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Market Report

Thursday September 27th, 2018

December closed up 1 ¾ at $3.64 ¾ and March 19 closed up 1 ½ at $3.76 ½. November beans closed up 5 at $8.55 and January 19 closed up 5 ¼ at $8.69. December wheat closed down 4 ½ at $5.13 and July 19 closed down 6 at $5.42 ¼. Crude oil closed down $.55 at $71.96.

The corn market bounced back from a limp Wednesday performance, finishing better. Futures looked set to correct the recent advance a little more overnight, but a strong export sales report halted the decline and revived buy interest. Managed Money traders were viewed net buyers of 5,000 corn today, which would leave them net short about 120,000 combined futures and options.

Exports remain the “go-to” arrow in the quiver of the bulls of late. Given large daily sales announcements, a big week was expected, but this report beat even the highest of expectations.  Net new sales of 1.713 MMT were well above the previous week and year ago week. One-third of the total was to Mexico. This takes the total YTD sold + shipped to 18.3 MMT prior year was just 11.3 mmt and is nearly caught up to 16/17′s stout early pace of 18.5 mmt. The focus of tomorrow will be on the Quarterly Stocks report, which will be released at the usual USDA time.  This is an easy one to cover in corn. Traders are expecting stocks as of Sept 1 to total 2.01 BB, which would be down from the prior year’s 2.293 billion, but nearly unchanged from the USDA’s latest estimate of 2.02 billion. Given the period covered, this will “set in stone” carryout for 17/18 and carry-in for 18/19. A large deviation from expectations could be interesting, particularly if stocks come in sharply below expectations.

The soybean market traded modestly lower in the overnight but firmed up heading into the break and after with support coming from strong exports. Beans continue to capitalize on a series export demand wins (Argentina and Brazil demand) in the headlines this week and today’s sales report kept that streak and momentum alive. As prices have recovered off the very recent contract lows the near term and long-term charts have taken on a constructive look that should help to stabilize the downside for the time being. This is a market with a lot of short open interest and we are seeing plenty of short covering. End of the month/quarter tomorrow could encourage additional position squaring.

Fundamentally, nobody is arguing that we have solved our oversupply issue. What has changed is the attitude of the market place which feels slightly less dire than it did a couple of weeks ago when we were crashing down to new contract lows. Keep in mind, we will be entering gut slot harvest timings. Even if weather will create some delays and we have the October crop report just around the corner which will once again showcase a record yield and record crop that may have grown larger since the previous report and judging by the finishing weather we’ve had this month.

The early gains sustained after a strong export sales report was not very lasting, and by 45 minutes into the session, wheat futures had turned from higher to lower. The rest of the session was spent quietly lower as trade now turns its attention towards the crop report Friday morning. With limited influential news around the marketplace, the theme over the past few days has been no news is bad news for the wheat markets. Not necessarily in a way that trade was going to completely break down, but enough to thwart any rally attempts and push values slightly lower. Better than expected data from the export sales report this morning sparked a rally into the morning break, but the gains were not very lasting once we moved into the day. The one thing that would have made the sales report this morning that much more meaningful would have been to see some of the Saudi business from a couple weeks ago show up on the report.

There was a cargo of HRW wheat sold to unknown. It has been mentioned throughout the week that the recent sales reports are moving in the right direction. But, until we start seeing the export demand surface on a more continual basis, rallies will be met with selling. The data from the crop report could be the influential factor as to whether wheat futures could take that next step forward. For now, price action this week seems to be telling us that there will probably be nothing in the report that will give trade that spark to get prices over those Sept highs. The lower close today after that strong rally into the morning pause only added more credence to that thought process.

Anna Kaverman

anna@mercerlandmark.com

Market Report

Wednesday September 26th, 2018

December closed down ¾ at $3.63 and March 19 closed down ¾ at $3.75. November beans closed up 4 ¼ at $8.50 and January 19 closed up 4 at $8.63 ¾. December wheat closed down 3 ¼ at $5.17 ½ and July 19 closed down 3 ¾ at $5.48 ¼. Crude oil closed down $.69 at $71.41

Well, it had to end sometime. Corn featured another quietly mixed performance, though this time, the market spent the vast majority of the day slightly lower. Futures would finish the day with losses. Managed Money traders were viewed small net sellers today, and is expected to head into tonight net short an estimated 125,000 combined futures and options. The markets had a sluggish feel today, with little fresh news to hash out and a major gov’t report due on Friday. “Hurry up and wait”, with a continued emphasis on winding down positions (particularly shorts) ahead of the grain stocks data. Macro traders had a little more ‘fun’ today, as the Fed hiked interest rates 25 bps, as widely expected. The Dollar tried to be firmer most of the day, but in the end, is still plumbing recent lows. The change in momentum of the Dollar has been a modest tailwind to grain prices in recent weeks.

On the weather front, rain expanded across the Midwest yesterday, no doubt causing further interruption to harvest progress.  A mix of rain and sunshine will occur during the next two weeks allowing for harvesting to advance well in many southern areas. Some progress will occur in the north, but they are expected to receive the brunt of the wetter autumn trend.  6-10 & 8-14 day NOAA maps remain very wet and somewhat cool, which will not make for a smooth harvest for many.  Brazil and Argentina weather is relatively normal and remains supportive of good first crop planting progress.

Trade volume was very light with November bean volume about half of yesterday’s total. Beans were supported from headlines promoting both Argentina and Brazil importing US beans in order to replenish domestic reserves to crush and sell the meal back to China. Oil World’s letter estimated 1.8 mmt of beans would be sold to Argentina in the Sept-Feb time frame while Reuters quoted another source saying Brazil would purchase 1.0 mmt. Look for those totals to rise over the coming months as the Chinese government continues to discourage direct purchases of US beans via tariff and harsh inspections due to the trade war and domestic supplies in Argentina and Brazil are running out.   This arbitrage is not a surprise but the sudden focus in the media has brought on some fresh soybean value buying along with short covering as the technical posture of the market stabilizes.

The USDA September 1 quarterly stocks and small grain summary reports will be released on Friday The USDA September 1 quarterly stocks and small grain summary reports will be released on Friday. This is primarily a wheat production report but it will finalize last year’s corn and bean crops, along with the quarterly stocks data. The USDA has revised its estimate of the prior year’s soybean crop in 16 of the last 18 September stocks reports raising the figure nine times and lowering it seven times. Any adjustments are expected to be relatively minor.

The last few days have seen very little in the way of fresh, positive news for the wheat complex, and because of that prices have struggled a bit. Following Tuesday’s poor performance, the markets tried to rebound overnight, and they were enjoying modest overnight gains for much of the evening, but in the hour leading up the morning pause those gains were erased. There was a huge sales announcement in beans during the morning break which gave the soy complex a little boost once trade re-opened for the day session, and that looked to carry over to the corn and wheat markets, but trade was only able to sustain that momentum for a couple hours. A midday collapse took futures lower. Volumes were very light, and the only thing that should probably be taken out of today’s price action is that at least for now, no news is bad news for the wheat markets.

On a more positive front, our export lineup continues to improve, which if nothing else should provide support if we see an extended break. Last week’s sales were not that bad, and if we could get another sales report of around 500 TMT, that would mean sales are moving in the right direction. Until we start seeing the export demand surface, it may be too tough to rally the markets thru the September highs. For now, the market seems to be biding time until the crop report Friday, but price action so far this week seems to be telling us that there will probably be nothing in the report that will give trade that spark to get prices over those Sept highs. In last year’s September’s report, we saw a slight increase in the overall acres planted and harvested from the June report. In August, the USDA gave us an overall winter wheat crop of 1.19 BB with an overall yield of 47.9 bpa.

Anna Kaverman

anna@mercerlandmark.com

Market Report

Tuesday September 25th, 2018

December closed up 3 ¼ at $3.63 ¾ and March 19 closed up 3 ¼ at $3.75 ¾. November beans closed up 4 ¾ at $8.45 ¾ and January 19 closed up 4 ½ at $8.59 ¾. December wheat closed down 6 ¼ at $5.20 ¾ and July 19 closed down 7 ¼ at $5.52. Crude oil closed up $.34 at $72.10.

Five day winning streak?? Trade was more mixed today, with markets taking a mid-day swan-dive on the back of wheat weakness, but corn stuck the landing on another higher close, finishing three cents better. Corn has rallied $.20 in one week. Managed Money traders were viewed net buyers of 10,000 corn today, which would leave them net short an estimated 120,000 combined futures and options heading into tonight.

There was a distinct lack of fresh news around today, but as we’ve touched on recently, the week ahead will not lack for data inputs. No doubt we are witnessing some short-covering ahead of the Quarterly Stocks data Friday. Corn open interest has shrunk each of the past three sessions. A weaker dollar, despite the strong likelihood of another Fed rate hike tomorrow, is also not hurting. Export interest was brisk before, but US corn getting a couple percent cheaper sure won’t hurt. Sure enough, the USDA found another 240,000 MT of corn sold to Mexico under daily reporting requirements today.

Harvest delays are also likely sparking some “buy” interest. Farmers in the Delta are reporting getting rained out, while the next three days will keep the Eastern Belt soggy (though the upper and western Midwest will dry out some). This fits within a central theme of an overall wet stretch of weather, but dry enough for long enough in many areas to be able to allow for some fieldwork. USDA data yesterday suggested 16% of the U.S. crop has been harvested.  Yes, this is ahead of normal, but sluggish relative to current maturity.

A sleepy, yet modestly higher overnight session turned interesting after the break. Beans ran their buy stops above $8.50 but ran out of gas short of the 40 day moving average at $8.61 and settled $.12 off the day’s high. The rally was sparked by news that China is starting to buy more Argentine soybeans because of China’s trade war with the United States, and Argentina will in turn purchase more U.S. soybeans to meet its own needs, according to Oil World. This arbitrage has been widely expected although the name brand of Oil World may have lent more credence to the headlines. They estimate that soybean shipments from Argentina to China may reach 1.8 mmt between September 2018 and February 2019 compared to zero a year ago as Argentina typically crushes the beans and ships the products.

This lead to a sharp rally with driven in large part by short covering and even though we traded into one-month highs, farm selling was minimal in beans. Meal rallied sharply off this news as well but similarly struggled to hold its gains the balance of the session. Additional export demand news came out of the USDA’s Global Agricultural Information Network where they report that Germany’s recent drought heavily affected grain, rapeseed and forage production and as a result are expected to strongly increase imports of soybeans, soybean meal and to become a net grain importer. Informa reportedly increased their estimate of Brazil’s soybean crop to 122 mmt vs. 121 mmt last month, planted area at 36.2 mln hectares down slightly from 36.45 but increased yield due to favorable planting environment.

In trade news, The US and S Korea signed a renewed trade agreement yesterday at the UN Generally Assembly meeting in NYC.  South Korea is the sixth-largest export market for U.S. agriculture, buying $6.9 billion worth of farm goods last year, according to the American Farm Bureau Federation. China said it’s open to talking on the trade dispute, but it needs the U.S. to show sincerity and not put a knife at Beijing’s throat. The U.S. trade restrictions are responsible for the stalled talks and any resumption is up to them, according to China’s vice commerce minister.

There was not a whole lot in the way of fresh, positive news around the wheat complex overnight and throughout the day, and prices struggled because of it. Trade finished the overnight, but several fresh tender announcements leading up to the morning pause gave the markets a little boost and futures settled well off their lows. The momentum was short-lived and once we moved into the day session prices were unable to move higher even with corn rallying. As the rally in those markets stalled, and the gains eroded, wheat futures started to unravel.

As mentioned earlier, as we move into the Fall months our export lineup is beginning to look a whole lot better than it did during the summer months. Countries are becoming less aggressive in their pricing as their stocks dwindle. Japan is back in for their weekly tender for US, Aussie and Canadian wheat, Taiwan is in next week for a couple cargoes of US wheat and Bangladesh is in for wheat. Make no mistake, this is what our trade is waiting for, and until we start seeing additional export demand surface, it will make it increasingly difficult to sustain any momentum built during rallies. Does not mean the markets cannot rally $.15-$.20 from where we are at, it just means that too much of an extended rally will price our market out of competition. For now, the market seems to be biding time until the crop report Friday.

Anna Kaverman

anna@mercerlandmark.com

Market Report

Friday September 21st, 2018

December closed up 4 ¾ at $3.57 ¼ and March 19 closed up 4 ½ at $3.69 ¼. November beans closed down 3 at $8.47 ¼ and January 19 closed down 2 ¾ at $8.61 ¼. December wheat closed down 2 ¼ at $5.21 ¾ and July 19 closed down ½ at $5.55 ¾. Crude oil closed up $.31 at $70.37.

FOR THE WEEK ENDED 9-21-18

CORN – The corn market got off to a weak start on Monday and Tuesday, shedding 8 ½ cents over the two sessions.  But a big, late week rally ensued to see the December contract close 5 ½ cents higher for the week.  I believe that the rally was fueled by news out of Argentina.  In their latest budget proposal, the Argentinian government could tax grain exports up to 33%.  Corn and wheat were at a zero tax rate until this month when the government put on new taxes at roughly 10.5%.  The Argentine peso is historically weak right now and the government feels like the farmers are making extra money with the weakened exchange rate. They feel its justified to raise taxes so farmers pay their fair share.  Argentina exports 27 million tons of corn making them a major player. If taxes are increased to the maximum level, it would create more opportunities for US corn exports in the world market.

Corn harvest is off to a good start.  So far, 9% of the crop has been taken off the fields.  The 5 year average is 6%, and last year at this time the harvest was 7% done.  The weather should be conducive for an active harvest in the eastern corn belt.  Minnesota, Wisconsin, and the Dakotas have been extremely wet and will keep the harvest slow in the upper Midwest. Crop conditions for corn held steady this week at 68% good/excellent.  This is slightly better than the 5 year average of 66%.

Ethanol production continues to run at a high level.  Weekly production numbers have topped 1 million barrels per day since April. Ethanol margins have been trending lower and lower for a while now and have now reached zero, forcing facilities to make tough decisions. Several ethanol plants announce this week that they are either closing or being idled until margins improve. Corn exports were very good this week.  Sales topped 54 million bushels and were the best sales in the past 8 weeks. Mexico was the best buyer this week and they continue to be the number one destination for US corn exports.

OUTLOOK – The next quarterly stocks report will be released next Friday.  This report has held some surprises in the past and created some big market moves.  The market will be trading harvest reports early in the week before squaring up ahead of the stocks report and month end next Friday.

SOYBEANS – The soybeans followed the price action of the corn market this week.  A slow start to the week was met with a big rally on Wednesday and Thursday.  I believe that the bean rally was tied to the Argentina situation as well.  We are also starting to hear talk about the planted acreage for next year.  Informa came out with an increase in corn to 93 million acres, but a huge cut to bean acres at just over 82 million. That is huge change that we haven’t seen in while and is certainly a friendly input. The tariff war is moving in the wrong direction. President Trump said he will impose new 10% tariffs on $200 billion of Chinese goods beginning September 24th.  These tariffs will increase to 25% at the end of the year.  China is expected to respond in kind.  Trump said if any retaliatory action is taken against our farmers, then he will immediately pursue and additional $267 billion of additional tariffs. The tariff situation remains the biggest bearish input for the soybean market.

Soybean harvest is underway. In the first reading of the year the crop was 6% harvested.  This is ahead of both last year’s 4% and the 5 year average of 3%.  Weather will be a factor in the upcoming week as eastern areas are dry and ready, but the upper Midwest has received too much rain. Soybean exports continue to disappoint but that is not a big surprise given that China has been absent from the market for so long.  The only export activity with China this week was a very small cancellation.  Crop conditions declined by 1% to 67% good/excellent this week.

OUTLOOK – The bean market feels tied to headlines and tweets, plus the quarterly stocks report next Friday.  When you look at the price action of the futures over the past month, it is either a very choppy or very quiet day, without a happy medium.  Some analysts are saying the market is untradeable, but I think you need to ready to execute your marketing plan if the market gives you the right opportunity.

Wheat

Freezing temps hit multiple areas of the wheat growing area of Australia. It is unknown at this point how much damage has been done.  The EU has dramatically reduced its soft wheat production estimate. In June they were at 138.8 million tons but have lowered that to 129.9 million tons currently. Russian consultancy firm IKAR cut Russian wheat production down to 69.2 million tons.  The USDA just raised Russian production from 68 to 71 million tons in the September WASDE report last week.

Anna Kaverman

anna@mercerlandmark.com

Market Report

Thursday September 21st, 2018

December closed up 6 ¾ at $3.52 ½ and March 19 closed up 6 ¾ at $3.64 ¾. November beans closed up 20 ¾ at $8.50 ¼ and January 19 closed up 20 ¼ at $8.64. December wheat closed up 1 ½ at $5.24 and July 19 closed up 1 ¼ at $5.56 ¼. Crude oil closed down $.46 at $70.06.

Market participants settling in for another ho-hum day of corn trade were treated to quite the surprise. Futures started a little higher following a mixed overnight session, and then proceeded to slowly melt up through the morning. Once soybeans caught the bug, corn really kicked it into overdrive, trading as much as $.11 higher at one point shortly after the noon hour.  Gains cooled some thereafter, but futures still finished with gains, finishing $.10 above Tuesday’s low. Managed Money traders were viewed net buyers of about 15,000 corn today, which would leave them net short an estimated 140,000 combined futures and options.

There was some positive export news around early. It all started with a sharp overnight break in the dollar. The push to a new six week low is stoking ideas of a larger break in the index, which is broadly positive for commodities that are priced in Dollars. Some macro traders also took the Dollar break to mean one of the many “trade deals” up in the air with the U.S. could be nearing some sort of positive conclusion. Note, this doesn’t necessarily have to be China. It could be Japan, Canada, or the EU, at this point. There was also the Argentine grain export tax story from yesterday, which no doubt improves the appeal of U.S. products.

On the weather front, U.S. harvest delays are likely in the northern Corn Belt through the end of this week, but after that, weather is expected to become more mixed, allowing maturation and some harvest progress around ‘brief’ periods of rain?  6-10 & 8-14 day maps stay very wet and have been building in a little more cold of late. Early season South American conditions are good; Brazil’s planting pace is expected to accelerate after this week’s rain passes. Argentina is rumored to be 5% planted, though only a few provinces have started in on corn.

The soybean market built on yesterday’s bounce off contract lows with a $.20 acceleration back to $8.50 on short covering.  Volumes were decent. Corn was our leader out of the gates this morning but beans were tugged higher after the break and spent the balance of the session chasing stops. A solid export sales report and a break in the dollar were the triggers and with today’s settlement, just about anybody who sold beans this month is under water on those positions. Funds were sitting near a record short and with the extreme carryout projections and lack of a China trade deal we developed too many shorts. Funds were estimated buyers of 11,000 contracts today.

The price action hinted of a potential development on the trade war front, and with Monday’s tariff deadline the timing seems right, but as of this afternoon there is no news or progress being reported between the US and China. China is expected to lower tariffs on non-US imports to reduce costs for consumers domestically. This follows a similar move in July. Monday is the date where the next round of tariffs will go into place on both China and the US. Talks with Canada continue and there is still optimism that a trilateral agreement is close but nothing is expected this week.

The wheat complex saw reserved price action today, with the markets battling both sides of unchanged before a late rally helped trade finish marginally higher across the board. With decent export sales this morning, the Dollar breaking down a bit, and trade across the rest of the grain complex strong, we were not expecting the wheat markets to break down much despite its defensive overnight price action. Since late last week there has been plenty of positive influences around, and wheat prices have reacted accordingly, rallying around $.25. The rally was probably due a little breather and with little in the way of fresh news overnight, trade was ripe for a lower finish. We probably would have seen one too if not for the strength in corn and soy. From a technical standpoint, the higher close does give the wheat complex new upside price projections. That would be $5.47 in Chicago. Many times, short covering rallies like what we saw today in corn and beans come in cycles of three. It sure would be nice to see that trend continue as another strong day tomorrow in both corn and soy should be enough to re-ignite the upward momentum the wheat market seemed to be lacking today.

Anna Kaverman

anna@mercerlandmark.com

FOR THE WEEK ENDED 9-14-18

CORN – The big bombshell in the corn market this week was the WASDE report so let’s get right to it.  The USDA increased the corn yield to a whopping 181.3 bpa.  This was almost 4 bpa higher than the average guess.  In the USDA’s Executive Briefing slides, they noted that corn weights and ears per acre were both at historic highs which generated the record yield.  Old crop corn stocks stayed above the 2 billion bushel mark.  The big yields also pushed new crop stocks up to a comfortable 1.774 billion bushels.  World stocks were bigger than analysts were guessing so that added to the burdensome domestic situation.  December corn futures lost 15 cents on report day and weren’t able to recover any of that loss the rest of the week.

The corn market is fundamentally bearish and technically bearish as well.  The July contract expired on contract lows. The September contract expired this week right on contract low as well.  This is not bullish scenario at all and would indicate that there is more downside potential for the December contract now. Corn harvest is underway.  The first harvest report of the season showed it at 5% complete.  This is slightly ahead of the 5 year average of 3%.  The weather looks conducive for harvest to really pick up over the next couple of weeks. Corn conditions improved this week with a 1% increase to 68% in the good/excellent category.

Export data was very weak for corn this week.  Inspections of only 30 million bushels were well below expectation of 40 to 55 million bushels. Export sales on Thursday’s report didn’t fare much better.  Sales of 30.5 million bushels were under the lowest expectation.  The USDA increased old crop exports by 25 million on the WASDE despite the weekly export data indicating a cut was warranted.

OUTLOOK – The direction of the corn market will come from harvest results in the next few weeks.  There are many out there who are in disbelief of the 181.3 bpa yield.  They will want to see big numbers off the combines in order to be converted.  If harvest numbers look small there are many who would love to see a rally.

SOYBEANS – The WASDE report for beans was a surprise to many as well.  The USDA increased the soybean yield to 52.8 bpa.  Although there were a few guesses above 53, this was still above the average guess of 52.3 bpa.  New crop ending stocks were pushed up to a record 845 million bushels.  South American production was also raised slightly. The USDA indicated that pod weights were the biggest ever by a big margin. You put all of these changes together, and one would think that the market would have sold off sharply with so much bearish news.  The bean market did go a little lower but rallied to close higher by about 8 cents.

The tariff war is ongoing, and President Trump is ready to impose sanctions on another $200 billion of Chinese exports to the US.  Soybeans continue to feel the pressure of those actions despite the tariff already being in place from the initial volley. There does not appear to be an urgency by either country to meet at the negotiating table. China’s ag minister said that they expect to import about 10 million tons fewer beans next year.  This is due to China finding alternative sources for their feed needs.

Soybean crop conditions showed a nice 2% increase to 68% in the good/excellent category.  This increase is helping to support the big yield in the latest WASDE report.  Export sales were ok this week with sales just over 25 million bushels.  Nopa crush numbers will be released on Monday and it is expected that we see another record crush.

OUTLOOK – The soybean market will be watching harvest results very closely to see if the current 52.8 bpa yield will be getting bigger or smaller.  Plus, there is always the wildcard with the tariff war.  If a true compromise looks likely the bean market will stage a rally. But the big question is whether or not that happens.

There is talk that Russia phyto-sanitary agreements/requirements may slow Russian exports. Asia is the world’s biggest wheat buyer. With a small Australian crop, they are looking for other sources of wheat and Argentina looks poised to fill the gap.  The September WASDE report was bearish for wheat.  The negative corn news weighed on the market along with a bearish world view.  World stocks were increased well above estimates as the USDA increased Russian production by 3 million tons.

Anna Kaverman

anna@mercerlandmark.com

Market Report

Thursday September 13th, 2018

December closed down 2 at $3.50 ½ and March 19 closed down 2 ¼ at $3.62 ¾. November beans closed down 6 ¾ at $8.33 ¼ and January 19 closed down 6 ½ at $8.47.  December wheat closed down 9 ¾ at $4.97 and July 19 closed down 6 ¾ at $5.38 ¼. Crude oil closed up $1.75 at $68.41.

To little real surprise, the corn market suffered a post-USDA report hangover. Futures tried to be a little firmer overnight and early in the day on profit-taking and bargain-hunting but struggled to hold up amid probable long liquidation from disappointed bulls. Corn finished the day lower into a new life-of-contract low. Managed Money traders were viewed net sellers of another 10,000 corn today and are estimated to head into tonight net short over 140,000 combined futures and options.  European traders apparently believe the USDA more than their own domestic analysts?  Analysts at Strategie Grains sharply reduced corn production estimates to 58.4 mmt, which was slightly below last year’s 59.3 mmt, and lower than the 61.3 mmt forecast in August. They also pegged the EU wheat harvest at the lowest level in six years, despite USDA assertions to the contrary yesterday.

Weekly export sales in corn were unspectacular. 774,200 metric tons, which was within expectations, but toward the low end of them. Most of the business was to Latin America and Japan. The data included 2.93 MMT of “carryover” sales from the now-defunct 17/18 marketing year. 17/18 accumulated exports were pegged 4% higher than 16/17. Not much story in the weather, other than Hurricane Florence, though that has broader implication for livestock than row crops. Late season and harvest weather is excellent for the Plains. A dry spell this week is helping to even out excessive early Sept moisture. Brazil early season planting weather said to be excellent.

The soybean market continues to digest the USDA crop report which was soundly bearish on just about all fronts including bigger yields, production and domestic and global stocks than expected. Beans were building on yesterday’s reversal momentum early on today until President Trump put out a tweet saying that ‘The Wall Street Journal has it wrong, we are under no pressure to make a deal with China, they are under pressure to make a deal with us. Our markets are surging, theirs are collapsing. “We will soon be taking in Billions in Tariffs & making products at home. If we meet, we meet”. This statement threw cold water on the newly revived trade deal optimism and sent beans back into negative territory.

USDA weekly export sales fell within expectations with no real surprises at 694 tmt in old crop 18/19 sales. A total of 2.431 mmt in sales were carried over from the 2017/2018 marketing year, which ended Aug 31. There was 1 cargo shipped to China.   Accumulated exports for 17/18 were 56.381 mmt, down 3 percent from the prior year’s total of 58.117 mmt. Outstanding sales on the books for 18/19 stand at 16.119 mmt compared to 15.842 mmt this time a year ago. Hurricane Florence has slowed some as it moves over N Carolina’s outer banks bringing heavy winds and rain inland which is expected to last through the weekend and head up north the eastern US early next week as the system winds down.  Damage to corn, soybean and cotton crops is expected and there are concerns over the status of the swine and poultry operations in the coastal area.

A second round of tariff-related aid to U.S. farmers could be announced in December, according to the USDA. “The second part will be announced, if necessary, in December and may account for other factors, such as new tariff levels, regional basis effects, or other market conditions that may have mitigated some of the trade damages,” according to a white paper release today.  The explanation from the office of Chief Economist Rob Johansson noted that the “gross trade damage only reflects direct export losses due to the retaliatory tariff imposed on the U.S. commodity. Indirect or secondary effects from the tariff, such as cross-commodity effects, are not reflected in the gross trade damage estimate.

The repercussions from bearish crop report data continued to resonate around the market place today, with all three classes of wheat reversing after a slightly higher start to the overnight and trading on the defensive throughout most of the day. Chicago Dec traded through its support around $5.00 and eventually settled the poorest. For a second month in a row there were a couple parts of the USDA crop report that has baffled traders, which in turn has put a lid on any thought of a rally at least for the time being. Maybe by throwing out some questionable data the USDA is trying to keep our wheat prices in check so that by the end of the year when other parts of the World start looking for wheat, US prices will look enticing and those looking for wheat will have to come to us. That will surely give us the huge second half program everyone is looking for. There was plenty of business around this morning that one would have thought could have brought some stabilization to trade, including some that have already been booked. They will probably capture some of the Iraqi business, but Tunisia and Saudi Arabia are in as well. The most interesting of these tenders is the Saudi tender. The US has just too much of a freight disadvantage, and looking at the numbers, it does not look like US wheat will work.

Anna Kaverman

anna@mercerlandmark.com

Market Report

Tuesday September 11th, 2018

December closed down ½ at $3.66 ¾ and March 19 closed down ¾ at $3.78 ½.  November beans closed down 13 ½ at $8.31 ¾ and January 19 closed down 13 ½ at $8.45 ½.  December wheat closed down 9 ½ at $5.18 ¾ and July 19 closed down 8 at $5.52 ½. Crude oil closed up $1.63 at $69.04.

“USDA Report Eve” brought more of the same for corn quiet, consolidative trade, ultimately finishing Tuesday fractionally lower. Corn made its highs Monday night and its lows shortly after the day open. This is a familiar theme of late and spent most of the day flitting between unchanged and lower. Managed Money traders were viewed small net sellers today, and will head into the report net short close to 90,000 combined corn futures and options.

World numbers were a focus early. Brazil’s corn crop keeps trickling lower. CONAB pegged the full year (first and second crop) corn at 81.4 mmt, which compares to last month’s forecast of 82.2 and the prior crop of 97.8 mmt. They believe Brazil will export 25 mmt of corn. By contrast, the Ukraine grain harvest keeps working its way higher. The gov’t there raised the total grain harvest estimate (including other crops besides corn) by +3.1 mmt from prior to 63.1 mmt. This likely helped stimulate a “Turnaround Tuesday” lower in European grain markets after making encouraging stability trades Monday following a harsh break. Note most of the Ukraine crop will likely be consumed regionally, with European feed grain estimates back-tracking.  For example, the French corn crop output was pegged 400k lower to 12.4 mmt.

Weekly crop progress report found the expected 5% corn harvested tally, which is slightly ahead of normal. Both “dent” and “mature” progress metrics are running 11% and 14% ahead of average, respectively, indicating harvest will likely ramp up much quicker than usual. NOAA maps still promising a dry five day outlook, which should help fields dry out from recent heavy early Sept rains. Rain does indeed make grain, apparently; condition ratings this week improved contra-seasonally in corn, with national Good-Excellent ratings advancing +1% wk/wk to 68% (vs. 61% last year).  Tales on the ground still indicating the storms likely did more harm than good to US corn yields, but time will tell. The focus of the USDA crop report tomorrow will no doubt be US production. The gov’t has a mixed record on the Sept report relative to Aug, raising yields just as often as they reduce them. The average analyst expectation heading in is for a small reduction from the USDA’s record 178.4 bpa reported in August.  Note, this would still imply a record high yield. Given high ethanol production rates, we also would not be surprised to see a modest reduction in old crop (17/18) carryout, but perhaps they will save that for October. Most analysts are looking for small cuts to both world and domestic 18/19 carryout estimates.  We see world corn production as a mixed bag. USDA may be forced to raise Ukraine corn production, but trim both EU & Brazil.

The soybean market broke sharply as pre-report selling took over and ran sell stops down for a test of the lows in July. Beans are bracing for a soundly bearish crop report tomorrow where yields are est. on avg. to increase from 51.6 to 52.2 bpa inflating the domestic carryout from 426 mb in 17/18 to 830 mb in 18/19.  Global stocks are est. on avg. to increase from 95.5 mmt to 107.3 mmt. These numbers will not be a surprise but are a stark reminder of the supply situation we are mired in. The delayed crop progress report midmorning reinforced this big crop message by showing soybean crop ratings increased counter seasonally by 2% to 68% gte which compares to 60% gte this time last year and brought additional pressure.

On the demand front, the USDA flashed a cancellation of 192 tmt beans to unknown which helped set the negative tone early on.  US soybean exports have more than held their own on non-Chinese demand stepping in but on a longer term basis, we need them and they need us but there no indications of any progress in negotiations with China at this point. Without the Chinese market, it is a longer and more arduous task to chew through our supplies will require a significant shift in acreage this spring if nothing has changed. The products were weaker but held up better than the beans which popped board crush a nickel to settle at nearly a one-month high for margins which have now recovered 32 cents off the corrective lows from last month.

The wheat complex was unable to hold early overnight gains, weakened through the morning break, then remained on the defensive throughout the day. The reversal after the stronger start to the night, and subsequent defensive price action throughout the day, is a sign that traders are still skeptical that the USDA is not going to be as aggressive as they probably should be in Wednesday’s report. But tomorrow is not only about the crop report anymore as Egypt is back in for wheat.

After the close the GASC announced they were in for wheat for Oct 25 thru Nov 4 shipment. Their last purchase was just last week. They only bought one cargo (60 TMT) and it was of Russian origin. The purchase price was $235.00, which was $6.30 below their purchase price from their prior tender. The lowest FOB offer last week was $217.90, which was $3.61 below their purchase price from their prior tender. Crop Report will be out in the morning. The report is mostly a corn and bean report, but the USDA could make it an exciting report for wheat if they tweak their World numbers more than people expect. US ending stocks should be up slightly from August’s 935 mil estimate. As far as the World numbers, 2017/18 ending stocks will probably be up slightly, but 2018/19 ending stocks should see some sort of reduction. August’s estimate was a shade under 259 MMT, but we very easily could see a 255 MMT number or lower, depending how much of a slash we see in World production estimates.

Anna Kaverman

anna@mercerlandmark.com

Market Report

Monday September 10th, 2018

December closed up ¼ at $3.67 ¼ and March 19 closed unchanged at $3.79 ¼.  November beans closed up 1 ¼ at $8.45 ¼ and January 19 closed up 1 ¾ at $8.59.  December wheat closed up 17 at $5.28 ¼ and July 19 closed up 17 ¾ at $5.60 ½. Crude oil closed down $.14 at $67.41.

The corn market was a bit of a snoozer Monday. Futures opened Sunday night lower and spent most of the day “in the red”, too.  Corn received a very small boost from an intraday rally in wheat, and the markets would end unchanged. Managed Money traders mostly stuck to their guns and will head into tonight net short about 85,000 combined corn futures and options. Most of the corn-specific news had to do with exports. First and foremost, U.S. trade negotiators have many balls in the air.  Canada is still trying to negotiate its way into “New NAFTA”, Trump stands ready to wield another $200 billion plus in new tariffs on China (but has not yet done so), and apparently Japan’s trade terms are next on the docket to be revisited.  U.S.-EU talks have been deathly-quiet, while South Korea eyes their earlier accord nervously. Speaking of the Koreans, all the heavy-hitter corn buyers were in for small cargos overnight.

The weekly crop progress report was unexpectedly delayed late afternoon. Trade cannot recall a time when the USDA was forced to delay a Crop Progress report with no prior notification. The trade was looking for solid early harvest progress of about 5-6%, along with a small seasonal downtick (-1% G-E) in national corn ratings. Weather watchers are eyeing Hurricane Florence, which is expected to wreak havoc on the U.S. East Coast, particularly the Carolinas. This theoretically could impact some corn and soy crops, but the area is a fairly minor producer at best. Over the weekend, the remnants of Tropical Storm Gordon brought heavy rain and some flooding to a large part of the lower and eastern Midwest. Fortunately, the next five days are expected to be bone dry for the Midwest.

The soybean market closed higher for a third consecutive session but struggled to hold gains above $8.50 and settled off the day’s high. You would expect this market to struggle in front of Wednesday’s crop report which will likely reinforce the bearish supply side realities. The lack of enthusiasm on the rally certainly reflects that. Meal extended its recovery, the absence of fresh swine fever headlines helped. Hurricane Florence was upgraded to a cat 4 storm today and is expected to make landfall near the Carolinas on Thursday. Forecasters are talking about 20+ inch rain totals similar to Hurricane Harvey in 2017.  The EU model hints at some 40-inch totals as the hurricane stalls near or over the coast. N Carolina is home to 1.6 million soybean acres, S Carolina 420k and Virginia 620k. There was a frost/freeze in NE China which may have hurt crops in that part of the country this caused Dalian soybean futures to rally and was a supportive feature to start the day. In export news, The USDA flashed 132 tmt of 18/19 soybeans sold to unknown.

After a back and forth night session that saw trade finish a little higher, the markets were able to extend those gains once we moved into the day session. By midday the rally had reached double figures. One of the bigger influences in today’s trade may have corm from ABARE. Even though most private expectations are for the Aussie crop to be between 18 and 19 MMT or less, when ABARE came out this morning and reduced the crop 2.8 MMT to 19.1 MMT, it increased speculation that the USDA is going to have to take down the Aussie wheat crop a notch or two come Wednesday morning. Keep in mind, we already know EU production will be lowered again, but September is when wheat yields are made or lost for our friends down under, so despite the USDA’s most recent forecast of 22 MMT, the thought was they may wait until the October report to adjust their Australian wheat production expectations. Lowering Australia probably means more shifting of export expectations.

Anna Kaverman

anna@mercerlandmark.com

FOR THE WEEK ENDED 9-7-18

CORN – August went out with a bang and September ushered in additional gains.  There wasn’t much fresh news to drive the market.  One market moving item was Argentina’s move to reinstitute the export tax on corn and wheat, and readjust the soybean export tax. In their bid to keep IMF funding, they need to shore up their balance sheet.  Their export tax on corn and wheat was eliminated back in 2015.  The new tax is a floating tax related to the US dollar/Argentine peso ratio, equating at current levels to a 10% tax.  This should be friendly to US commodities.  A negative spillover effect from the wheat came from Russia confirming they see no need to limit their wheat exports at this time.

Moisture from Tropical Storm Gordon pushed up into the Midwest, delaying early harvest progress, and increased chatter of possible quality and/or lower yield concerns.  Informa Economics raised their 2018 US corn yield from 176 BPA to 178.8 BPA, and slightly higher than the current USDA forecast of 178.4 BPA.  Informa’s corn production was pegged at 14.621 billion bushels versus USDA at 14.586 billion bushels.  The next WASDE report will be released September 12th and may change this comparison.

Weekly export sales were delayed a day due to the Labor Day holiday.  They were okay at 1.2 million bushels for old crop and 40.7 million bushels for new crop. Old crop carryover sales look to be historically big at 132 million bushels.  Last year, we carried over just 40 million bushels of sales. New crop total commitments are 451.6 million bushels compared to just 334.1 million bushels last year.  Weekly ethanol production was up 17,000 bpd to 1.087 million bpd.  This was the second highest weekly production in the last 36 weeks.  Ethanol stocks declined 358,000 barrels to a record high level for the end of August at

On the political landscape, the US, Mexico, and Canada are closer to a trade deal.  One of the hold-ups with Canada is their wanting to keep the 300% dairy import tax in place.  There is chatter that the closer we come to a NAFTA deal, the less likely we’ll settle our issues with China at the November meetings.  If we are making deals with other countries, then possibly they will join the US in opposing Chinese trade policies.  There are new rumblings that President Trump wants to renegotiate trade policies with Japan, and not in a good way for Japan.

OUTLOOK:   In the present political environment, most traders anticipate corn acres expanding next spring at the expense of soybean acres.  Keep an eye on the December 2019 corn price to establish a benchmark first sale.   Looking ahead to the September 12th WASDE report, the trade historically underestimates the September USDA corn and soybean yield. December 2018 corn feels comfortable ahead of the report in its $3.55 to $3.70 per bushel price range.  After the report, attention will focus on yield reports from the field for both corn and soybeans.  For the week, December corn was up 2 cents at $3.67, July up 2 ¼ cents at $3.92 ¾, and December 2019 up 1 ¾ cents at $3.96 ½ per bushel.

Average trade guess for the September 12th WASDE report:  US yield at 177.8 BPA vs. 178.4 BPA last month; production 14.529 billion bushels vs. 14.586 billion last month; US 2017/2018 ending stocks 2.028 billion bushels vs. 2.027 billion last month; US 2018/2019 ending stocks 1.639 billion bushels vs. 1.684 billion last month; world ending stocks for 2017/2018 at 192.24 mmt vs. 193.33 mmt last month; world 2018/2019 ending stocks 154.48 mmt vs. 155.49 mmt last month.

SOYBEANS – Soybeans continue to struggle under the absence of Chinese buying.  Prices drifted sideways during the week.  Support early in the week was generated from Argentina’s restructuring of their soybean export tax.  The tax was steady at 25.5%.  Under the new equation, the tax was lowered to 18%, but then a $4 peso/US dollar calculation brought it up to around 28% at current exchange rates.  The situation is fuzzy as traders untangle what the regulations mean to sales already on the books and how payments will be handled.  This should be supportive to US prices, but with no progress on ending the trade war with China and a huge crop at hand, the path of least resistance is lower.   In fact, the trade war may escalate as the comment period on 25% tariff on $200 billion worth of Chinese goods expired. The US, however, did not immediately implement the proposed tariff.  If they do, China is expected to retaliate with tariffs on $60 billion worth of US goods.  This equates to roughly 40% of the total value of all Chinese goods imported into the US in 2017.  As traders began heading home for the weekend, the US administration stated they could have an additional $267 billion in tariffs ready on short notice, if needed. In Brazil, the government raised the minimum freight rate by 5%, which will be passed on to producers in higher costs.

Put this on your “things to watch” list.  China has confirmed at least 13 cases of African Swine Fever in the country.  There is no cure for the disease.  The United Nations Food and Agriculture Organization held an emergency meeting to discuss the situation and determined it is highly likely the disease will spread to other Asian countries.  If China is forced to cull pig herds, it will negatively affect their meal and, to a lesser extent, corn demand.  This week, an executive with one of China’s top soybean crushers stated China wouldn’t need US soybeans until February/March.  He is forecasting China’s 2018/2019 soybean imports will decline 10.8 mmt to 84.7 mmt with only 700 tmt being sourced from the US, down from 27.85 mmt in 2017/2018.  They estimate they will import 71.1 mmt of Brazilian soybeans and 7.5 mmt of Argentine soybeans, with the balance from various countries.

Informa Economics raised their US soybean yield forecast to 52.9 BPA from 50 BPA last month.  The August USDA outlook was 51.6 BPA.  Informa’s soybean production estimate is 4.698 billion bushels versus USDA’s August number at 4.586 billion bushels. Weekly export sales were essentially nothing for old crop (but did include 35 tmt to Argentina) and 24.7 million bushels for new crop, which included 60 tmt to Argentina and China cancelling 66 tmt.  Old crop sales carryover to new crop looks to be 98 million bushels versus 87 million last year. New crop total commitments are 510.4 million bushels versus 478.5 million bushels last year by this date.

OUTLOOK: Any potential rally in soybean prices will be difficult with US soybean yields believed to be rising and no end in sight to the Chinese trade war.  Historically, November soybeans decline in the second half of September as harvest picks up.  November 2018 soybeans are expected to eventually take out the current $8.26 ¼ per bushel contract low, with rallies finding resistance in the $8.50 to $8.60 area.   For the week, November soybeans were up ½ cent at $8.44, July up ¾ cents at $8.91 ¾, and November 2019 a penny higher at $8.99 ¼ per bushel.  December meal jumped $9.80 higher to $317.00 per ton.

Average trade estimates for the September 12th WASDE report: US yield at 52.2 BPA vs. 51.6 BPA last month; production at 4.649 billion bushels vs. 4.586 billion last month; US 2017/2018 ending stocks at 426 million bushels vs. 430 million last month; US 2018/2019 ending stocks 830 million vs. 785 million last month; world 2017/2018 ending stocks 95.57 mmt vs. 95.61 mmt last month; world 2018/2019 ending stocks 107.29 mmt vs. 105.94 mmt last month.  Interesting tidbit:  the average September soybean yield trade guess has underestimated the September USDA number in each of the last 5 years.

The wheat market is fractionally mixed, stabilizing after last week’s losses. This selloff has allowed the US to become more competitive on the global stage, now we just need to see the US get some business as a result. Overall US exports remain relatively slow and the strongest pace in 6+ years will be needed. We add to the world supply as Canada harvest continues with Alberta at a reported 13% complete. Meanwhile US begins to seed winter wheat in Montana with other areas expected to begin soon. Acres are overall expected to increase and an early corn/soy harvest may also benefit wheat seeding. Winter wheat areas are expected to see a dry weather pattern develop this week. The average trade estimate for US carryout stocks is 941 mb and the average world carryover stocks is 257.58 mmt, down slightly from 258.96 mmt last month.

Anna Kaverman

anna@mercerlandmark.com