removed?  NAFTA news lent a positive air to the market this week as well.  Both the US and Mexico have indicated there could be a framework in place by the end of August and a deal done by the end of the year.  Where does this leave Canada?  No answer to this question, but having a deal with Mexico, the number one importer of US corn, doesn’t hurt.  The major surge in wheat this week also was a supportive factor to this week’s corn rally.  Disappointing wheat yields on the Wheat Quality Tour in North Dakota pushed prices higher, as well as shrinking world production due to dryness in various areas of the world.  President Trump indicated he was closer to getting year-round E15 gasoline approved.

The International Grains Council left their world corn production unchanged at 1,052 mmt.  They cut 2018/2019 world corn carryout from 253 mmt to 249 mmt.  The IGC cut world wheat production from 737 mmt to 721 mmt and dropped world wheat carryout from 256 mmt to 247 mmt.  The US ag attaché in Brazil cut the estimate for Brazil’s 2017/2018 corn crop 500 tmt to 83 mmt.  The official USDA number is 83.5 mmt.  His outlook for Brazil’s 2018/2019 corn crop is 95 mmt, 1 mmt lower than the USDA’s 96 mmt figure.

Demand for US corn remains robust.  Weekly exports were very good for old crop at 13.3 million bushels and very strong for new crop at 29.4 million bushels.  Old crop total sales are running 5% ahead of last year, which is on par with the USDA’s projection.  New crop commitments are 243 million bushels compared to 157.5 million bushels last year at this point.  At week’s end, US corn had lost its price advantage as Argentina’s corn price was slightly lower. Weekly ethanol production hit 1.074 million BPD, a 30-week high and up 10,000 BPD from the previous week.  Stocks fell 115,000 barrels to 21.65 million barrels.  Margins were steady at 5 cents per gallon.

Unchanged weekly corn condition ratings of 72% good/excellent as of July 20 were better than the 1%-2% decline expected by the trade.  81% of the crop was silking versus 62% on average.  18% was in the dough stage versus 8% on average.  These ratings will be closely watched as the US drought monitor showed an expansion of abnormally dry conditions in the Midwest from 22.4% to 35%.

OUTLOOK:  December corn has bounced nearly 30 cents off the contract low set at mid-month.  It is up against resistance near $3.80 in the December contract, but if broken, it could open the door for another dime rally.  August weather, the WASDE report, demand, and politics will drive the price action.  Funds are still holding short positions.  If we need to rebuild a weather premium back in the market, any short-covering from this sector could extend a rally.  The downside may be limited in the short term to the $3.50 per bushel area.

The next WASDE report will be released on August 10th.  Trade estimates should be out in the coming week.  How much the USDA will raise the corn yield will be closely watched.

SOYBEANS – November soybeans were slightly lower to begin the week, but then closed higher in each of the last four sessions.  After setting their contract low at $8.26 ¼ on July 16th, November soybeans have closed higher in nine out of the last ten sessions.  Soybean conditions improved 1% to 70% good/excellent.  This was unexpected by the trade, who were anticipating a 1%-2% weekly decline. 78% of the crop was blooming as of July 22 versus 63% on average.  44% of the crop was setting pods versus 23% on average.

The Trump administration announced a $12 billion aid package for US farmers.  No details were released, but reportedly it includes making direct payments to soybean farmers, a food purchase and distribution program, and a trade promotion program.  More details are expected around Labor Day.  News that the European Union promised to buy US beans was perceived and traded positively in the latter half of the week.  However, US soybeans are the cheapest in the world and we can logistically deliver them.  With China scooping up Brazil’s supplies, it makes sense any of the EU soybean purchases would be sourced from the US.  Last year, the US shipped the EU 4.1 mmt of soybeans.  So far this year, we have shipped them 4.5 mmt.  Last year, we shipped China 34 mmt of soybeans.   The gesture was nice, but I’m not sure it really added anything to our export outlook.  We’ll take any perceived friendly trade news we can get at this point.  There hasn’t been any movement on US-China trade relations, but there are three boats carrying US soybeans waiting off the coast of China to unload.  They are the first boats to hit China since the 25% import tariff went into effect.

Weekly export sales were huge for old crop soybeans, with no Chinese cancellations and including 70 tmt to Argentina. Old crop sales were 19.8 million bushels, bringing total yearly sales to 2.137 billion bushels.  The USDA’s forecast is 2.085 billion bushels.  The average rollover of sales from old crop to new crop is 61 million bushels, but last year we rolled over a record 87million bushels.  New crop sales were 35.4 million bushels.  Total new crop commitments are 361.2 million bushels, 63% ahead of last year. Earlier in the week we saw China cancel 165 tmt of new crop optional origin soybeans.  It’s estimated China still has 59-66 million bushels of US soybeans bought for this marketing year that have not shipped.

The IGC kept their world soybean production forecast at 359 mmt, but increased carryout stocks from 41 mmt to 44 mmt.  Brazil’s Abiove raised their 2018/2019 soybean production forecast from 118.4 mmt to 118.7 mmt.  The USDA is using 120.4 mmt.  Abiove put the export outlook at 73.5 mmt versus the USDA at 75 mmt.  One of the largest Chinese soybean crushers in Shandong filed for bankruptcy this week.  Margins have declined as the price of soybeans has increased and meal demand has waned.

OUTLOOK:  The soybean crop is normally made or lost in August.  The market has essentially removed any weather risk premium.  If it does turn hot and dry in August, soybeans may find a bid under the market; otherwise, without a resolution to the China situation, it will be difficult to build a case for a significant, extended rally in soybeans.

Egypt purchased a hefty 420,000 tons of wheat from Romania, Russia, and the Ukraine.  The were aggressive buyers on thoughts the global wheat market is tightening up.  They paid more the $15/ton more than their last tender two weeks ago. IGC lowered their world wheat production estimate by 16mmt to 721mmt, which would be 37mmt below last year.  The cut was mostly due to poor harvest reports in the EU and CIS countries – including Russia and Ukraine.

Spring wheat is rated 79% G/E, down 1% from last week, but the best rating for this date since 2010.  Winter wheat is 80% harvested, up 6% from last week. The final yield estimate from the Wheat Quality Council’s Spring wheat tour was 41.1 bu/acre, which is 3 bushels above last year, but below the 5 year average of 45.4 bu.

Anna Kaverman

anna@mercerlandmark.com

Market Report

Wednesday July 25th, 2018

September corn closed up 7 ¼ at $3.59 ¼ and December closed up 7 ¼ at $3.73 ¼. August soybeans closed up 2 ¾ at $8.60 ¾ and November closed up 2 ½ at $8.75 ¾. September wheat closed up 32 ½ at $5.43 ¾ and July 19 closed up 25 ½ at $5.84 ¼. Crude oil closed up $.82 at $68.01.

The corn market was content to ride an ascendant wheat market’s coattails today, finishing higher. Yesterday, the market never traded higher, and today, the market never traded lower. Managed Money was viewed net buyers of about 15,000 contracts today, which would leave them net short roughly 100,000 combined corn futures and options heading into tonight.

In truth, there was not a lot of corn-specific news around today at least during the session. After the close, it was announced that the E.U. and U.S. managed to strike a trade deal. While we think the current $1+ discount in U.S. beans to most world importers is the best inducement to buy, signs of positive movement to avert “Trade War” tariffs should cheer up the ag markets. Next up, Mexico?  Maybe. China could be the toughest nut to crack, after the “deal-no-deal” about-face seen back in May.

Weekly EIA data this morning unexpectedly found a new eight month high in U.S. ethanol production. Production inched another 1% higher wk/wk to a 1.074 mil bbl/day rate, which continues to put the corn-for-ethanol grind on a trajectory to exceed current USDA 17/18 forecasts by at least 25 million bushels.

The U.S. weather front remains fairly non-descript, though “trouble spots” that missed out on recent rains will need to be monitored given erratic (at best) precip expected over the next couple of weeks. Below-average temps are expected to continue, which will keep pollinating crops on a favorable trajectory in most areas.  On the world scene, “hot and dry” will continue in Germany, which is the primary focus of the EU markets. South American harvest weather will continue favorable.

The soybean market fought off a weaker overnight and opening trade to extend the rally to a new high close. It was a wheat show today here at the CBOT and the limit move in wheat helped to float all the boats to a certain degree and that support was welcomed in the absence of any fresh fundamental inputs to feed the soybean bull. Strong export and crush demand and a shifting technical posture are supporting the recovery while big crop potential and long term trade uncertainty limits enthusiasm.  Volumes were off from yesterday but still stronger than what they have been.

Tomorrow we’ll get the weekly export sales report where the trade is estimating 400 – 900 tmt. Traders will be looking for additional sales confirmations of new crop US beans into Argentina where to date they have 720 mt on the books and that number will continue to grow thanks to their reduced crop this year. We will also be looking for Chinese/unknown cancellations where China has 638 mt old crop sales open on the books along with 1.332 mmt in the new crop. Un known which likely includes a high percentage of Chinese sales is holding 3.122 mmt old crop and 4.517 mmt new crop.

Wheat was the feature market today with CBOT futures reaching limit up and synthetically traded a penny above at one point.  The rally was led by the fronts as fund shorts were chased out. The spark in this wheat rally is European crop production. The EU soft wheat crop was reduced by another 2.5 mmt, which puts them at 130 mmt compared to last year’s crop of 141.8 mmt and the USDA at 145.0 mmt. Most of this cut today came out of Germany’s crop but further reductions are anticipated with the extreme heat and dryness that has stresses large portions of the growing region. When you factor in Russia’s poor crop and Australia’s struggles the world wheat crop is going to be short this year which is increasing ideas of US export demand later on in the year. That is, unless we price ourselves out of the competition. This tightening of supply is seen in world trade values. In addition, the US spring wheat crop tour is underway and the first day yield report in N Dakota of 38.9 bpa was stronger than last year’s yield of course but disappointing relative to expectations.

Anna Kaverman

anna@mercerlandmark.com

Market Report

Monday July 23rd, 2018

September corn closed up 2 at $3.57 ¼ and December closed up 2 ¼ at $3.71 ¼. August soybeans closed down 2 at $8.47 ¾ and November closed down 2 at $8.62 ¾. September wheat closed down 2 ¼ at $5.13 ¾ and July 19 closed up ¾ at $5.61 ¼. Crude oil closed up $.11 at $66.75.

The corn market kept the winning streak alive, in undramatic and quiet fashion. Futures finished higher in light volume trade and $.04 range, and have rallied seven days out of the last eight.  European markets continue to hold better feature, trading to new highs in the lead Sept contract. Managed Money traders were viewed net buyers of about 5,000 contracts today, which would leave them net short roughly 105,000 combined corn futures and options.

Crop Progress data after the close lacked the fireworks of the prior week. The USDA left corn ratings unchanged wk/wk, holding the line at 72% Good-Excellent, which compares to 62% G-E last year. Poor-Very Poor was also left unchanged wk/wk at 9%, which compares to 12% seen this time last year. More states were up than down, but the (mostly minor) states that saw deterioration tended to decline sharply; Colorado off -14% G-E, North Carolina off -10% G-E, Ohio off -9% G-E, and Michigan off -6% G-E.  Of note continues to be the rapid maturation of the crop; 81% seen silking nationally versus 62% average.  18% of the corn was seen in the “dough” stage, up from 8% last year and average.

U.S. weather is still advertised to be favorably mixed with rain and sunshine over the next two weeks and temperatures that are below average for much of the period. That will translate into favorable late season crop development potential, though some of the rains are expected to have erratic distribution. Europe remains dry in the north, which we suspect has a greater impact on wheat crops and grain logistics than on corn condition.

Export inspections remained in good stead.  For the week ended 7/19, U.S. exporters shipped 1.31 million metric tons of corn, which was about 100k more than expected, slightly better than last week, and about 40% greater than the equivalent year ago week. Year-to-date corn shipments stand at 49.8 mmt, which compares to 51.8 mmt shipped out last year.

The soybean market was two-sided but ultimately failed to hold new recovery highs with a lower settlement that breaks a modest 5 day rally out of new lows.  Trade volumes remain extremely light with unresolved trade disputes and ideas of big crop potential in the US hanging over the market.

Soybean crop condition was up 1% in good to excellent ratings to 70% compared to 57% a year ago and with 78% of the crop blooming (65% last week and 67% last year) and 44% of the crop setting pods (31% last week and 27% last year). The states that saw the greatest ratings improvement were AR +5, IL +5, LA +5, MO +8, NE, NC, ND and SD were each +2. The states that saw the most deterioration were MI -7 and OH -2.

Weekly bean inspections totaled 772 mt which was above the 600 mt estimate and compared to 637 mt last week and 641 mt this week last year. Year to date bean shipments stand at 51.702 mmt compared to 53.958 mmt this time a year ago representing a 78 million bushel deficit to last year which is roughly in line with the USDA’s upwardly revised 2.085 billion bushel projection for exports on the year. Non-Chinese export demand remains strong due to the steep discount in price relative to Brazil. Pakistan bot 360 mt of optional origin beans over the weekend which are assumed to be US but we’ll have to wait for confirmation of that. The USDA reported a cancellation of 165 mt of new crop optional origin beans to China, again assumed to be US.

Wheat prices were mixed Monday after Chicago SRW contracts slipped from six-week highs on a round of technical selling. Wheat export inspections last week hit 14.6 million bushels, easing from the prior week’s total of 17.3 million bushels but landing in the middle of the average trade guess, which ranged between 11 million and 18 million bushels. Mexico was the leading destination, with 2.8 million bushels. Analysts expect USDA’s next Crop Progress report, out Monday afternoon, to show 79% of the 2018 U.S. spring wheat crop in good-to-excellent condition, down from 80% the prior week but well ahead last year’s good-to-excellent rating of 33%. Analysts also anticipate the 2017/18 U.S. winter wheat harvest has reached 83% complete, up from 74% the prior week and in line with last year’s pace of 84%. EU crop monitor MARS trimmed its forecast of the region’s 2018 soft wheat crop, moving total yield potential from estimates of 89.8 bpa in June to 86.5 bpa, due to ongoing production concerns in central and northern Europe.

Anna Kaverman

anna@mercerlandmark.com

By Jeff Prickett 07/17/2018

As a follow-up to Jacob Lewis’s Blog article from last week, I have observed disease in both corn and soybeans really blow up this past week. Below are a few pictures I took yesterday. Frogeye Leaf Spot in soybeans is becoming more prevalent. Also, just about every corn field I have scouted this past week has gray leaf spot present at, or just below the ear leaf. Seeing some Northern Corn leaf blight move in as well.

It is not too late to treat your crops with a fungicide application! Most corn fields have not quite reached brown silk and most soybean fields are near R-3. The timing for a fungicide treatment is now!
This past week’s alfalfa scouting shows building pressure of potato leafhopper populations. Remember to perform 10 pendulum net sweeps in 3 to 5 areas of the field. Economic thresholds equal 1 leafhopper per inch of height. (example: 8” alfalfa has 8 or more leafhoppers per 10 sweeps, corrective action is recommended.)

I know this is a busy time of the year, so if you need any help scouting for disease or insect pressure on your farm, please feel free to reach out to any of us at Mercer Landmark Agronomy, we are here to help!

Market Report

Monday July 16th, 2018

September corn closed up ½ at $3.41 ¾ and December closed up ½ at $3.55 ¼.  August soybeans closed up 10 ¾ at $8.29 ½ and November closed up 11 ½ at $8.45 ¾. September wheat closed down 8 ½ at $4.88 ½ and July 19 closed down 7 ½ at $5.35 ¼. Crude oil closed down $2.88 at $67.07.

The corn market managed to start the week slightly higher in a two-sided and light volume session. The market split the difference today, settling in-between. Note, the weekly chart will get a $.11 “jump start” due to the expiration of the July contract. Funds were viewed net buyers of about 5,000 corn today, which would take their net position to an estimated net short of 85,000 combined futures and options

Crop Progress data after the close could generate some buzz tonight and tomorrow, given broad-based declines in conditions in nearly every commodity covered by the USDA. Note, this was not wholly-unexpected given some extreme heat seen last week and limited moisture. Corn conditions were among the most impacted. Good-Excellent ratings slipped 3% wk/wk to 72%, though this still compares very favorably to the 64% reported this week in 2017. What makes this potentially more interesting is the fact that so much of the corn crop was pollinating. The USDA reported 63% of the U.S. crop was silking during the reported week, up 26% wk/wk and 26% greater than average. The driest states – Michigan and Missouri – headlined the declines, each falling double-digit G-E. Iowa and Illinois were little changed, but MN, SD, and IN, all saw notable declines wk/wk.

Fortunately for the sake of the above crops, U.S. forecasts moderate greatly in coming days, with cooler weather at a minimum expected. There are also broad rains in the five day precip maps, though forecasters warn present conditions could make those rains erratic. Europe will get some rains and South American harvest weather is favorable. China is dry and rains next week could prove critical to maintain currently solid yield potentials on corn.

The soybean and meal markets reversed out of new lows as we continue to search for a bottom to the extended slide in prices.  Trade volume remains light with much of the trade war fear and big production potential seemingly priced in with essentially zero weather risk premium at these levels.

Weekly grain inspections for export totaled 635 mt for beans including 2 cargoes shipped to China off the PNW. Soybean exports to date stand at 50.978 mmt vs. 53.316 mmt this time last year representing a deficit of 86 million bushels vs. the USDA projection of an 81 mb deficit as non-Chinese exports continue to support our trade. NOPA June crush came in slightly below trade estimates at 159.23 slightly below trade expectations of 159.6 expected and 163.57 in May. This is a new record for June (previous record 145.05 in 2016). New crop demand remains the big question mark obviously but old crop is very strong.

In trade news, there was some talk of China being ready to come back to the negotiating table but those are just rumors at this point. Here is what we know: China filed another complaint with the WTO against the US plan to impose tariffs on an additional $200 billion worth of Chinese goods. China’s Q2 GDP slowed by 1 tick to 6.7% after spending the previous 3 quarters at 6.8%. It is this data that could be the source of the rumors of China’s willingness to return to talks. Chinese state media downplays the significance of the negative economic indicators but the strength and size of the US economy relative to China’s, and Europe’s, Mexico’s and Canada’s for that matter, is the reason the US will ultimately come out on top of the trade wars even if it means near term pain for all involved. The US today brought five separate complaints at the WTO against Canada, China, the European Union, Mexico and Turkey, in response to their retaliatory tariffs on American products.

Weather remains conducive to crop development overall with the forecasts shifting to a below normal temperature outlook for the second half of July for much of the corn belt with some pockets of dryness worth watching (AR, E KS, N MO, S IA, S/C MI, and parts of S IN and S OH). But those areas are not prime soybean production areas and they are forecast to get some relief over the coming 5-10 days. Bean yields are determined in Aug-early Sept so nothing is made yet and it is too early to tell anything but based off of USDA crop conditions, field reports and soil profiles, it is safe to say the soybean crop has very strong yield potential. The record national soybean yield was in 2016 at 52.1 bpa, last year 49.1 bpa with an avg. the past 5 years of 48.1 bpa and USDA last at 48.5 bpa.

Soybean crop conditions this afternoon were off 2% to 69% gte and compares to last year at this date 61% gte. The states that saw the biggest gains were MS +5. The states that saw the biggest deterioration were AR -5, IN -2, KS -6, KY -3, MI -10, MO -8, NC -3, OH -5 and SD -5. The crop is 65% blooming vs. 47% last week and 49% last year this date.  The crop is 26% setting pods vs. 11% last week and 15% last year this date.

After an evening that saw slightly lower price action throughout, the wheat complex caught a bid during the early stages of the day session, thanks in large part to a strong start to the day in soy, and a rally in corn. Wheat values did not get nearly as strong, but prices in both Chicago and KC did briefly trade higher. Today’s lower start to the week marks the eleventh consecutive week the wheat complex has started the week lower. There was talk late last week that Russian wheat prices will soon be on the rise, but prices looked to end last week mixed and the European contract Matif saw two-sided type trade today before finishing the day marginally higher. The Russian wheat harvest is racing ahead of last year with the warm and dry conditions. Export loadings this morning came in above expectations at 470 MT vs an adjusted 268 MT last week and 595 MT this time last year. To date, wheat shipments are 2.220 MMT vs 3.938 MMT this time last year.

Anna Kaverman

anna@mercerlandmark.com

Market Report

Friday July 13th, 2018

September corn closed down 4 ½ at $3.41 ¼ and December closed down 4 ½ at $3.54 ¾.  August soybeans closed down 15 at $8.18 ¾ and November closed down 15 at $8.34 ¼. September wheat closed up 12 ½ at $4.97 and July 19 closed up 7 ¾ at $5.42 ¾. Crude oil closed up $.60 at $69.95.

CORN – The key reversal higher from July 6th didn’t confirm when we returned from the weekend, sending prices to fresh lows ahead of the July 12th WASDE report.  Favorable growing weather in the US and continued fund selling kept buyers at bay in pre-report trading.  New contract lows were set in the session leading up to the report.  The USDA report finally brought some relief to the market with lower than expected US and world carryout numbers for both the 2017/2018 and 2018/2019 crop years.  Whether corn has seen its low for now is still a question mark.  According to many, the biggest problem with corn right now is the soybean market.

The report’s biggest surprises on the report were the cut to ending stocks for both old and new crop.  Ending stocks were cut 75 million bushels on the 2017/2018 balance sheet, falling from 2.102 billion bushels to 2.027 billion bushels, and below the lowest trade estimate.  The trade estimate was calling for stocks to stay unchanged.  On the balance sheet, imports were lowered 5 million bushels, feed/residual was decreased 50 million bushels, ethanol usage increased 25 million bushels, FSI declined 5 million bushels, and exports surprisingly jumped 100 million to 2.4 billion bushels.  The stocks to use ratio fell from 14.2% to 13.6%.

The 2018/2019 balance sheet raised eyebrows when ending stocks dropped 25 million bushels to 1.552 billion bushels from June’s 1.577 billion bushels.  The trade was anticipating ending stocks of 1.712 billion bushels.  The USDA used the June 30th acreage number of 89.1 million acres, up 1.1 million from the June WASDE report.  The yield was left unchanged at 174 BPA.  Production improved 190 million bushels, going from 14.04 billion bushels to 14.23 billion bushels.  Other changes from the June report included: feed/residual up 75 million, ethanol usage down 50 million, FSI cut 10 million bushels, and exports increased 125 million to 2.225 billion bushels.  The stocks to use ratio fell from 10.8% to 10.5%, the lowest since the 2013/2014 crop year.

World ending stocks for 2017/2018 were as expected at 191.7 mmt versus 191.4 mmt estimated and down from 192.7 mmt in June.  However, 2018/2019 ending stocks had a bullish slant, coming in below the average 156.3 mmt estimate at 152 mmt.  In June, they were forecasted at 154.7 mmt. This is the lowest figure since 2013/2014.  Brazil’s corn production was pegged at 83.5 mmt, down from June’s 85 mmt.  Argentina’s corn production was left unchanged at 33 mmt.

US weather currently looks favorable for crop development.  If we add 4 BPA to the 2018/2019 corn balance sheets, and leave everything else alone, we could add over 372 million bushels to the bottom line.  This could kick up ending stocks to over 1.9 billion bushels.  However, the caveat could be other countries production numbers are overstated due to dry areas around the world.  It is something to be thinking about if weather remains non-threatening.  In each of the last 5 years, the final corn yield has been higher than the July report.  Interesting that last year on the July report CZ17 corn was at $3.88 per bushel with carryout projected at 2.3 billion bushels.  This year CZ18 was $3.59 ¼ per bushel with carryout of 1.55 billion bushels.

Weekly export sales were the second lowest in 26 weeks and the sixth lowest of the marketing year.  Old crop sales were 15.8 million bushels with total commitments at 2.29 billion bushels.  The new forecast is 2.4 billion bushels.  New crop sales were 5.1 million bushels.  New crop commitments are 183 million bushels versus just 130 million last year.  Weekly ethanol production dropped 34,000 bpd to 1.033 million bpd.  This is the lowest number in eight weeks.  Stocks rose 400,000 barrels to a 14-week high of 22.4 million barrels.  Margins fell a penny to 10 cents per gallon.

OUTLOOK:  Weather will likely dominate the market with corn in its critical pollination period.  Outside political factors and ideas of higher yield prospects may limit the upside, but further downside is difficult to project from current low levels as world stock levels decline.  The contract low in September corn is $3.37 ¼ and $3.50 ¼ per bushel in the December contract.  Funds were net short an estimated 62,000 contracts after the report.  Can we get a bounce?  Possibly, but current weather forecasts are a limiting factor for any rally.

The CME announced this week that beginning with CZ19 and SX19 contract expirations, maximum storage rates for corn and soybeans would go from approximately 5 cents/bushel/month to 8 cents/bushel/month.  They also announced that beginning with the August WASDE report, the current “lock up” for media outlets ahead of USDA reports would be discontinued.

SOYBEANS – Soybeans began the week with double digit losses for the third consecutive Monday.  The after-effects of the official start to the trade war with China spilled over into the fresh trading week, with good growing conditions lending pressure as well.  New contract lows were set before the crop report was released on July 12th and again into the weekend.  News that trade talks with China had broken down kept pressure on the market.  The next round of $16 billion of tariffs on Chinese goods is coming up in about a week and another 10% tariff on $200 billion worth of goods was brought up this week.  Can an agreement or truce be reached before then?  On the bright side, US officials were heading to Mexico to meet with their new President-elect and the current administration.   Trying to figure out the politics is impossible.  The July WASDE report didn’t help when report numbers on their face were bearish, but prices managed to eke out a minimal gain on report day.  That euphoria didn’t last when fund selling resumed as we headed into the weekend.  The contract low in November soybeans is $8.26 ¾ per bushel, but on the continuous chart there is nothing but air beneath it until the mid $7.70’s per bushel.  If, and it’s a huge if, we see some relief to the tariff situation, we would expect a significant rally.  Otherwise, it will be tough going for any soybean bounce.

The 2017/2018 US balance sheet had just a few changes, including a 40 million bushel increase to crush to a record 2.03 billion bushels, a questionable 20-million-bushel increase to exports to 2.085 billion bushels, imports down 3 million, residual up 2 million, and seed up 1 million bushels.  Ending stocks were down 65 million bushels at 465 million bushels.  This was smaller than the 507 million trade estimate and below the lowest estimate.

The 2018/2019 balance sheet used the June acreage number of 89.6 million acres and kept the yield forecast at 48.5 BPA.  Production was up 30 million bushels from last month at 4.31 billion bushels.  Other changes included a 45 million bushel increase to crush and dropping exports 250 million to 2.04 billion bushels.  The USDA had previously indicated they would incorporate the trade war with China into the July balance sheets.  Ending stocks exploded 195 million bushels to a record carryout of 580 million bushels versus expectations for 471 million bushels.  This was also greater than the highest trade forecast. The stocks to use ratio at 13.7% is the highest since 2006/2007.

On the world scene, 2017/2018 ending stocks were 96 mmt versus the average trade estimate of 91.8 mmt and last month’s 92.5 mmt outlook.  For 2018/2019, ending stocks were even larger at a record 98.3 mmt versus estimates for 88.2 mmt and last month’s 87 mmt projection.  China’s 2018/2019 import line was cut 8 mmt to 95 mmt. China says their imports will be as low as 93.85 mmt.  Brazil’s soybean production jumped 0.5 mmt to a record 119.5 mmt and Argentina’s number was unchanged at 37 mmt.  The USDA is already raising the 2019/2020 production numbers for both Brazil and Argentina.  Brazil’s forecast rose from 118 mmt last month to 120 mmt, while Argentina’s grew from 56 mmt to 57 mmt.

China this week indicated they could get by without US soybeans.  China’s national bean stocks were reportedly 8.5 mmt, the highest since at least 2010 and up 50% since the middle of April when the trade issues began.  Talk also floated that China was willing to talk with US again about tariffs.  President Trump has suggested another 10% tariff on $200 billion worth of Chinese imports, but the comment period wouldn’t be until August 20-23.  Nothing is boding well for the soybean outlook, unless we get some resolution to the trade situation.  If we add just 1.5 BPA to the soybean yield and leave everything else static, we could be facing a 2018/2019 ending stocks number over 700 million bushels.  The final bean yield has increased from the July report in each of the last 4 years.  It’s a disheartening scenario.

Weekly export sales were a measly 5.8 million bushels for old crop and 9.9 million for new crop.  Old crop total commitments are 2.11 billion bushels versus 2.085 projected.  Total commitments for new crop are 303 million bushels, well ahead of last year’s 146 million bushels.

OUTLOOK:  What’s left to be said that hasn’t already been in the market?  The WASDE pointed out further bearish aspects of the soybean market, but funds had already been factoring in much of the changes.  Weather premiums have been removed from the market, but most expect the current yield outlook to climb closer to 50 BPA.  The tariff war casts a long shadow, and it can’t be ignored.  How much of China’s market share will the US lose?  But how much will non-Chinese business pick up?   Chatter is beginning about fewer US soybean acres next year and more corn acres.  Lots of negative news has been factored in, but the soybean crop is made in August and the fate of world soybean trade is undecided, giving soybeans a wide range of uncertainty.  Without a resolution to the trade war and expectations for a higher yield, and resulting higher carryout, we may have not seen our lows.

Wheat prices were boosted by yesterday’s WASDE report, which reinforced possible production concerns in some key overseas markets. The mini-rally extended into Friday, with some winter wheat contracts gaining double digits. Losses incurred through Wednesday, however, still left prices trending lower for the week, including: September Chicago SRW – down another 3.2%

Also for the week, CBOT wheat speculators increased their net short position by another 249 contracts for a total of 24,693. Russia’s Agriculture Ministry is expecting a 2018 wheat production totaling 2.366 billion bushels.  France’s 2018 soft wheat harvest reached 20% completion as of July 9 (up from 3% the prior week). The country’s current soft wheat crop is in 72% good-to-excellent condition according to consultancy FranceAgriMer, down from 73% the prior week.

Anna Kaverman

anna@mercerlandmark.com

Market Report

Thursday July 12th, 2018

September corn closed up 5 ¾ at $3.45 ¾ and December closed up 6 at $3.59 ¼. August soybeans closed up ¾ at $8.33 ¾ and November closed up 1 at $8.49 ¼. September wheat closed up 12 ¾ at $4.84 ½ and July 19 closed up 7 ¼ at $5.35. Crude oil closed up $.49 at $69.35.

Report Day proved to not be a complete bust. Even though there was no yield update, the elves at the USDA were busy in their workshops, making small tweaks to both old and new crop balance sheets. The corn market went stop-hunting shortly before the report, trading to new lows for the move shortly before the release. With mostly bullish data in the offing, the market was able to rebound, trading nearly a $.10 at one point before settling six cents higher. Managed Money traders were viewed net buyers of about 15,000 corn today, reversing their activities from Wed. CFTC data tomorrow will be welcome to tighten up their net positions (probably 50k net short?).

The July WASDE had mostly bullish feature, both in absolute terms and relative to expectations. As is usually the case, the USDA did not adjust yields in this report, leaving it at a trend-line 174 bpa, though we note that is a small victory given some rather aggressive yield expectations out there. They did increase acreage the expected 1.1 million from the June 29th report, but what was interesting is that a corresponding increase in demand completely swallowed up that extra production. The surprise, perhaps, was that a good portion of the demand came from the old crop, not the new, despite the small ‘miss’ from the June 1 stocks report. They increased 17/18 ethanol demand 25 MB, exports 100 mil, but did trim the feed/residual slush fund by 50 MB. This reduced old crop (17/18) ending stocks (and 18/19 carry-in) by nearly 75 million bushels to 2.027 billion. In the new crop (18/19), the USDA raised feed/residual by 75 mil bu, and exports by 125 mil, but cut ethanol 50 mil.  All in, the USDA actually lowered 18/19 domestic ending stocks 25 mil bu from the June report to 1.577 billion bushels.  The average analyst guess going in was 1.71 billion!

The world corn numbers were fairly unexciting by comparison but they also certainly were not bearish. The major change in the “old crop” was the reduction of full year Brazil crop estimates by 1.5 mmt to 83.5 mmt, which brought them into alignment with CONAB.  World 18/19 ending stocks were reduced almost 3 mmt, including the resulting 1 mmt reduction in old crop 17/18. The only other meaningful change in world production was a 3 mmt reduction in FSU corn production for the coming marketing year.  Note that world carryout excluding China is at the lowest stocks/use ratio seen since 12/13.

The soybean market shrugged off a bearish crop report to reverse out of new contract lows. A friendly corn report perhaps helped but the bean side of the report should have come with a disclaimer saying the following numbers project a scenario where no trade deal between the US and China is reached and if one is made you can rip up this forecast. That is pretty much how the trade handled the numbers where at sub $8.50 new crop beans, the risk reward to some favored buying this worst case scenario as presented by the USDA. While today’s reversal was very small and is not a clear signal that we are through breaking, this is the second time in less than a week that the soybean market reversed off of bearish news (trade tariff on Friday) and has the potential to be a building block, time will tell.

The USDA increase old crop crush by 15 mb and exports by 20 mb which reduced the carryout from 505 mb to 465. They left soybean yield unchanged at 48.5 bpa while applying the additional acres from the June 29th report which increased production by 30 mb from last month to 4.310 bb. The lower carry in to new crop along with a 45 mb increase in crush was not enough to offset a 250 mb reduction in exports so the carryout went up by 195 mb to 580 mb. The increased crush took soybean oil production up by 520 mln lbs which along with a 140 mln lb increased carrying more than offset an 500 mln increase in biodiesel and 100 mln increase in exports with the new crop carryout seen at 2.236 bln lbs.

In the world numbers, old crop carryout went up 3.5 mmt to 96.02 on increased supply in Argentina, Brazil and China more than offsetting the US reduction.  This carried into the new crop where carryout was up 10.25 mmt to 98.27 mmt.  They are projecting an increase in Brazilian plantings with a crop size of 120.5 mmt, up 2.5 mmt from last month.  The Chinese tariff is expected to cause higher prices for beans in China and slower protein meal consumption growth. Chinese soybean imports were lowered 8 mmt to 95 mmt.

According to Bloomberg, the US and China signaled they were open to resuming negotiations over trade after days of exchanging retaliatory threats, though Treasury Secretary Steven Mnuchin said Beijing must commit to deeper economic reforms.  Mnuchin told the House Financial Services Committee on Thursday that he and administration officials are “available” for negotiations, as he called U.S. tariffs imposed on China a “modest” step aimed at leveling the playing the field. “To the extent that China wants to make structural changes, I and the administration are available.

More EU production downgrades gave the Matif wheat market a little bounce, and that minor support spilled over to the US markets as we started the morning. Trade remained slightly better up until the crop report late morning, and the initial knee-jerk reaction to the data was an $.11 spike higher move. Although the rally was short-lived, price action did steadily firm over the latter half of the session and trade would settle not too far off its highs. The wheat complex has now seen a higher finish on 6 of the last 7 crop report days, but in a week in which we had already seen SRW wheat futures lose $.43, HRW wheat futures lose $.39 and Spring wheat futures lose $.33, it made it awfully difficult to get a bearish response to the USDA data. The reduction in SRW wheat production was definitely a positive influence, as well as 18/19 World carryout being lowered more than 5.0 MMT. Everyone was looking for a very large Spring wheat production estimate and we got it, but Mpls was still able to post modest gains.

The USDA said that starting August 1, the agency will no longer release data under embargo to the media, and will only release live data sets on its website starting next month. Meaning everyone will get the data at the same time. There will be no changes to its report later this morning.

What the Crop Report said:

We thought the headlines out of this report was going to be what type of reduction we see in harvested wheat acreage this year AND what the USDA will do as they plug in their view of what the tariffs do to US trade. Every SRW wheat state either saw their production estimates left alone, or they were taken down. HRW wheat states were mixed, some saw an increase in production estimates, and some were reduced, but at the end of the day, overall HRW wheat acreage saw a marginal increase. Spring wheat is a monster crop as we expected. We were looking for a slight increase in overall 2018/19 all wheat production based on that huge Spring wheat crop, and that is exactly what we saw, with the USDA projecting an overall wheat crop of 1.881 BB vs 1.827 BB from last month.

Anna Kaverman

anna@mercerlandmark.com

Market Report

Wednesday July 11th, 2018

September corn closed down 7 ¾ at $3.40 and December closed down 7 ½ at $3.53 ¼. August soybeans closed down 22 ¾ at $8.33 and November closed down 23 ¼ at $8.48 ¼. September wheat closed down 20 ¼ at $4.71 ¾ and July 19 closed down 15 ½ at $5.27 ¾. Crude oil down $3.70 at $68.86.

With an escalation of “Trade Wars” the corn market opened lower and gradually extended losses throughout the day. Futures would eventually close lower, falling to new lows for the move in all actively-traded contracts. Corn futures have finished lower every day this week and have declined almost $.80 from the May high. Managed Money traders were viewed net sellers of just over 15,000 corn today, which would take their position to net short almost 70,000 combined futures and options.

The seemingly never-ending saga of “Trade Wars” opened a new chapter overnight. The measure is clearly designed to get China to come back to the negotiating table; we see the reaction in corn as more of a “kneejerk” macro response rather than anything fundamentally significant for the marketplace. This strategy was not a complete surprise, as it was in-line with ideas mooted this spring, but the timing of it was surprising, as there was no forewarning.

Weather is not offering anything for the bull to chew on. It’s hot, really hot for some and dry across the Midwest, but the center of the Belt is due to get multiple opportunities for a drink over the next several days. The change in the forecast from an extended period of that hot and dry, to one that has a definite expiration so far has proved durable. 6-10 & 8-14 day maps did introduce a change late today, taking out some of the rains from the prior day runs, but it is also expected to be accompanied by cooler temps. No story here, yet. Many believe the market is trading 180 bpa plus type yield, though we continue to warn that could be difficult to achieve, given modest problems in N Missouri, Michigan, and C Wisconsin, along with potential flood damage along the IA/NE/MN border, and less than ideal crop conditions in the Delta/SE.

The soybean market was not alone in its sharp selloff today as broad based commodity selling swallowed the grains, meats, metals, energies and softs by the escalating trade war between the US and China. Beans continue to search for a bottom which has been elusive with new lows established again today. The products held up better than Benign growing weather, fund selling as well as trade uncertainty have all continue to press beans.

Tomorrow we’ll get a USDA report which can at time bring needed focus to the underlying stats. Not that the report is expected to be bullish for beans but it will serve as a reminder that we have disassociated the price on the board from the fundamentals of the market place largely due to an outside influence. US production will increase on the increased acreage from the June 30th report (corn +1.1 to 89.128 and beans +.58 to 89.557) but the avg. est. for increases in yields may not pan out, it is very unusual for the USDA to increase yields in this report.

Yesterday afternoon the US proposed a 10% tariff on an additional $200 billion in Chinese goods imported into the US.  There is a 4-week comment period before those tariffs can be enacted while the previously approved $16 billion from the initial $50 billion still have not yet been put in place. There are no open negotiations between the two countries taking place today. China is vowing a full retaliation to the US tariffs which could require moving beyond tariffs such as imposing new taxes and added regulation on U.S. companies, slowing deal approvals, or encouraging citizens to boycott American products.

More tariff talk, more talk of yields and protein coming in better than expected, and more selling to a complex that already has seen plenty of that recently. The encouraging news is that there is a crop report tomorrow. Not that traders are expecting friendly data. It is just that on five of the last six crop report days, wheat futures have finished the day higher. In a week in which we have already seen SRW wheat futures lose $.43, HRW wheat futures lose $.39 and Spring wheat futures lose $.33, it makes it awfully difficult to get a bearish response to the USDA data, even if the data is not friendly. This morning’s news that Russian lowered wheat production and export estimates gave our wheat markets only a momentary reprieve, and when the selling returned and the overnight lows were violated, the selling intensified.

Before the crop report tomorrow morning we will get export sales. The past few weeks have been pretty good, but with the Holiday last week, look for sales this week to taper off. Last week’s sales were at the high end of expectations at 440 MT. Look for sales tomorrow to come in between 300 and 400 MT.

Anna Kaverman

anna@mercerlandmark.com

Within the past week many corn fields have tasseled or are near tasseling. Soybeans are approaching or are at the R3 growth stage. These two stages in corn and soybeans are recognized as the optimal times to apply fungicides to the growing crop and the perfect time to ad a plant nutritional product such as Max IN ZMB or Max IN for Beans. When thinking about a fungicide application, you should always ask three questions: 1. What is the hybrid? 2. Is the weather conducive to disease environment? 3. Is there disease present?
The first question in soybeans is not as relevant as corn, question 2 we can definitely answer yes with hot and humid conditions we have been having, for question 3 Septoria Brown Spot has been affecting the soybean plants for several weeks, in the past few days frog eye leaf spot has shown up in many (look at pictures below) for frog eye leaf spot one lesion per 25 feet of row can reduce yield up to 8 bushel per acre.

For corn, the yield potential is great so protecting it from disease is a must. Grey leaf spot has been found in many fields, (look at pictures below) scout your fields or ask your Mercer Landmark representative. With the warm humid conditions, the disease can progress up the plant very quickly. We have to protect the plant all the way through grain fill.

Market Report

Tuesday July 10th, 2018

September corn closed down 6 ¼ at $3.47 ¾ and December closed down 6 ¼ at $3.60 ¾. August soybeans closed unchanged at $8.55 ¾ and November closed down ½ at $8.71 ½. September wheat closed down 16 at $4.92 and July 19 closed down 11 ¾ at $5.43 ¼. Crude oil up $.58 at $72.56.

The corn market kept the bull at bay and finished lower. A combination of a Europe-inspired wheat shell-out and a confirmation of yesterday’s bear weather turn was all she wrote today. The Dec contract traded to new lows, but did not close into new lows. Managed Money traders were viewed net sellers of about 15,000 corn today, which would take their position to net short 50,000 combined futures and options.

Summer weather market volatility continues, as the trade lives and dies from model run to model run. Going home Friday, it sure looked like the broader Midwest was going to get a dose of hot and dry, just in time to impact pollinating crops. Fast forward to Monday/Tuesday; yes, it’s largely dry and getting warmer across the Midwest, but the forecasts suggest this will come to an abrupt end as soon as next week. That has been enough for a defensive market to “reabsorb” weather premium.

It wasn’t all bearish, though. Brazil’s gov’t (CONAB)crop report once again trimmed estimates of the country’s safrinha corn.  Second crop output was reduced 2 mmt from prior forecasts to 56 mmt. If correct, this would leave full year Brazil corn at 82.9 mmt vs. 97.8 mmt last year. If private analysts are correct, they still may have at least one more small downgrade to come?  A reduced crop and logistics issues may keep Brazil from realizing its normal corn export potential in the coming marketing year, which could help keep U.S. sellers in the driver’s seat into the 18/19 campaign.

The soybean market had a two-sided performance where the market initially tried to follow the lead of meal to the topside before the larger wave of wheat/corn selling dragged the market lower. It was a quiet day of trade with volume remaining light as we test Friday’s reversal trade which for now at least, has held.

Benign growing weather, fund selling and trade uncertainty continue to press beans. Meanwhile improved export demand thanks to premium priced Brazilian beans along with ongoing strong crush demand are helping to chew through our ample domestic supplies. The job of the market at this point is to identify a bottom and perhaps, perhaps we already have that low in place but it has yet to be confirmed and fund flows can certainly have their say if they continue to pile in with new shorts and buyers decide to stand aside. With many farmers looking at a lower $8 cash price fresh sales understandably are thin. It would help to have a trade deal with China to remove this cloud of demand uncertainty longer term, but that appears to be away off at this point with details of a government reimbursement plan to farmers not expected until Labor Day.

The overnight session was lower throughout, and it did not get any better during the day. The worst seemed to be over after the opening hour of the session. There has been a plethora of news for the wheat complex to look at over the past 24 hours, but it is crop report week, and it will be this data that will most likely determine how the markets finish the week. It is looking more and more likely that the USDA will not reduce harvested acres as much as we think, and with a Spring wheat crop looking monstrous, and a HRW and SRW crop that finished the season a little better than many expected, the outlook that the USDA will raise overall wheat production in this week’s report is pretty high. The wheat complex also had some added pressure today out of the European contract where Matif gapped lower to start the day. If strength in the Matif contract is a reason behind why our US markets rally on strong days, you also have to use it as a crutch on days it is down hard.

The next USDA crop report will be released Thursday morning. The headline out of this report will be what type of reduction we see in harvested wheat acreage this year (abandonment) and what the USDA will do as they plug in their view of what the tariffs do to US trade. Expectations are for 2018/19 All Winter Wheat production to come in around 1.195 BB, slight below last month’s 1.198 BB forecast, but this number could be a little lower. 2017/18 Global wheat stocks are expected to be similar to last month at 272.5 MMT vs 272.4 MMT in June. However, 2018/19 world wheat ending stocks will be lower, especially after production downgrades with EU and Black Sea wheat. Expectations are 265.1 MMT vs 266.2 MMT in June, but this number could be sub 260.

Anna Kaverman

anna@mercerlandmark.com