Blogging by the Bushel
With numerous challenges over the past several years for producers, we at Mercer Landmark understand the need for a comprehensive risk management solution. We seek to provide our customers with unparalleled service to ensure maximum results.
Archives

Archive for November, 2018

Market Report

Tuesday November 13th, 2018

December closed down 4 ¾ at $3.66 ½ and March 19 closed down 4 ½ at $3.77 ¾. January beans closed down 5 at $8.78 ¼ and March 19 closed down 5 at $8.91 ¾. December wheat closed down 12 at $5.07 ¾ and July 19 closed down 6 ¼ at $5.35 ¼. Crude oil closed down $4.24 at $55.84.

The corn market was negatively influenced by wheat today where that market gave back a large part of its rally and dragged corn back down through last week’s low where we are testing support.  Recently, corn has struggled from a combination of slowing exports, a weakening ethanol margin environment and last week’s application of revise Chinese corn stats to the world carryout in the WASDE. Add to all of that we are in a negative seasonal timing as harvest hits, the market has handled itself ok. Weekly corn inspections for export totaled 1.136 mmt, down from 1.284 mmt last week and compares to 407 tmt this week last year.  Year to date inspections total 11.106 mmt compared to 5.959 mmt this time last year representing an increase of 203 million bushels from last year’s pace. The USDA is currently projecting corn exports to increase by 25 million bushels year over year.  Elsewhere in the news, Corn harvest progress came in at 84% compared to 76% last week while beans were 88% compared to 83% last week.

The soybean market had a back and forth, two-sided trade but ultimately could not sustain its rally and settled with an outside day lower with the products not faring much better.  Beans have enjoyed recent support from a more positive tone in trade rhetoric from both the US and China. News broke that US Treasury Sec Mnuchin and the Chinese Vice Premier Liu had a positive phone conversation that could lead to a visit to Washington by Liu ahead of the G20 summit on the 30th of this month. That news was followed by additional positive news around the wires that talks on trade and other matters were actively taking place. This change in tone is certainly welcomed after months of stalled talks but as today showed, the board needs some concrete positive developments to grab hold of beyond the two sides making nice in the media in order to get the long-awaited relief rally. The degree of and sustainability of that rally is dependent on the amount of trade that is included in a deal.

The USDA flashed a sale of 277 tmt of old crop beans to unknown.  Bean basis at the Gulf has been firming so perhaps we will see some stronger buying interest ahead of the G20 as importers sense the window for cheap US beans could be closing? Weekly bean inspections totaled 1.302 mmt compared to 1.244 mmt last week and compares to 2.185 mmt week last year.  Year to date inspections sit at just 9.908 mmt compared to 17.054 this time last year representing a reduction of 263 million bushels from last year’s pace.  The USDA is currently projecting bean exports to fall short of last year’s pace by 229 million bushels.

Heading into today, trade was looking for a sign as to whether yesterday’s strong start to the week was demand induced or was it a reaction to Friday’s awful finish to the day when we saw the back months of Chicago wheat fall. If it was demand induced, we probably would have seen some stabilization after a sluggish overnight. If it was the latter, we warned people we could see double digit losses today. Why? Because rallies in wheat are going to have to be led by demand. Cannot stress that enough. Unless you are in the know, or an announcement is made by the USDA, most times it is very difficult to tell the difference if indeed business is getting done, or if some other trigger prompted the move.

Probably the most influential headline news coming into the session today was that Russia keeps trying to open doors for further export trade, and after successfully negotiating with Brazil and China to increase trade, we can now probably add Iraq to the list. The Iraqi Trade Minister will send a trade delegation to Russia before the end of 2018 to discuss the quality of Russian wheat and its suitability for Iraqi purposes for import. Keep in mind, Iraq usually only imports wheat from the US, Canada and Australia, and their needs are quite significant, with this year’s wheat imports totaling close to 4.5 MMT.

Anna Kaverman

anna@mercerlandmark.com

FOR THE WEEK ENDED 11-9-18

CORN – Be careful what you ask for…we wanted to see the November WASDE numbers and boy, were they a surprise!  Just when you think that China only affects our soybean market, they surprise you in the corn market. Action in the corn market leading up to the November 8th WASDE report was uneventful.  Prices rose slightly early in the week and were a penny higher for the week into the report’s release.

The USDA’s US numbers were slightly friendly on their face.  The shock came from the world carryout number which nearly doubled what it was a month ago.  Let’s first recap what the US balance sheets for 2018/2019 showed.  The US corn yield was lowered 1.8 BPA to 178.9 BPA from October’s 180.7 BPA forecast.  This was below the 180.0 BPA trade guess and was construed as friendly, but it is still a record yield.  As a result, US production fell 152 million bushels from 14.778 billion bushels to 14.626 billion bushels.  This was within the range of estimates, but well below the 14.721-billion-bushel average trade guess.  On the demand side, feed/residual was cut 50 million bushels and exports were slashed 25 million bushels to 2.45 billion bushels.  Resulting ending stocks were down 77 million bushels to 1.736 billion bushels versus 1.773 billion expected and compares to 2.14 billion carryout in 2017/2018.  The stocks to use ratio fell 0.5% to 11.5%.  The average farm price was raised 20 cents on the low end and left unchanged on the high end for a range of $3.20 to $4.00 per bushel.

Now for the kicker.  World ending stocks exploded to 307.51 mmt!  At first I thought it was a mistake, but it wasn’t.  This compares to last month’s 159.35 mmt forecast and the average trade estimate of 158.82 mmt.  This all came at the expense of China doing a 10-year revision of their balance sheets which they released a day before our WASDE report.  One of the biggest changes was a 43.2 mmt increase in 2017 production to 259.1 mmt.  China’s stocks went from 58.5 mmt last month to 207.5 mmt this month.  The USDA did make a comment on their release that they included historical revisions to area and production published by China’s National Bureau of Statistics.  The revisions were based on the results of China’s Third National Agricultural Census.  The Brazilian corn production estimate was unchanged at 94.5 mmt and Argentina’s was raised 1.5 mmt to 42.5 mmt.  If you exclude the increase in China, the global carryout would have decreased 830 tmt.

Corn prices whipsawed higher, and then lower, upon the report’s release.  By the end of the session, corn had posted a key reversal higher on the daily chart.  However, prices fell to end the week.  China imports and exports very little corn.  Does anyone have a good grasp on what they produce, use, and store?  So, do their revisions make a difference?  China’s supplies are not readily available to the world marketplace, but it does give them usage options domestically, which they’ve always had.  The USDA indicated they would separate China’s numbers out beginning in May.

Weekly export sales were a moot issue at 27.6 million bushels.  We are running 16% ahead of last year and the USDA is projecting year on year exports to be relatively unchanged.    Weekly ethanol production was up 9,000 barrels per day at 1.068 million bpd.  Stocks were 500,000 barrels higher at 23.2 million barrels.  Margins continue to be ugly at a negative 10 cents per gallon.

OUTLOOK: Now that the report has been digested, the focus will be on South American planting weather and demand for US corn.  December corn was down 1 ½ cents for the week at $3.69 ¾ per bushel, after trading a decent $3.66 to $3.79 weekly range.  We may be setting up for further consolidation, but in a slightly higher range from $3.60 to $3.90 per bushel as we head into the holidays.  Taking a longer-term view, this year’s 1.736-billion-bushel carryout is big, but it’s still a year on year decline of 404 million bushels.  March corn was 2 cents lower this week at $3.81 ¼ and December 2019 was down 1 ¼ cents at $4.02 ½ per bushel.

SOYBEANS – Soybeans sparked higher to begin the week, but then eased lower ahead of the November WASDE report.  Most traders were anticipating a bearish report, and that’s what they got.  The US 2018/2019 balance sheet lowered the soybean yield 1 BPA to 52.1 BPA, which remains a record yield.  The average trade estimate 52.9 BPA.  Production took a 90 million bushel hit from last month to 4.60 billion bushels versus estimates for 4.676 billion bushels.  Exports were slashed 160 million bushels to 1.9 billion bushels!  This was enough to push ending stocks well above traders’ expectations. The crush was increased 10 million bushels and residual was lowered 2 million bushels.  Ending stocks surged 70 million bushels higher than last month’s 885 million to a whopping 955 million bushels!  This is over double the 2017/2018 carryout of 438 million bushels.  The stocks to use ratio increased from 20.7% to 23.3%.  The average farm price was narrowed to a range of $7.60 – $9.60 per bushel.

World ending stocks were a record 112.08 mmt compared to the 110.91 mmt trade forecast.  Last month, ending stocks were pegged at 110.04 mmt.  China’s soybean imports were dropped 4 mmt to 90 mmt compared to last month.  Argentina’s 2019 soybean production outlook fell 1.5 mmt to 55.5 mmt and Brazil’s production was left unchanged at 120.5 mmt.  Weather in Brazil has been favorable for soybean planting and there are expectations that soybeans may be available in January to feed China’s appetite.  Early soybean planting can also lead to early second crop corn planting.  If so, corn may pollinate ahead of the worst summer heat and promote higher production.

Weekly export sales were just below expectations at 14.3 million bushels.  Total commitments stand at 802.4 million bushels, down 31% from last year.  Year on year soybean exports are forecasted to be down 229 million bushels or a 10.7% yearly decline.  Accounting for the reduced export forecast, we need to average 26.5 million bushels per of sales from November through August.  This would be a record sales pace.  Unless a political fix is accomplished with China, the export category could be lowered in future reports.

President Trump is currently set to meet with China’s President Xi before the G20 summit later this month in Argentina.  Reportedly, the US is drafting a framework for an agreement.  There have been differing opinions from China on whether they will be open to an agreement, while simultaneously voicing they will not be dictated to on their policies by the US.  Brazilian bean basis plunged this week on concerns there that a US-China agreement may be reached.  Safras pegged Brazilian farmers new crop sales at 31% compared to 33% sold on average.  AgRural put Brazil’s soybean planting at its fastest pace ever at 71% complete versus 41% on average. In other news, China imported 6.9 mmt of soybeans in October, a record for the month of October.  This is an 18% increase compared to last year.  So far this calendar year, China has imported 76.9 mmt of soybeans.  It’s estimated 95% of those supplies originated from Brazil.

OUTLOOK: For the week, January soybeans fell just a penny at $8.86 ¾, March was unchanged at $9.00, and November soybeans gained 3 ½ cents at $9.36 ½ per bushel.  Politics will continue to sway the markets but ending stocks of 955 million bushels are definitely not bullish.  Ending stocks climbing to 1.0 billion bushels is still a possibility.  South American weather has gotten Brazil’s crops off to a very good start.  Unless their weather turns negative, we can expect to come up against strong competition for exports into 2019.  Sustained rallies may be difficult without an agreement with China to reestablish exports.

Wheat

There was confusion on Russian wheat exports this week as Russia’s IFAX was quoted lowering Russian grain exports to 35 million tons. However, the Deputy Ag minister of Russia is now quoted as saying their 39 million ton export estimate is still intact. USDA crop progress showed winter wheat planting at 84% complete compared to the 5-year average of 90% complete. The USDA also reported winter wheat condition at 51% good/excellent, down from last week’s 53% good/excellent. Wheat export sales were surprisingly good with the 2nd best total of the marketing year. The big buyers this week were SE Asian destinations, excluding China. On the latest WASDE report, the USDA didn’t do much for changes to the wheat balance sheets this time through. They increased wheat seeding usage overall 7 million bushels to drop our carryout to 949 million bushels. They dropped the Australian wheat crop 1 million tons to 17.5 million tons while at the same time slightly increasing the EU crop and leaving the Black Sea wheat production estimates unchanged.

Anna Kaverman

anna@mercerlandmark.com

Market Report

Thursday November 8th, 2018

December closed up 1 ¼ at $3.73 ½ and March 19 closed up 1 ½ at $3.85 ¼. January beans closed down ½ at $8.79 and March 19 closed down ¼ at $8.92. December wheat closed down 2 ½ at $5.07 ¾ and July 19 closed down 2 at $5.39 ¾. Crude oil closed down $.96 at $60.86.

The November WASDE is officially in the books, and it was one of the strangest reports in recent memory. The market was confused, to say the least, finishing in the middle of a $.12-$.13 range.  Ironically, the market settled out about where it started ($.01 better). Managed Money traders were viewed net buyers of about 10,000 corn today, which would leave them net even the corn market.

Everyone was watching the yield today, which did not disappoint.  The real change, however, came in the world stats, which nobody was really expecting much out of. The USDA shocked the market by adopting wholesale the data published by the Chinese yesterday, which made massive (+20%) revisions to production and stocks data going back a full decade. The net impact of this was to nearly double the bottom-line USDA world carryout number for 18/19. We would be hard-pressed to remember a similar occurrence, and some news outlets were forced to triple check their numbers before putting it out for public consumption. In the end, the numbers are the numbers, but they are still heading in the same direction. Lower, relative to levels seen over the prior two years. The new USDA 18/19 world carryout projection is 307.5 mmt, which compares to 159.4 mmt in October and 340.9 the prior year (and 350.3 in 16/17).

Domestically, the USDA did not disappoint the corn bull, taking another large chunk out of yield. They pegged the 2018 U.S. corn yield at 178.9 bpa, which compares to 180.7 in Oct and the high water mark of 181.3 bpa in Sept. The yield is still a record, and the production is still the second largest on record at 14.626 billion, but it is a rather remarkable retreat from the 183-184 bpa ideas many in the trade were espousing in early October. The USDA focused most of their efforts east of the Mississippi. They shaved 6 bpa off South Dakota, 6 bpa off Iowa, and 7 bpa off Minnesota.  As for the balance sheet, the USDA trimmed 50 MB off residual demand and 25 million off exports, which limited the downtick on carryout to 1.736 BB, which was not too far off from trade expectations (1.773 avg) but remains well below last year’s 2.140 bil. On the world scene, the USDA raised Argy and Ukraine production, while lowering the EU.  Net/net, excluding the wild China revisions, world corn production expectations were raised slightly from October.

The soybean market settled slightly lower for a fourth consecutive day with the bull spreads weaker as new crop gained on old. The price action was dynamic however as the market closed $.15 off the session low in what was a wild trade around the USDA crop report and WASDE. The report highlighted the increasingly bearish supply side realities one more time although a bigger reduction than expected in the bean and corn yields along with some controversy and confusion surrounding the world corn carryout number led to the markets bouncing back off their lows. In the case of corn that was fundamentally justified although beans seemed to be more along for the ride than having anything friendly in the numbers to support a recovery.

The US soybean yield was reduced to 52.1 bpa from 53.1 bpa last month which was a deeper cut than the avg. trade est. at 52.9 bpa. While they increased the pod count they lowered the pod weight for a second consecutive report. This took the crop size down to 4.600 bb from 4.690 bb last month. The carryout was raised to 955 mb from 885 mb and the avg. trade est. of 898 mb despite the smaller crop because they also lowered exports by 160 mb to 2.060 bb and seed use by 7 to 96 mb to more than offset a 10 mb increase in crush to 2.080 bb.

The changes to the products were very interesting with the S&D adjustments tightening oil supplies while building meal supplies although the price action today didn’t necessarily reflect that.  US oil ending stocks were reduced by 201 mln lbs to 1.915 bln lbs as beginning stocks were lowered by 126 mln. Meal ending stocks were raised by 50 to 450 tst coming on an increase in beginning stocks by 153 and production by 197 which was partially offset by a 250 increase in exports. The world soybean carryout was increased by 2 mmt to 112.08 mmt which was 1 mmt bigger than the trade est.  World oil carryout was unchanged at 3.64 mmt while meal was raised slightly to 12.10 mmt.

It was crop report day, and at least for wheat, the report was not expected to be too impactful. The USDA gave a little something for both the bull and the bear. We saw a slight reduction in US carryout, and an increase in World carryout. The initial knee-jerk reaction to the report was positive as the US numbers were announced first. In wheat, KC once again took the brunt of the selling. It did not help that HRW wheat stocks were raised slightly, while HRS, SRW and White wheat stocks were all lowered some. Late in the day the markets tried to rally some, but again, we saw limited follow through and prices weakened into the close.

Looking ahead, not a whole lot has changed. The wheat market is going to have to be a demand driven market. Although we do not see much in the export lineup, the sales reports are telling us that demand is there at these current levels. The Asian flour mills have been around looking for wheat especially with the problems the Aussies are having, and Brazil is looking for wheat for Jan just to name a few. So we know the chances are pretty good that the opportunity is there

Anna Kaverman

anna@mercerlandmark.com

Market Report

Wednesday November 7th, 2018

December closed down 1 at $3.72 ¼ and March 19 closed down 1 ½ at $3.83 ¾. January beans closed down 4 ¾ at $8.79 ½ and March 19 closed down 4 ¼ at $8.92 ¼. December wheat closed down 1 ¾ at $5.10 ¼ and July 19 closed down 4 ½ at $5.41 ¾. Crude oil closed down $.52 at $61.82.

Corn featured another disinterestedly lower session of trade, as the mid-terms offered no surprises and traders position for tomorrow’s major crop report. Managed Money traders were viewed net sellers of almost 10,000 corn today, which would likely leave them small net shorts heading into tomorrow.

Make no mistake it’s all about the report tomorrow. The November WASDE is normally a “tweaker” report, as everyone has been exposed to reams of “real” data on harvest since Aug/Sept. The average analyst guess is for the USDA to continue taking yields lower after surprising the trade with lower October numbers.   The forecast is for 180 bpa yields, which compares to 180.7 in Oct, and 176.6 final last year. This is expected to trim carryout back a notch too. Analyst guess for domestic 18/19 carryout is 1.77 billion vs. 1.81 bil in October and 2.14 bil the prior season. World carryout will likely also be an afterthought. Analysts are expecting world ending stocks to hold steady, as other countries offset the expected dip in US carryout expectations. For corn, at least, the focus will be on U.S. production, whereas for beans, by contrast, it will likely be equal split between U.S. supply and demand.

The U.S. mid-term elections are in the books, and offered little feature to the grains given the expected split verdict (GOP controls Senate, Dems control House). Outside markets reacted positively, with the Dollar trading to a two week low and equities firm. A surprise either way may have had a bearing on trade negotiations, potentially, but this likely changes nothing. Corn seemed to be more preoccupied today with some interesting revisions coming out of China. In one fell swoop, the gov’t there raised 2017 production to 259 mmt from 216 prior. Imagine if the USDA raised their estimates of US production by 20% on a random Wednesday morning – pandemonium!  The relative unreliability of Chinese statistics contained the reaction to this development.

The soybean market settled lower for a third consecutive day on pre-positioning ahead of tomorrow’s USDA report. Trade volumes continue to be very light with uncertainty over how to quantify near term risk/reward. On one hand you have potential for a breakthrough in trade negotiations with China starting with the G20 summit later this month that has the potential to spike prices and thus prevents an aggressive stance on new sales while the current statistical realities of the market keep fundamental buyers on the sidelines.

The grain markets’ focus of the moment is on tomorrow’s USDA crop report which will feature another look at the US corn and soybean yields where slight reductions are expected. This is more significant for corn considering the tighter supply situation while shaving a little off the bean yield doesn’t change the burdensome bean supply situation. On top of that, we are also expecting a cut in bean exports on the demand side of the ledger, so our carryout may still go up. There is no reason to downgrade Southern Hemisphere production prospects either with a favorable start to their planting and development. On a longer-term basis, we have to solve our acreage issue, most likely through lower prices. China tariffs or no, we would still be fighting this burdensome supply situation because we have planted 90 mln bean acres the past two years and grown near record and record yields.

Elsewhere in the news, the US is set to impose new duties on Chinese aluminum sheet products. China’s top grain producing province Heilongjiang is slashing subsidies for farmers to plant corn and nearly doubling the subsidy to plant beans. The 2018 subsidies are set at $25.79/acre for corn and a whopping $330/57/acre on beans. This is a dramatic effort to shift production in soybeans. Chinese Ag Ministry acknowledged another African swine fever outbreak was recorded in central province of Hubei.

The wheat complex saw mixed price action overnight. That trend continued throughout the day, with the spread between the classes extending. The Mpls/Chicago spread had a big outside day lower move today, maybe implying that in tomorrow’s report we will see similar adjustments in carryout in each class of wheat as we saw last month. Hard to imagine that the USDA will lower SRW carryout for a second consecutive month, but we could easily see HRW and HRS carryout go up a little again.

Looking ahead to the crop report tomorrow, the bull will be once again hoping for World production downgrades, but how much of a reduction could we possibly expect. Australia is the obvious reduction, as the USDA will no doubt lower production there by 1.5 to 2.0 MMT from 18.5 MMT down to maybe 17.0 or 16.5 MMT. Everywhere else though is a toss of the dice. Can they lower Argentina? Sure. Will they finally lower the EU that is so long overdue? They should, but they probably will not. Russia’s wheat production continues to rise. Look for the USDA to offset any reductions with an increase in Russia’s crop estimate and maybe give us slightly higher yields out of the FSU. With that being said, look for World wheat ending stocks to be similar to last month’s 260.18 MMT.

Anna Kaverman

anna@mercerlandmark.com

Market Report

Monday November 5th, 2018

December closed up 2 ¾ at $3.74 and March 19 closed up 2 ½ at $3.85 ¾. January beans closed down 2 at $8.85 ¾ and March 19 closed down 1 ¾ at $8.98 ¼. December wheat closed down 1 ½ at $5.07 ¼ and July 19 closed unchanged at $5.42 ¾. Crude oil closed down $.07 at $63.21.

Mixed overnight trade gave way to a “slightly firmer” day.  Managed Money traders were viewed net buyers of about 10,000 futures today, which would leave them as “small net longs” in the corn market for the first time since early summer. Trade had a sluggish feel today, as many are likely waiting for the mid-term elections tomorrow before taking any serious stands.

Crop Progress data after the close pegged U.S. corn harvest progress at 76%, advancing 13% from the prior week. Progress is 8% ahead of last year, but is now 1% behind normal. The report implies just under 20 million total acres left to harvest, over half of which are in five western Belt States (Iowa 3.6 mil, MN 1.6 mil, NE 3.2 mil, and a combined 3.5 mil in both Dakotas).  Harvest weather is due to become more challenging, particularly in the soggy (and soon to get soggier) Eastern Belt. South American weather remains favorable overall. Strong early soy planting pace in Brazil bodes quite well for second crop (safrinha) corn planting in a few months.

Weekly Grain Inspections found their rally caps.  For the week ended 11/1, U.S. exporters shipped 1.25 million metric tons of corn. This was almost double the prior week pace, and a nearly three-fold leap from the prior year period. It is also barely above the pace needed to meet current USDA sales goals. The pace of booking new business in corn has slowed dramatically in recent weeks, as Ukraine and South American sellers compete more aggressively into Asia. Latin buyers remain captive to U.S. markets; Mexico picked up another two cargos of U.S. corn under daily reporting today.

The soybean market had a back and forth, two-sided session that slipped back into negative territory and stayed there when meal gave up its gains mid-morning. Volumes were very light and with no China trade news whiplash around the price action was mostly driven by pre-report positioning. The selling in meal came after a report that Brazil was in talks with China looking for ways to increase meal exports seeking a better balance of soybean and product trade as a way to help their domestic crushers.

Weekly grain inspections data was better than expected in beans with 1.229 mmt but down slightly from last week at 1.329 mmt and well behind this week last year where 2.493 mmt was inspected.  Inspections to date stand at 8.578 mmt compared to 14.869 mmt this time last year representing a deficit of 231 million bushels. Soybean harvest progress advanced to 83% from 72% last week and 89% avg. for this date. This leaves just over 15 million acres left to cut with MO (2.081 mln), KS (1.743 mln) and IA (1.193 mln) with the most crop still in the field.

AgRural reports that Mato Grosso has planted 60 percent of its estimated soybean area of 35.8 million hectares, above a 5-year average of 41 percent and higher than last year’s 43 percent. This record early pace will have some producers harvesting their beans in some areas of Mato Grosso well ahead of normal in mid-December.  The weather forecast shows Brazil rains shifting to the North of the country where some drying would be welcomed in the South.

Wheat continues in a repeating pattern. A surprisingly firm start to the overnight was unable to carry through the entire night. Trade seemed unenthused throughout the day after a weekend absent of any business or fresh, influential news and that is exactly what is needed if the wheat complex wants to take that next step forward.

Black Sea prices for Russian wheat looked to be up a little week over week and are said to be at roughly $224/mt which is a positive sign moving forward. Russian wheat is not the cheapest in the World anymore, and it looks as if the shift away from other countries only looking to the Black Sea for wheat might be in its early stages. Crop progress this afternoon continues to show winter wheat planting in some states such as Kansas, Oklahoma, Texas, Michigan, Arkansas and Missouri lagging. But keep in mind, last Monday afternoon’s crop progress did not influence price direction at all that night or the following day, so hard to see today’s report being too much of an influence. Most feel the winter wheat planting will eventually get done. There is just nothing around at this time that looks to be powerful enough to ignite such a move. Maybe the crop report Thursday could be that influence.

Looking ahead to the crop report Thursday, the bull will be once again be hoping for World production downgrades. Australia is the obvious reduction, as the USDA will no doubt lower production there around 1.5 to 2.0 MMT from 18.5 MMT down to maybe 17.0 or 16.5 MMT. Everywhere else though is a toss of the dice. Can they lower Argentina? Will they finally lower the EU that is so long overdue? They should, but they probably will not. Russia could be the wildcard. The Russian Ag Ministry continues to raise its wheat production estimate, so I would not be surprised if the USDA offsets any reductions with an increase in Russia’s crop estimate. So, with that being said, World ending stocks should be similar to last month’s 260.18 MMT.

Anna Kaverman

anna@mercerlandmark.com

FOR THE WEEK ENDED 11-2-18

CORN

The corn market edged higher this week on spillover strength from political statements that rallied the soybean market.  Without the surge higher in soybeans, corn remained stuck in its $3.60 to $3.75 trading range.  Export demand for corn has been uninspiring, but basis was steady to firm as growers tucked bushels away in both on and off-farm storage, or on delayed price contracts. Demand from ethanol and feed users has been good.  Mexico bought 201 tmt of US corn in routine business this week.  Corn harvest continued to plug along.  As of October 28th, corn harvest was right on the average at 63% complete.  Growers pushed to combine ahead of forecasted rain showers for the week of November 5th.

Trade estimates are emerging for the November 8th WASDE report.  The average estimates from the Bloomberg survey for the 2018/2019 marketing year are: corn production 14.729 billion bushels using 180.1 BPA yield, ending stocks at 1.775 billion bushels, world ending stocks at 159.2 mmt, Argentina’s 2019 corn production at 41.2 mmt, and Brazil’s 2019 at 94.6 mmt.

On November 2nd, the USDA released their 10-year baseline forecasts.  For the 2019/2020 US corn crop, they are predicting 92 million acres (down 2.9 million from this year), 176.5 BPA, production 14.93 billion bushels and carryout of 1.603 billion bushels.  The national average farm price is estimated at $3.90 per bushel.

Weekly export sales for corn were a disappointment at just 15.5 million bushels.  Total export commitments, however, are up 28% from last year at 859.5 million bushels.  New crop sales for 2019/2020 were a meager 200,000 bushels.  New crop commitments are sharply lower than last year at 4.1 million bushels versus 16.7 million bushels on the books last year. Weekly ethanol production was up 35,000 bpd to 1.06 million bpd.  This was the second biggest weekly increase in the last 26 weeks.  Ethanol stocks fell 1.15 million barrels to 22.75 million barrels.  This was the largest single week decline since August 2010.  Stocks are still nearly 6% higher than last year at this time.  Margins were up 2 cents but were still a negative 8 cents per gallon.   The September NASS Grain Crush report showed corn for ethanol used 449.3 million bushels.

OUTLOOK: December corn rallied 3 ½ cents higher this week as it followed soybeans, closing at $3.71 ¼ per bushel.  The March contract gained 3 ¼ cents at $3.83 ¼ and the new crop December 2019 contract was 1 ¼ cents higher at $4.03 ¾ per bushel. Seasonally, December corn declines from November 8 through November 19.  Corn may continue in its recent range ahead of the November WASDE report, and without fresh news, any significant gains may be difficult to come by.

SOYBEANS

Politics reared their head this week to jumpstart the soybean market.  On November 1st, President Trump tweeted that he had a “very good conversation” with Chinese President Xi concerning trade issues.  This drove futures prices up over 30 cents on a closing basis as fund short covering ensued.  The gains were extended into Friday, with January soybeans trading as high at $9.00 ¾ per bushel.  Prices retreated from the highs as chatter surfaced that a deal was still a long way from being done, despite talk that President Trump had asked the Cabinet to draft a Chinese trade proposal.  At least one Trump administration official denied that a trade proposal was requested by President Trump.  President Trump and President Xi are scheduled to meet at the G-20 conference in Argentina later this month.  China’s soy complex tumbled lower on the trade talk.  Their soymeal traded down the 5% limit.  On the US weekly charts, soybeans posted a key reversal higher, which may attract additional fund short covering.

China imported 7.59 mmt of Brazilian soybeans during September, up 28% from last year and accounted for 95% of China’s September soybean imports.  During October, Brazil exported 5.353 mmt of soybeans, up 116% from last year.  There has been chatter that Brazil’s soybean crop may have been underestimated by as much as 2 mmt. China announced recently they are lowering the “recommended” protein levels in pig feed by 1.5% and by 1% in chicken feed. These are not mandatory reductions. According to China’s Ag Ministry, this would cut China’s annual soybean consumption by 13% or 14 mmt and their soymeal usage by 15.5% or 11 mmt.

Turning to Brazil, they elected a new President in the last week.  Jair Bolsonaro’s administration is expected to look for more bilateral trade deals.  He has also indicated he is concerned about China’s buying controlling interests in oil, mining, and energy industries, as well as farmland, railway, port, and highway projects.  At one point, he was quoted as saying, “The Chinese are not buying in Brazil.  They are buying Brazil.”  Market watchers are also waiting to see if a soybean export tax may be implemented to give Brazil’s coffers a kick.  Brazil’s soybean planting and early development is off to a record start.  A fast start in soybean planting can lead to early planting of the safrinha corn crop, which then favors higher corn yields.  As of October 26th, Brazil’s soybean planting was 44% complete versus 27% on average.

The average trade estimates for the 2018/2019 marketing year from Bloomberg’s survey are as follows: soybean production 4.536 billion bushels using 53.0 BPA, ending stocks at 906 million bushels, world ending stocks 111 mmt, Argentina’s 2019 beans at 56.8 mmt, and Brazil 2019 at 120.7 mmt.  There have been just few times in the past when the USDA raises the October US soybean yield, which happened this year, they leave the November yield unchanged or lower it.  History doesn’t favor a yield decline on the November report next week.

The USDA also released the 10-year baseline projections on November 2nd.  They are initially forecasting 2019 US soybean acreage at 82.5 million acres (down 6.6 million acres from this year) with a yield of 50 BPA and production of 4.09 billion bushels.  They project 2019/2020 carryout at 723 million bushels and an average national farm price of $8.75 per bushel. The September NASS Oilseed Crush report showed a record number of soybeans crushed in September at 169.2 million bushels, but slightly less than anticipated.  Soyoil stocks were smaller than expected at 1.99 billion pounds.

Weekly export sales were 14.5 million bushels, bringing total commitments to 788.2 million bushels.  This is down 29% from last year. Cancellations to unknown and China continue.  New crop sales for 2019/2020 were 2.2 million bushels.  Total new crop commitments are in line with last year at 5.6 million bushels.

OUTLOOK: January soybeans surged 30 cents higher to close the week at $8.87 ¾, March followed with a 29-cent gain at $9.00, and November 2019 bounced 23 ¼ cents to settle at $9.33 per bushel.  Soybeans saw their biggest weekly gain in 16 months. Whether soybeans can continue to build on this week’s political news is unknown, but even if we are headed to a trade deal, it will take time to complete.  Soybean harvest was 72% complete as of October 28th versus 81% on average.  Can soybean futures rally beyond the $9.00 mark and maintain it?  The next few weeks leading to the G-20 conference may be volatile and be swayed by tweets and the November 8th WASDE report.  The fast, favorable start to Brazil’s soybean crop is another factor to consider in any bullish sentiment.

Egypt’s Supply Ministry said on Monday that the country’s strategic reserves of wheat are enough to cover needs until the beginning of March 2019.  The Crop Progress report estimated winter wheat is 78% planted, up 6 from last week, but still below the 5 year average of 85%.  Colorado is 96% planted vs the 5 year average of 98%, Kansas 76% vs 89% ave, Nebraska 96% vs 99% ave, Oklahoma 78% vs 88% ave and Texas 67% vs 75% average. The first condition report of the season for the winter wheat crop rated it 53% Good/Excellent, compared to 52% a year ago. Wheat export sales were bigger than expected.  In fact wheat sales topped both corn and soybeans this week.

Anna Kaverman

anna@mercerlandmark.com

Market Report

Wednesday October 31st, 2018

December closed down 1 ½ at $3.63 ¼ and March 19 closed down 1 ½ at $3.75 ¾. January beans closed up 4 ¾ at $8.51 ¾ and March 19 closed up 4 ½ at $8.65. December wheat closed up ¾ at $5.00 ½ and July 19 closed down 2 ½ at $5.34. Crude oil closed down $.90 at $66.31.

The corn market has been nothing if not consistent this week.  Corn down-ticked again today. Volumes have been quietly inching higher throughout the week, though ranges and excitement remain muted. Managed Money traders were viewed small net sellers for a third day and will head into tonight net short an estimated 50,000 combined futures and options.

In truth, it was a very quiet news day. Harvest remains full throttle in the western Corn Belt, while those in the East are rained out. The balance of the week promises more of the same.  After that, the weather becomes a little more mixed. It will be interesting to see the harvest mix in Monday’s weekly report, as the 6-10 day map leans wet and the first half of November is starting to look a little chilly again, which reduces evaporation rates. The weekly export sales report in the morning is expected to be another rather depressing affair. There were no announced daily sales over the report timing, the Dollar has firmed, and both South American and Ukrainian sellers have become more aggressive.

The soybean market began the day under pressure but rallied back for a reversal trade driven by technical short covering in an otherwise quiet Halloween session. There was a technical component to today’s bounce as well. The daily bean charts had become oversold after the two-week break off the recovery highs and in the process.Meal bounced back with front month Dec respecting its lows against this $300 area once again. In the currency trade, the Dollar index extended its rally into new highs and fund selling seemed mostly concentrated in wheat.   The dollar index is extremely overbought and due for a correction and when that happens, it should take some of the sell pressure away. With the start of a new month tomorrow, money flows in/out of commodities could be more pronounced than normal.

Another quiet news night, and another session in which prices were lower, that is until the end of the day. Much of the overnight weakness came in the hour leading up to the morning pause. A late morning run in beans and meal helped take wheat futures off its lows, but until the end of the day, values were mired in a mostly lower trading range.

Over the past few days, trade seems to have been focused on World wheat prices lower week over week, Bangladesh and Jordan passing on their recent tenders citing too high of offers and what was next for the US export program. But, what ignited the late run? Early in the session when Chicago Dec was trading on its lows at around $4.90, it was said that at that point US SRW wheat was once again the cheapest wheat in the World, and we have seen before that when US wheat becomes that cheap, it generates business. Did not hear of any wheat business, but that does not mean there wasn’t any. Also, as we moved through a quiet news day, talk started to once again surface about the quality of the Aussie wheat crop. Those reports coming out on the early stages of the Australian wheat harvest were not very encouraging.

Anna Kaverman

anna@mercerlandmark.com