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Archive for August, 2018

Market Report

Thursday August 30th, 2018

September corn closed down ¼ at $3.41 and December closed unchanged at $3.56 ½. November beans closed down 4 ½ at $8.31 ½ and January 19 closed down 4 ¼ at $8.45. September wheat closed down 7 ¾ at $5.08 and July 19 closed down 6 at $5.61 ¾. Crude oil closed up $.55 at $69.72.

Corn prices remained steady Thursday amid some light technical maneuvering that failed to push prices very far in either direction during the session. Corn exports saw 6.9 million bushels in old crop sales, plus another 20.7 million bushels in new crop sales, for a total of 27.6 million bushels. That was nearly half of the prior week’s total of 51.7 million bushels and well below trade estimates of 39.4 million bushels. Corn export shipments reached 52.9 million bushels last week, leaving the rate needed to reach USDA forecasts at a mostly unmanageable 195.2 million bushels. For the 2017/18 marketing year, Mexico is the leading destination for U.S. corn export commitments, accounting for 25% of the total. Private exporters announced to USDA the sale of 4.0 million bushels of corn for delivery to Mexico during the 2018/19 marketing year, which begins September 1. China sold 102.9 million bushels of its state reserves of corn at auction Thursday, which was 65.9% of the total available for sale.

The soybean market was unable to sustain overnight strength and sold off at the start of the day session. Some of the sell pressure was tied to a mundane weekly export sales report, some was tied to another report of African swine fever in China, some was tied to the general bear stat environment that has a firm hold on the market. After the close we got another reminder that the trade war with China is not only unresolved but escalating.  Bloomberg reported that President Trump is considering enacting the threatened $200 billion in additional trade tariffs on China as soon as next week when the public comment period ends next Thursday the 6th.

Weekly export sales for grains were within trade expectations although on the lower end for beans at 111 tmt old crop and 592 tmt new crop.  New crop export commitments stand at 13.218 mmt which compares to 15.381 mmt this time last year and have fallen behind last year’s pace for the first time this year.  Old crop meal sales were net -22 in the old crop but very solid at 500 tmt in the new crop from unknown (280), Mex (84), Ecuador (30) and Ireland (30). China reported another breakout of African swine fever in the eastern Anhui province infecting 185 pigs on a farm. This marks the fifth breakout in the country and has led to concerns of a larger outbreak that will limit feed demand. US Ag Sec Perdue commented that the outbreak is probably bigger than what has been reported publicly.

Overnight trade saw prices initially rally, but it was Mpls that traded the strongest, with the Dec rallying to more than $.09 higher and in the process, moved above the $6.00 level. But, shortly after the European markets opened trade began to falter, with all three classes of wheat finishing the night around a $.05 off its highs. The selling continued as we moved into the day session, with the lows being made midday. Price action today was similar to what we saw a few weeks ago when the Russian wheat export restriction chatter first started. There is supposedly a meeting scheduled for September 3 between the Russian Ag Minister and exporters to discuss the situation. In the meeting next week, it is expected that the Russian Ag Ministry will curb total grain exports to 30 MMT and limit wheat exports to 25 MMT. If trade exceeds this total, there will be an export tax levied, and it will be large.

The export sales report was uninfluential to trade today. The reason we possibly saw price action struggle today is the fact that the 25 MMT that Russia will still export is similar to what they have exported each year prior to this past year. Also, keep in mind, the GASC tender this week did show that US HRW wheat is at least $45 away from being competitive to the rest of the World. Eventually, sales will come to the US. The larger concern right now may be what is the USDA going to do about their export expectations? They have Russian exports for this coming year pegged at 35 MMT. We now know that is not going to happen. The USDA may raise US export expectations 75 mil to 1.1 bil, but after the August crop report we mentioned that they might eventually be doing that anyways. Argentina will see their exports increase, and Canada is still a possibility. There has been talk that the Chinese are currently looking at Canadian wheat pretty hard. But that still leaves around 200 MB that needs to be accounted for.

Anna Kaverman

anna@mercerlandmark.com

Market Report

Wednesday August 29th, 2018

September corn closed up ¼ at $3.41 ¼ and December closed up ¼ at $3.56 ½.  November beans closed up 2 ¾ at $8.36 and January 19 closed up 2 ¾ at $8.49 ¼. September wheat closed up 17 ½ at $5.15 ¾ and July 19 closed up 13 ½ at $5.67 ¾. Crude oil closed up $.95 at $69.17.

“Limp” performance in the corn today. Futures were able to muster up fractional gains despite a double digit rally in wheat. Corn traded in a tight $.04 range. Managed Money traders were viewed net sellers of about 5,000 corn today and will head into tonight net short about 90,000 combined futures and options. The corn market continues to suffer from a terminal lack of headline news. This is especially apparent given the excitement recently in beans (big supplies!) and wheat (Russian export ban?!). Finishing weather is relatively benign; big storms seen overnight in the central Midwest. Reports of harvest in Kansas and Missouri, though the latter likely got rained out today.  Some concern building that the wetter forward weather picture could interfere with the harvest season.

The soybean market is trying to stabilize against the July lows and managed a modest reversal trade today. It was a struggle for beans to hold strength but at this point you are just looking for a signal that we can build off of and perhaps today’s small gains against this key support area could be the start of a technical recovery trade. Fundamentally, there isn’t much positive to talk about with production and supply overwhelming demand and longer term, exports are less certain with the trade tariffs from China. A Chinese delegation is in IA today for the annual agricultural tour that has in the past led to signed deals for sizeable soybean export sales commitments (last year was 12 mmt) but this year the trade tariffs mean that no commitments will be made.  Canadian Foreign Minister Freeland is in Washington for trade talks and looking to make a deal to rejoin the US-Mexican trade pact, formerly known as NAFTA. There is a push to get a trilateral agreement in place but as of this afternoon there were still unresolved issues and talks are ongoing.  Trump says talks with Canada are going ‘really well’ and that he’s optimistic that they ‘very much want to make the deal’ before Friday’s deadline.

The overnight rally which seemed to have originated from another round of rumors of Russian wheat export restrictions received some credibility mid-morning and that changed the dynamic of trade over the rest of the day. If you recall, just a few weeks ago this became a hot topic of conversation after talk surfaced that following a meeting with Russian exporters, the Russian Ag Ministry was thinking about curbing total grain exports this coming year to 30 MMT. The Ministry quickly tried to defuse the situation by saying that they did not discuss curbs on grain exports this coming year in that meeting. This morning, Russian export restriction talk once again surfaced, and when Reuters carried a headline that said the Ag Ministry was going to meet with grain exporters on September 3 to discuss the situation, there was more substance behind it just being talk. In the meeting next week, it is expected that the Russian Ag Ministry will curb total grain exports to 30 MMT and limit wheat exports to 25 MMT. If trade exceeds this total, there will be an export tax levied, and it will be large.

It will be interesting to see how this effects price action moving forward. The European wheat market reacted the strongest, rallying to more than 6 Euro’s higher. The thinking was, as long as Matif prices stayed firm, the rumors were more reality. But as we moved into the day session the rally started to fade. US prices had fallen more than $.10 off its highs and Matif wheat had slipped three Euros, but the Reuters headlines reinvigorated trade and price action remained near its highs the rest of the session. We have to remember, Russia had a monster crop last year and they reaped its rewards by exporting some 42 MMT of wheat. The two years prior Russia exported roughly 27 MMT and 25 MMT of wheat. So, the larger concern may be what is the USDA going to do about their export expectations. They have Russian exports for this coming year pegged at 35 MMT. We now know that is not going to happen.

Anna Kaverman

anna@mercerlandmark.com

Market Report

Tuesday August 28th, 2018

September corn closed down 5 ¾ at $3.41 and December closed down 5 ¼ at $3.56 ¼.  November beans closed down 15 at $8.33 ¼ and January 19 closed down 15 ¼ at $8.46 ½. September wheat closed down 1 at $4.98 ¼ and July 19 closed down ¼ at $5.54 ¼. Crude oil closed down $.32 at $68.22.

No “Turnaround Tuesday” in the corn today. The markets were a little higher early, but steadily surrendered ground throughout the day. In the end, futures would finish lower. A rather light news day implied no change to the overall narrative of strong yield potential and ongoing challenging trade negotiations.  Managed Money traders were viewed net sellers of about 15,000 corn today, which would leave them net short an estimated 85,000 combined futures and options.

Apparently there was plenty of news around yesterday. News wires were quiet and traders equally so, as everyone hunkers down to receive another big crop. Finishing weather is relatively benign, though some of the models are building in a cooler look for mid-Sept. Given the advanced maturity of US corn this year, there is likely not a serious probability of great harm in a frost event.  Crop progress data last night maintained strong Good-Excellent ratings of 68% nationwide, which compares to the prior year’s 62%. 61% of U.S. corn is dented, which is 19% ahead of normal. Harvest has already begun in Missouri and Kansas.

After keeping everyone in suspense last week, Mexico and the U.S. finally announced a trade accommodation Monday. It’s important to note that a Mexican trade deal lies in the realm of “not bearish” rather than “bullish” for corn, as the deal will likely not lead to any increase in actual business done. If a deal with Mexico was not reached, however, it could have endangered up to 15 mmt/yr in corn business, which would have been ugly in the current “well-supplied” environment.  Canada arrives today to see if they want to get on board with the current deal?  Next up was the “Trade War” farm aid package.  The aid for corn is minimal, amounting to just a penny per bushel on 50% of production. Soybeans get the lion’s share ($3.6 billion out of $4.7 billion), but with the package less generous than expected, it likely will not alter producer selling behavior much.

The soybean market continues its slide with limited buying interest as we challenge our July lows and seek out just how cheap is cheap enough in order to discover demand to offset the substantial supply side pressure. The bear holds all the cards ranging from record yield potential, excessively burdensome ending stocks, weakening basis, lack of Chinese export demand, and record southern hemisphere acreage intentions.  Even the meal market, which had been a bull story that stood apart in the sea of bearishness, has been negated to a certain degree by the spread of African swine fever in China and Europe which has led to funds liquidating their length and driving the oil share into six and half month highs.

Where do we go from here? Even if a China deal is reached tomorrow, the resulting relief rally is likely smaller than it would have been 30 days ago thanks to our growing yield and domestic surplus which means that there will be heavy selling to meet and limit any rally potential. If the southern hemisphere doesn’t run into a weather problem this winter to alter the global supply situation materially, US new crop acreage will need to come down and somewhat dramatically too.  If you work with the numbers you will quickly find that this will not be an easy task.

The wheat complex tried to rebound after another rough start to a week yesterday, but only the Chicago Dec was able to muster marginal gains, while the rest of trade finished slightly lower. There was some optimism at the start of the day. Also, there was a seasonal trade recommendation that started today that was to buy wheat and sell beans. This may have given Chicago wheat some support and put some pressure on beans throughout the day. But there was nothing really friendly that came out of the GASC tender, and with the corn market struggling and the soy complex trading on the defensive, even with the seasonal trade recommendation today, there was little hope of much of a rally in wheat.

Stats Can will be out this Friday with their first crop report estimate. Yields have been hard to gauge as they have been up and down, but protein is high. A couple weeks ago, the USDA left the Canadian wheat crop at 32.50 MMT, but may private analysts think this number could be closer to 30.0 MMT. The average guess for all wheat production is around 30.6 MMT, but do not be surprised if that number is a little bigger, only because they may be slow in adjusting what their crop may be. If they do come in below expectations, that would only add fuel to the speculation as to how much the USDA will adjust their World wheat production estimates come the Sept report.  Keep in mind, EU production will be lowered again in the Sept report, and Australia most assuredly will at some point, but the September report might be too soon. September is when wheat yields are made or lost for our friends down under, and with the weather issues the country has already been having, they will be hoping Mother Nature is a little more cooperative over the next four weeks. The USDA decided not to touch their Aussie wheat production estimate in the August report and left it at 22 MMT, but that crop is at best 20 MMT, and some are thinking it could be as low as 15 MMT if weather does not improve.

Anna Kaverman

anna@mercerlandmark.com

Market Report

Monday August 27th, 2018

September corn closed down 1 ¾ at $3.46 ¾ and December closed down 1 ¼ at $3.61 ½.  November beans closed down 7 at $8.48 ¼ and January 19 closed down 6 ¼ at $8.61 ¾. September wheat closed down 15 ½ at $4.99 ¼ and July 19 closed down 11 ¾ at $5.54 ½. Crude oil closed up $.18 at $68.54.

Corn maintained a lower trajectory to start the week. Price action was somewhat mixed intraday. While the market never seriously threatened to trade much higher on the day, it did bounce more than a nickel off the early day lows. Managed Money traders were viewed net sellers of about 5,000 corn today, which would leave them net short an estimated 70,000 combined futures and options.

Though the markets initially traded the “Pro Farmer” yield tour results Sunday night, the focus quickly shifted to the “not-so-hidden hand of gov’t” during the day. First up was NAFTA or more precisely, Mexico, since Canada is not yet on board. After keeping everyone in suspense last week, it was announced Mexico and the U.S. finally arrived at a trade accommodation. It needed to happen soon to get the deal in place under the current Mexican administration. It’s important to note that this news item lies in the realm of “not bearish” rather than “bullish” for corn, as the deal will likely not lead to any increase in actual business done. If a trade deal with Mexico was not reached, however, it could have endangered up to 15 mmt/yr in corn business. Canada arrives tomorrow to see if they want to get on board with the current deal.

Next up was the farm “Trade War” aid package, the results of which trickled out after the close. The aid for corn is minimal, amounting to just a penny per bushel. Soybean farmers get the lion’s share of the proceeds; $1.65/bu on half of production, or about $3.63 billion. $4.7 billion will be spent under market facilitation (ie: direct aid payment) out of a total $12 billion available. The aid is perhaps not as generous as initially believed, which could prove a little friendly to price direction. Farmers will be less likely to “take the hit” and sell out, at least immediately. Again, likely has more bearing for beans.

Crop Progress data after the close played out close to trade expectations. Overall national corn Good-Excellent ratings held steady wk/wk at 68%, which compares to the year ago week’s 62%.  The general theme was slight downgrades in the Dakotas, offset by improvement in the periphery?  We see condition reports ebbing in importance going forward, with the crop closing in on “made”. 61% of U.S. corn is dented, which is 19% ahead of normal.  ome reports of harvest already in Northern Missouri.

The soybean market broke down $8.50 November support which had contained the post-report USDA flush earlier this month. Beans managed to close $.10 off the session lows but that was not enough to negate the technical damage as this clears the way for a potential test of the July contract lows next. Corn and beans bounced off their lows this morning as news of a bilateral US-Mexican trade deal was confirmed in the media.  Trump said as part of the US-Mexico trade agreement, Mexico will immediately purchase as much US farm product as possible.  Mexico had already been buying US farm products aggressively in case there was a tariff situation. The Canadian foreign minister is supposed to head to Washington to resume talks tomorrow where they can either rejoin the US and Mexico as a third party or negotiate their own deal. Trump also stated that now is not the right time to talk to China about trade.

The story in beans has evolved somewhat over the past few months. Soybean prices were initially pressured early on this summer by the 25% trade tariffs with China. The longer-term demand uncertainty overshadowed the stronger non-Chinese export program that developed as world buyers scooped up cheaper US supply.  Since then, thanks to favorable weather, the US has also grown what is shaping up to be a record yielding crop that will push the domestic carryout to extremely burdensome levels which has weakened basis and brought on a new round of selling to the board. Now, the spread of African swine fever is growing and the culling of hog herds in China and Europe is expected to reduce feed demand and meal consumption. Meal demand had been the lone bright spot of the complex due to the Argentine production shortfall and this news has the potential to offset even that modest bull story and funds were long nearly 53k as of a week ago according to the COT report. It is the perfect storm of bearishness for the soybean market.

Overnight, the wheat complex picked up where it left off on Friday afternoon, opening slightly lower, then gradually weakening throughout the evening. The European wheat market only added more of a negative impetus as Matif wheat futures were under pressure as well. Not much changed as we moved into the day session, but trade did get a little boost as the US/Mexico trade agreement was announced. As the initial reaction subsided the wheat complex turned back to its burdensome problems. US wheat prices that are still not very competitive compared to the rest of the world and a long fund position in KC. Stats Can will be out this Friday with their first crop report estimate. Yields have been hard to gauge as they have been up and down, but protein is high. A couple weeks ago, the USDA left the Canadian wheat crop at 32.50 MMT, but may private analysts think this number could be closer to 30.0 MMT. The average guess for all wheat production is around 30.6 MMT, but do not be surprised if that number is a little bigger, only because they may be slow in adjusting what their crop may be. If they do come in below expectations, that would only add fuel to the speculation as to how much the USDA will adjust their World wheat production estimates come the Sept report.

Anna Kaverman

anna@mercerlandmark.com

By: Doug Eickholt

What can field imagery do for you? A popular question that a lot of growers may not realize the answer is so simple. It can help you scout your fields! Today, field health imagery from satellites and drones can give you clear insights into every acre of your fields, making scouting so much more efficient and effective. Sensors on satellites and drones capture imagery over an entire field, giving you a full view of your field’s health from above. It’s a different perspective on your operation, and one that will help you better track your crops through the season. The image below can show you the variability throughout the field that you otherwise couldn’t see. How does this help me? The image below is small and hard to see, but if you notice you can see the section in front of the woods is not treated with late season fungicide and the rest of the field is. The image dated 8/12/2018 shows a very clear difference where the fungicide was not applied. Please contact your local Mercer Landmark Agronomist and ask for more information on Plant Health Imagery!

Untreated Leaf from the field above.

Treated Leaf from the field above.

Market Report

Friday August 24th, 2018

September corn closed up 1 ¾ at $3.48 ½ and December closed up 1 ¾ at $3.62 ¾.  November beans closed up 1 ¼ at $8.55 ¼ and January 19 closed up 1 at $8.68. September wheat closed down 7 ¼ at $5.14 ¾ and July 19 closed down 4 ½ at $5.66 ¼. Crude oil closed up $.83 at $68.36.

Grains

The Federal Reserve meeting minutes released this week sent a strong signal that a rate hike next month is forthcoming. The US imposed an additional $16 billion of new tariffs on a variety of products this week. China immediately retaliated with tariffs of the same amount. There is not a viable solution to solve this matter yet, despite both countries meeting this week to talk. U. S. and Chinese negotiators have ended two days of trade talks in Washington D. C. without making any real progress towards ending the trade dispute. Not all trade negotiations are going poorly.  The US and Mexico are very close to having a solution on NAFTA, possibly even this week. This would put pressure on Canada to come back to the negotiating table.  The ideal scenario is to have all parties agree and sign before outgoing Mexican President Nieto leaves office on December 1st.  The Senate and House agriculture committees will begin debating the 2018 Farm bill on September 5 after the 56 member committee returns from the Labor Day recess. Secretary of Agriculture Sonny Perdue said on Thursday that the details of the $12 billion aid package to U. S. farms hurt by the trade war, will be disclosed next week.

Corn

China sold 2 million tons of state-owned reserve corn at auction this week at an average price of $225.40/ton. The sale represented almost 53 % of the total corn available at the auction. The Crop Progress Report Monday afternoon placed 68 % of the corn crop in Good/Excellent condition, down 2 % from last week, but right on the 5-year average. Corn is 85 % in the dough stage vs 73 % last week vs the 5- year average of 72%. Corn is 44 % dented vs 26 % last week vs the 5-year average of 26 %. The Pro Farmer Midwest Crop Tour estimated Iowa average corn yield @ 188.2 bushels/acre vs 179.8 last year vs the 3-year average of 182.7 bushels/acre. The latest USDA estimate of Iowa corn yield stands @ 202.0 bushels/acre. The Tour estimated Minnesota average corn yield @ 178.7 bushes/acre vs 191.5 last year vs the 3-year average of 188.2 bushels/acre. The USDA in its latest report estimated Minnesota average corn yield @ 191.0 bushels/acre. The final estimate from the tour places the corn yield at 177.3 bpa vs the USDA currently at 178.4.

Soybeans

China continues to search for soybean meal substitutes to supplement its animal feed supply. China is making overtures internationally to possibly purchase canola, peanuts, sunflower seeds and cottonseed meal to gain the protein needed for its animal feed. China sold 74,666 tons of 2013 state owned soybean reserves at auction this week. The average price for the sale was $ 439.94/ton and was just over 25 % of the total soybeans available for auction. Analysts’ are forecasting Brazilian farmers will expand their 2018-2019 soybean planted area for the 12th consecutive year to a record 36.28 million hectares, a 3.2 percent increase from last year. Early projections are for production to go up 0.65 percent to 119.76 million tons.

The Pro Farmer Midwest Crop Tour estimated Iowa average soybean pod count @ 1,209.0 in a 3-by-3 foot area vs 1,092.9 last year vs the 3-year average of 1,178.8. In Minnesota, the Tour estimated average soybean pod count @ 1,090.5 in a 3-by 3 foot area compared to 1,020.0 last year versus the 3-year average of 1,082.3.  The crop tour’s final estimate of soybean yields is 53 bpa compared to the USDA at 51.6 bpa.

Wheat

China sold 4,055 tons of imported 2013 reserve wheat at auction this week @ $ 341.87/ton. The sale represented less than 1 % of the wheat available at the auction.  Australia has announced another 1.3 billion dollars of aid to Australian farmers suffering from the unrelenting drought along the country’s east coast. Dryness in Ukraine and Southwest Russia has intensified this month and may hamper late harvest as well as the seeding of new crop wheat this fall. Germany’s farm ministry is now forecasting the German wheat harvest @ 19.4 million tons, down from 24 million tons in 2017 after drought and hot weather took its toll on crops this season.  US Spring wheat rated in the Good/Excellent category fell 1 % vs last week to 74 %. Spring wheat harvest reached to 60 % complete vs 35 % last week vs the 5-year average of 44%. HRW 1st quarter exports are pointing towards the lowest total in history and all wheat exports in the 1st quarter are expected to be the 2nd lowest in history.

Anna Kaverman

anna@mercerlandmark.com

Market Report

Tuesday August 21st, 2018

September corn closed down 2 ¼ at $3.59 ¾ and December closed down 2 ¼ at $3.74 ¼.  November beans closed down 7 ¼ at $8.86 and January 19 closed down 7 at $8.98 ¾. September wheat closed down 15 at $5.27 ¼ and July 19 closed down 10 ¾ at $5.75. Crude oil closed up $.39 at $65.49.

The corn market tried valiantly to fight off bear influences today, but in the end, came up just short. Futures finished lower today in a $.05 range. The highs were made on the Monday night open, and the lows on the Tuesday morning open.  Managed Money traders were believed net sellers of another 5,000 corn today, which would leave them net short an estimated 45,000 combined futures and options.

With crop tours lending credence to the USDA’s record yield guess and Midwest rains adding some kernel fill to later-planted crops, the corn market has lacked the bull ammo to fight off a sharp downside correction in the wheat market. The tour left Ohio and South Dakota behind yesterday, travelling into Nebraska and Indiana today. Mid-day, today’s scouts noted some variability in Nebraska corn and soy yield potential.

There was no real news of note on the “Trade War” front today.  Without action to forestall them, the next $16 billion in U.S. tariffs on Chinese goods takes effect Thursday. A China Commerce Dept delegation lands late week, too, to start the prescribed “Road Map”, which is expected to culminate in a November summit between Trump and Xi. It appears like a Mexican/NAFTA deal is the closest to fruition. While we can envision a “relief rally” on the first domino to fall, a Mexican deal simply maintains the status quo and is unlikely to add any new export bushels to the mix. European futures markets continue to feature a defensive tenor to start the week, correcting their recent sharp rally.

The soybean market was pressured on ideas of big US crops that are supported by the early crop tour reports and continued strong crop ratings even though some deterioration was noted in yesterday’s crop progress report.  At this stage, it is getting too late to hurt production and there is nothing concerning in the weather forecast into early September days. The rains over the past week have been hugely supportive of what could end up matching or exceeding the previous record yield of 52.0 bpa in 2016.

Soybeans still have the potential to unleash a strong demand shock rally if a trade agreement with China is reached partly on the sizeable sales commitments that come with it but also on pure relief. In the meantime, you have to continue to feed the bull which is difficult in an otherwise bear supply scene where beans should continue to face strong headwinds from the weather, crop prospects and supply side realities which was the story today.  President Trump downplayed the trade talks scheduled for later this week between low level trade reps. Says he does not expect much progress and that he had “no time frame” for ending the trade dispute with China.  While you wouldn’t expect him to say anything different during negotiations, this cooled off some of the newly-developed optimism of a deal being reached soon.

The USDA flashed 250 tmt of new crop meal sold to unknown.  That is a big sale. Fundamentally, last week’s change in Argentina’s export tax structure, on top of their reduced soybean supply, is expected to continue to support strong demand for US meal.

The Pro Farmer crop tour began yesterday in parts of SD and OH and showcased huge bean yield potential based upon pod counts.  Today, scouts were in NE and IN where the results were similar.    NE bean crop was seen as on par to slightly above avg. with pod counts at 804 , 1,111 and 1,344 on three different roots.  The W/C IN let found pods counts on avg. of 1,200 compared to 1,172 last year and a 3 year avg. of 1,165 for that area. At the conclusion of the tour on Thursday, PF will adjust the numbers according to their own formula/bias to project final yield estimates.

The wheat markets continue to fend off the lack of any demand surfacing, but trade is having a hard time finding any willing participants to step in and try and slow down the break. And, if we do not see any business, who is going to want to buy the board? Not the large spec (funds) as they are already long and after the past two days are in scramble mode and not the commercial. At least for now the path of least resistance is lower. We only need to look back at the past two days to figure that out. Chicago Dec has already lost $.32 this week.

As we look ahead we should find support on breaks as demand picks up, but during the spells when the demand goes dormant like now, who will be there to support trade? All it will probably take for the wheat complex to snap right back is one positive headline and it could really come from anywhere. Maybe a rise in World wheat prices (Russian offers for Dec were higher again overnight and the break in US wheat futures should make HRW more competitive again for Dec forward), or another Egyptian tender, maybe a couple tenders will pop up or a sales announcement similar to the one we saw late last week. If the Iraqi business is on the sales report this week we will get another big export sales report. But that is not until Thursday, and usually the export sales report are a fade anyways.

Anna Kaverman

anna@mercerlandmark.com

Market Report

Monday August 20th, 2018

September corn closed down 2 ¼ at $3.62 and December closed down 2 ¼ at $3.76 ½.  November beans closed up ½ at $8.93 ¼ and January 19 closed up ¾ at $9.05 ¾. September wheat closed down 18 ¼ at $5.42 ¼ and July 19 closed down 11 at $5.85 ¾. Crude oil closed up $.21 at $65.42.

The corn market was mixed Sunday night into the dawn, but turned decisively lower on the day open. Futures traded over $.04 lower at one point Monday, but this break found commercial buying, which arrested the decline. The market rallied a little into the close, ultimately settling lower. Managed Money traders were believed net sellers of 5,000 corn today, which would leave them net short an estimated 40,000 combined futures and options.

Crop Progress data after the close found the “catch-up” downgrades in national crop ratings. Many analysts felt state-by-state rating declines in recent reports did not “add up” to the more subdued crop ratings portrayed in the USDA’s national “average”. Corn Good-Excellent (G-E) declined 2% wk/wk, while Poor-Very Poor increased 2%. The market was expecting 1% deterioration, so a little “knee-jerk” buying tonight wouldn’t be a huge surprise. The state-by-states were actually fairly unexciting, with one large exception. North Dakota G-E fell 9% wk/wk, as a dry two plus week stretch apparently took its toll.  Iowa ratings fell 2% G-E, too, while the other “I states” were unchanged this week.  Minnesota, Wisconsin, and South Dakota also saw G-E ratings fall 3-4% wk/wk.

Weekend weather saw broad improvement in many of the aforementioned states, though given 85% of the corn is “dough” and 44% is “dented” (per the USDA report), good weather is very nearly “window dressing” at this point. The annual “Pro Farmer” crop tour kicked off today; South Dakota in the West, Ohio in the East. Corn yields sampled from around South Dakota averaged 168.6 bpa, better than the 158.6 bpa seen there last season, and above the 165.4 bpa three year average. Note, good conditions continue for the balance of the week, though late August is shaping up to be warmer and dryer again. May be too late to matter, however, at least for corn.

The soybean market continues to struggle to hold rallies above $9.00 as weather, yield potential and supply side realities act to limit upside enthusiasm. The market tried to build upon Friday’s news of the resumption of trade talks with China with a $.16 push in the overnight, but this is a bull that needs to be fed and there was no follow through trade headline support so we gave back the gains during the day session. Volume was very light with November futures trading only 74k contracts compared to double of 148k traded on Thursday on the initial report of the trade rep coming to DC.

Rains have moved from west through the east giving most crops a welcomed drink.  There is a follower up system that sets up for later in the week across the western/center of the belt.  Finishing weather is looking very good, particularly for soybeans. Crop conditions this afternoon showed corn ratings off 2 to 68% gte compared to 62% a year ago. Bean ratings were off 1 to 65% gte compared to 60% a year ago. There were enough misses in the coverage that this was not the case but this weeks’ rains perhaps could help make up for it.  The bean states that saw the greatest improvement were AR +5, IN +2, KS +2, KY +7, MI +1.  The bean states that saw the greatest deterioration were IA -2, LA -5, MN -6, ND -8, SD -6. Beans are 91% setting pods vs. 84% last week and 86% a year ago. The Pro Farmer crop tour began today in parts of SD and OH and showcased huge bean yield potential based upon pod counts. In South Eastern SD, Soybean pod counts per 3-foot-by-3-foot square averaged 1,295 pods, compared with 892 pods last year and the three-year average of 993.  In West Central Ohio, soybeans averaged 1,200.4 pods, up from 1,188.2 pods last year and the three-year average of 1,111.1 pods.

With the exception of a couple weeks, the wheat complex has struggled during the early parts of most weeks over the past four months. Monday was no exception as trade fell back into that trend. The grain complex has built a reputation recently of trading headlines as opposed to trading fundamentals or technicals, and after a Friday that saw futures rally sharply after another warning about World wheat inventory and export limits, the wheat complex was unable to carry that momentum forward and trade struggled throughout the day.

There was not a lot of influential news to talk about today, but the few tidbits of news around could not have been construed as very friendly to the market. Since the beginning of August, Argentina has issued 1.87 MMT of wheat export registrations. Since they already have some of the cheapest wheat prices around the World, look for them to be a big player and probably take some business away from the US. This is at least until their supply runs out. Eventually, the US will get its fair share. Also, the Russian Ag Ministry is considering requesting permission from the gov’t to sell an additional 1.5 MMT of grain this season the country holds in state stocks. This is in addition to the previously approved 500 TMT (of which they have already sold 470 TMT). If Russia is able to meet the 35 MMT of wheat they are expected to export this upcoming season, this will only add to their total they will be able to export.

As we look ahead to the coming months, production reductions around the World this past summer will have an effect on upcoming exports and the US should benefit the most. We saw last week how the markets will respond when a couple tenders surface and when we get a reminder of what we already probably know – that country’s such as Russia and/or Ukraine have no idea as to how much wheat their country will be able to export over the coming year.

But, uncertainty brings volatility and double digit moves in either direction has become the norm. We should find support on breaks as demand picks up, but during the spells when the demand goes dormant, who will be there to support trade? All it will probably take for the wheat complex to snap right back is one positive headline and it could really come from anywhere. Maybe a rise in World wheat prices, another Egyptian tender, a couple tenders to pop up or a sales announcement similar to the one we saw late last week. If the Iraqi business is on the sales report this week we will get another big export sales report. But that is not until Thursday. You have to keep feeding the bull if you want prices to rally and maintain those gains. Otherwise days like this occur.

Anna Kaverman

anna@mercerlandmark.com

FOR THE WEEK ENDED 8-17-18

CORN – Corn began the week on a soft note, but quickly recovered as crop conditions fell another 1% to 70% good/excellent.  Corn was heavily influenced by the soybean market, as well. Beans were able to shrug off the bearish August WASDE report after spiking lower on Monday.  The recovery in beans spilled over to corn.  Demand for corn continues to provide underlying support with the USDA announcing additional corn sales for both old and new crop during the week.  Political news was thin for corn.  There continues to be reportedly good progress on NAFTA talks with Mexico.  They hope to have a deal in place by month’s end and then bring Canada into the mix.  The strength in the US dollar and improving weather forecast limited the upside in prices.  The US dollar rallied to 14-month highs as Turkey’s failing economy pushed buyers to the US dollar.  Weather forecasts looked cooler and wetter for the Corn Belt on the 6-10-day forecast.

Weekly export sales were good at 13.3 million bushels, bringing total old crop sales for the year to 2.372 billion bushels.  The USDA’s target is a reachable 2.40 billion bushels.  We may see the USDA raise the export category one more time.  New crop sales were a huge 41.1 million bushels.  Total new crop commitments of 348.7 million bushels are almost 55% ahead of last year’s 226 million bushels last year by this date.

Weekly ethanol production fell 28,000 bpd to 1.07 million bpd. The USDA’s forecast of 5.6 billion bushels for ethanol this year seems reasonable to maybe a little low.  Stocks were up 94,000 barrels at 23 million barrels.  Ethanol crush margins were cut in half to 3 cents per gallon.  Corn spreads widened back out during the week as the crop size increases.  The December/March carry was back out to 14 ½ cents and the December/July carry was back to the mid 20’s.  Remember, a carry is only good if you sell it.

Celeres projected Brazil’s 2018/2019 corn acres to be up 7% with the corn production growing to a record 104.1 mmt versus USDA’s 94.5 mmt outlook.  In Argentina, the Buenos Aires Grains Exchange is forecasting corn acreage to rise to a record 14.3 million acres, up 7% from this year.  The Rosario Grains Exchange is forecasting Argentine corn acreage at 16.8 million acres.  UkrAgroConsult increased their Ukrainian corn crop estimate 1.2 mmt to a record 28.5 mmt.  They also raised their corn export outlook 1.5 mmt to 22.5 mmt, up 25% from last year.

OUTLOOK:  The Midwest Crop Tour will be conducted from August 20 through August 23.  With the crop well ahead of the average, the findings of the tour will be closely scrutinized by the trade.  As of August 12th, 73% of the crop was in the dough stage versus 56% on average, and 26% was in the dent stage versus 13% on average. Remember, in each of the last four years, the USDA has raised the US corn yield from the August report to the final report.   Each Twitter comment and picture may sway market direction.   December corn was up 7 cents for the week at $3.78 ¾, December 2019 was up 4 cents at $4.00 ½ and December 2020 was ¼ cent higher at $4.15 ½ per bushel.   Corn may be stuck in a $3.65 to $3.85 trading range without surprises in the crop tour’s findings or a turn in political events.  Begin setting targets for your first 2019 crop sales.

SOYBEANS – The market got a sweet surprise toward the end of the week when it was announced that the US and China would hold low level trade meetings later this month in Washington.  This would be the first official talks in two months.  While nothing specific was mentioned, it does provide hope that the next $200 billion in proposed tariffs may be avoided.  The trade perceived the news as positive and rewarded the market with a rally that sent November soybeans to $8.99 ½ per bushel.  The day before the bearish August WASDE report, November soybeans closed at $9.04 per bushel; we essentially nearly recovered all of the post-report decline.  The Trump administration downplayed expectations from the upcoming talks, stressing they are low level talks.  This resulted in profit taking into the weekend on ideas the Thursday rally was overdone.  My take is these meetings may best be described as trying to get “high level” officials to the table.  At a minimum, it’s a move in the right direction. From this week’s Monday low to the Thursday high, November soybeans rallied 48 ¼ cents.

Prior to the trade talk announcement, November soybeans had extended their losses from the August WASDE report on Monday, but managed to settle higher as meal strengthened.  Meal showed additional gains on Tuesday when Argentina said they would suspend their monthly cut in soymeal and soyoil export taxes for six months.  Their current tax rate is 23%.  The monthly export tax cut for soybean exports will remain in place for the time being.  They need to balance their budget by 2020 to keep their $50 billion credit line open with the International Monetary Fund.

The soybean crop condition fell 1% as of August 12th to 66% good/excellent.  Will the recent USDA 51.6 BPA soybean yield be the biggest of the year?  The August 12th condition report showed Nebraska’s crop in the good/excellent category dropped 4%, Iowa and Missouri were down 2%, Illinois and Minnesota fell 1%, and North Dakota plunged 11%.  Ohio’s crop improved 2%, with Indiana and South Dakota up 1%.  Keep in mind, the USDA has raised the US soybean yield from the August report to the final report in each of the last four years.  There were 96% of the beans blooming as of August 12th versus 92% average, and 84% were setting pods versus 72% on average.  Other long term negative news included China working closer with Brazil to source meal and Russia offering 2.5 million arable acres to foreign investors.  The land isn’t the highest quality, but it’s thought China would be in the market for the land to produce soybeans.

Weekly export sales were 4.9 million bushels, bringing the marketing year total to 2.156 billion bushels, down 4% from last year when the USDA is projecting a 2.6% decline.  The USDA’s target is 2.110 billion bushels.  With the average sales rollover of 61 million bushels, we are on target for the USDA projection.  New crop sales were 21 million bushels, bringing new crop commitments to 421.7 million bushels.  This is nearly 45% ahead of last year; however, this is just 21% of the projected sales versus 28% on the books by this time.

The first US soybean boat since the 25% tariff to China went into effect was unloaded this week after waiting since July 6th to unload. A second boat was also off-loaded that had been waiting since July 24. There are three other US soybean ships bound for China or waiting to unload in China. The US loaded its third soybean vessel for Argentina, with two more in the line-up.

Celeres predicted Brazilian farmers will plant 89.4 million acres this fall, up 3% from last year.  Their soybean production outlook is a record 119.6 mmt, up 1% year/year, and versus USDA at 120.5 mmt.   A potential ban in Brazil on the herbicide glyphosate could be a “disaster” for their agricultural industry, according to Brazil’s agricultural minister.

OUTLOOK:  The proposed trade talks with China later this month was the positive force this week.  On the negative side, weather forecasts are cooler with rain, global stocks to use ratio for 2018/2019 are a 28 year high at 12.8%, US stocks to use ratio is a 12 year high at 18%, and the August to final US soybean yield has increased in each of the last four years.  We’ll keep a close eye on what comes out of the crop tour in the coming week, as well as any indication of a change in the trade war status.  For the week, November soybeans rallied 31 cents to $8.92 ¾ and November 2019 beans gained 23 cents to $9.28 ½ per bushel.  Politics and the crop tour’s data will drive direction next week.  Without fresh, bullish news, soybeans will find resistance at the $9.00 level, with next resistance at $9.22 ¼ per bushel.  First support will be the recent $8.51 ¼ low, then the contract low at $8.26 ¼ per bushel.

Turning to the wheat market, a surge higher into the weekend came after reports out of Russia suggested they may limit wheat exports this year once exports exceed 30 mmt.  The news was denied by the Ag Ministry after the ministry had met with grain exporters.  The ministry said they only talked about “operational volumes.”  They estimate they will export 35 mmt this year, compared to 42 mmt last year.  The USDA is forecasting Russia’s wheat exports at 35 mmt also. Russia has experienced a severe drought this year. For the week ended August 17, 2018:  Chicago wheat was up 10 ¼ at $5.79 ¾.

Anna Kaverman

anna@mercerlandmark.com

Market Report

Wednesday August 15th, 2018

September corn closed down ¾ at $3.61 ½ and December closed down ½ at $3.76.  November beans closed down 10 ¾ at $8.69 and January 19 closed down 10 ¾ at $8.81. September wheat closed down 9 ½ at $5.32 ¼ and July 19 closed down 8 ¾ at $5.78 ¾. Crude oil closed down $1.87 at $64.46.

The corn market featured back-and-forth trade today, ultimately finishing fractionally lower. Not a bad performance overall, given a broader “sell commodity” bias that negatively impacted many related markets. Managed Money funds were believed net buyers of 5,000 corn today, which would leave them net short 65,000 combined futures and options. The start of a cooler and wetter stretch of U.S. Midwest weather was likely behind much of the early weakness in the markets. At this point, the benefit to corn is fairly limited, with over one-quarter of the crop dented, but more immature crops will see better kernel fill under better weather conditions. Key dry areas in Eastern North Dakota could be left wanting for rain.  Private crop tours will fire up next week and no doubt twitter feeds will be scoured for comments given the uncertainty surrounding yield potential in such a rapid maturing crop.

The weekly EIA report today was more mixed for ethanol, coming on the heels of the prior week’s solidly bearish data.  Production backtracked 2.6% this week to a 1.072 mil bbl/day rate, which is still among the strongest levels recorded. Elsewhere, macro markets were a negative input today. The US Dollar continues to hang near one year highs, while Crude Oil pushed to new six week lows. USDA disclosed a small private corn sale today to “unknown” 55k mt for 17/18 year, almost 60k for 18/19. Export sales tomorrow should stay on a familiar trajectory

The soybean market set back on weather selling today as a more active rainfall pattern sets up for the coming week. While the benefit to the early corn crop at this stage is supportive it probably isn’t a game changer for yields. On the other hand, this pattern of non-threatening temps with good rains is likely to be a big help to bean yields and as a result beans and meal gave back most of yesterday’s gains. Trade volumes continue to shrink with Nov bean futures trading 81k contracts compared to Friday’s high volume flush on 183k.

Yesterday the talk of the market was China buying Argentine meal for Sept/Oct. Today the wires are reporting that China bought 10 cargoes of Brazilian beans and 15 cargoes last week. Chinese crush margins are $20/mt in the black despite the big premiums paid. It was noted that the buying overall is subdued and normally they would be taking 25 cargoes/week but that is likely due to a build-up of supply from their aggressive earlier buying posture.

The early overnight gains were not very lasting, with prices trading slightly weaker most of the night. The European wheat market opened and stayed slightly lower throughout the morning which added to some of the negative tone, and with the lack of any positive fundamental news around the market place today, and with the US Dollar into new contract highs again. It did not take too long into the day session to find that out, with prices hitting double digits lower within the opening hour. Things did not improve much over the course of the day, with trade mostly staying within a $.07-$.12 lower trading range.

Anna Kaverman

anna@mercerlandmark.com