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Archive for January, 2019

Market Report

Tuesday January 29th, 2019

March 19 corn closed down 2 ½ at $3.77 ¼ and December 2019 closed down 2 at $4.01. March beans closed down 4 ¼ at $9.19 and November 19 closed down 4 ¼ at $9.58. March wheat closed down 5 ½ at $5.13 ¼ and July 19 closed down 6 ¼ at $5.25. Crude oil closed up $1.31 at $53.60.

Much like the broader Midwest, the corn market “hunkered down” today, easing a couple cents lower as traders await developments to play out later this week and next. Volumes picked up a little, and the daily range widened out to 4-5 cents. Managed Money traders were viewed net sellers of 10,000 corn today, which would leave them net long 45,000 combined futures and options. The CFTC confirmed it would release data piecemeal on Friday’s and Tuesday’s into early March, similar to the prior gov’t shutdown.

The markets continue to mostly discount the present in favor of future developments, namely the China dialogue this week, and the USDA updates next week. On the latter point, there was are still a few question marks, particularly pertaining to the weekly export sales release Thursday. There was a “twitter rumor” around mid-day that the USDA would take the “piecemeal” approach we discussed above with the CFTC releases. If true, this would significantly reduce the usefulness of the export sales report for the foreseeable future. The USDA did issue their first daily sales announcement today in well over one month, reporting 138,000 metric tons in optional origin sales to South Korea. This is actually neutral to corn at best, as it implies it could theoretically be satisfied from non-U.S. origins.

Forecasters continue to promote “some relief” in dry areas of Brazil starting next week.  Soy production estimates continue to creep lower off very high levels, though getting corn planted behind those acres are the more important point for corn.  Argentina may be too wet in spots, but it remains to be seen whether it will have much impact.  South Africa is improving, but some damage has been done. U.S. Midwest is hunkering down for near-record cold Wed-Thurs.

The soybean market settled lower as our choppy trade continues and the chart formation continues to coil. Both products also settled lower with bean oil overdue for a technical correction after its recent gains. Bean prices are currently supported by the potential for Chinese purchase commitments as part of a trade agreement as well as falling production ideas out of Brazil. Unfortunately, China is unlikely to buy enough soybeans from the US to materially change our oversupply situation this year. Unfortunately, for us, Argentina is likely to more than make up for any Brazilian production short falls this growing season.

The looming issues of African Swine Fever reducing demand from the world’s biggest soybean buyer in China, net-net larger South American production year over year, too many US soybean acres likely to be planted this spring due to inflated prices, and existing supply side statistics will be reflected on the board some point.

The CFTC and the USDA will release staggered, back dated commitment of trader’s reports and weekly export sales reports instead of one big report to catch everything up at once. The COT reports will re-start this Friday and will be published on Tuesday as well, starting with data from the week ending Dec 24 this Friday so it will be a couple of weeks before we get caught up.  The weekly export sales report this Thursday supposedly will be for sales from the week ending December 20th and will not encompass all the activity during the shutdown.  The data will be updated once per week until they get caught up?  Importantly, it appears that the markets will be in the dark on the current fund position and export data for the Feb 8 WASDE.

All eyes turn to the US-China trade talks in Washington scheduled for tomorrow-Thursday.  There is plenty of optimism surrounding the negotiations along with the potential to see substantial ag and energy purchase commitments by China.  However, the reality is that it is unlikely that the two side will get past the fundamental disagreements on intellectual property theft and forced technology transfers that continue to hold up a larger trade agreement. The US has requested the extradition of the Huawei executive who was arrested in Canada last month and is being used as a negotiating tactic and symbol of the trade dispute. March 1 is the deadline for a trade agreement to be reached before tariffs rates are increased, so there is a strong possibility that no breakthrough is reached this week. Expect both sides to posture in the media creating continued headline choppiness on the board.  The old saying is that those who chase headlines end up selling papers in the street.

The wheat complex saw mixed price action overnight with futures starting a little weaker, before rallying a bit late evening and staying firm through the European opening. However, as we neared the morning pause the GASC offers were revealed and that is when wheat prices collapsed. There was nothing positive to take out of those offers this morning, and trade during the day reflected that. The bottom line is the US offers in the GASC tender are not as competitive as a few weeks ago. Keep in mind, the US was only around $3.00-$4.00 away from being competitive in the GASC’s last tender on Jan 8. Hard to rally a market on that news. The good news is there is enough demand around that could stop the bleeding, we just have to get a little more competitive in price to win that business. If not, it may be a long ten days as the next bout of positive news may not be until Feb 8 when the USDA will release the January reports for quarterly stocks, wheat acres, and final 2018 production.

Anna Kaverman

anna@mercerlandmark.com

Market Report

Friday January 25th, 2019

March 19 corn closed up 3 ¼ at $3.80 ¼ and December 2019 closed up 2 ½ at $4.03 ¼. March beans closed up 9 ¼ at $9.25 ¼ and November 19 closed up 7 ¾ at $9.64 ¼. March wheat closed down 1 ½ at $5.20 and July 19 closed down 1 at $5.33. Crude oil closed up $.56 at $53.98.

FOR THE WEEK ENDED 1-25-19

CORN – The more things change, the more they stay the same.  Corn was stagnant in the same trading range it’s been in since November and closed slightly lower for the week.  Corn closed lower for the first three days of the holiday shortened trading week before recovering on spillover strength from the soybean market.  This week was not much different from last week with traders trolling daily for headlines to act upon. On Friday, President Trump announced the government would reopen for three weeks until February 15th while negotiations continue on border security and immigration issues.  According to early reports, we will see both overdue and scheduled USDA reports on February 8th.

Weekly export inspections for corn were better than anticipated at 43.6 million bushels and the largest in eight weeks.  We need inspections to average 46 million bushels per week to hit the USDA’s 2.45-billion-bushel export outlook.  The weekly ethanol report showed production fell 20,000 barrels to 1.031 million barrels.  Over the last ten weeks, ethanol production is running 2.5% behind last year’s pace.  Weekly ethanol stocks were up 150,000 barrels to 23.5 million barrels.  Net ethanol margins were negative for the 18th week in a row at a negative 6 cents per gallon.  When the government finally issues updated balance sheets, it’s likely the corn usage for ethanol will be reduced.

A grower survey by Farm Futures projects corn acreage will increase from 89.1 million acres in 2018 to 90.3 million acres in 2019.  This is a 2.4 million acre or 1.3% year on year increase.  For soybeans, the survey indicated soybean acreage will fall 2.9 million acres or 5.5% year on year from 89.1 million acres to 84.6 million acres.  Wheat acreage in 2019 was forecasted to fall 2.5% to 46.6 million acres.  IEG Vantage, formerly Informa Economics, is currently forecasting 2019 US corn acreage at 91.5 million acres, soybeans at 86.2 million acres, and winter wheat at 31.5 million, other spring wheat at 13.8 million, and durum wheat at 1.88 million acres.  IEG Vantage is forecasting the corn carryout for 2018/2019 at 1.817 billion bushels versus USDA’s 1.781 billion bushels.  For 2019/2020, they predict the carryout at 1.824 billion bushels.  The International Grains Council increased its 2018/2019 world corn production forecast 3 mmt to 1.076 billion tons.  The 2018/2019 world corn carryout outlook was raised 5 mmt to 271 mmt but is down 33 mmt year on year.

China’s corn market posted its biggest one-day rally in over a year on news their strategic reserve administration for state firms would raise corn prices paid to farmers.  Growers there are said to be holding a larger than normal percentage of their old crop corn and the government would like to get it into better storage facilities.  This prompted talk that the government would push back corn auctions of state reserve corn from early summer until later to give farmers a longer selling period.

OUTLOOK:  Each day can hold its own surprises and this has kept traders cautious, but overall, it’s been a sideways, mostly boring market.  The US dollar index rallied to a 3-week high during the week, lending some pressure on commodities early in the week; however, the US dollar fell into the weekend, helping corn to break a string of 3 consecutive lower closes.  For the week, March corn was down 1 ½ cents to $3.80 ¼, July was off ¾ cents at $3.96 ½, and December fell ½ cent to settle at $4.03 ¼ per bushel. Now that the government is reopening, we could see USDA reports that will drive direction.  Did China buy any corn during the last month?  Stay tuned.

SOYBEANS – Soybean prices tested the $9.00 level when traders returned from the long holiday weekend.  Weekend weather in Brazil was as expected with rain in Brazil easing some dryness concerns.  Prices recovered in the days following, but a comment from US Commerce Secretary Ross that the US and China were “miles and miles” apart on resolving trade issues but believed eventually an agreement would be reached, limited the upside.  Rumors early in the week that the US had cancelled a preliminary meeting between the US and China before higher level meetings scheduled in the US for January 30-31 were rejected. The scheduled January 30-31 meetings between the US and China remain on the calendar.  According to US officials, there never was a preliminary meeting on the books, thus, there was no meeting to cancel.  Headlines and rumors continued to capture the market’s attention and drive daily direction.  Remember, the deadline to reach a deal with China and avoid raising the tariff on $200 billion worth of Chinese goods from 10% to 25% is March 1.  China’s economic growth in 2018 was just 6.6%, the lowest since 1990.

Brazil’s second largest soybean producing state of Parana lowered their soybean production estimate 2.3 mmt from 19.1 mmt to 16.8 mmt due to dryness in December.  Parana’s soybean harvest was estimated at 15% complete with 70% in good condition and 7% in poor condition.  On January 7, 58% of their beans were rated good and 12% of the crop was in poor condition.  It was said areas that have been hit the hardest by dryness in Brazil are the areas that had the earliest planted soybeans.  Later planted soybeans are believed to be in better condition.  The third leading soybean producing state of Rio Grande do Sul reduced their production estimate from 18.7 mmt to 18.4 mmt.  The International Grains Council cut their world 2018/2019 soybean production projection 4 mmt to 363 mmt.  2018/2019 carryout was increased 3 mmt to 54 mmt and is up 10 mmt year on year.

Weekly soybean export inspections were within expectations at 40.8 million bushels with cumulative exports down 40% from a year ago.  We need to average 35 million bushels per week to hit the USDA’s 1.9-billion-bushel export forecast.  China imported just one soybean cargo from the US in December.  They imported 4.39 mmt of soybeans from Brazil in December.  For all of 2018, China only imported 16.6 mmt of US beans versus 32.9 mmt in 2017.

The EU meets in Brussels on January 30th and will discuss waiving the import tax on Argentine biodiesel imports, with the possibility of adding an import quota.  If it happens, Argentina may crush beans for the biodiesel market.  This will put more meal on the market, which we don’t need, especially if China’s African swine fever culling has been underreported.

OUTLOOK:  Overall price direction will depend on the accuracy of rain for Brazil and updates on progress of trade talks with China.  March soybeans closed above the 200-day moving average technical resistance for the first time since June on Friday’s rally.  This may attract buyers to send prices to the $9.40 area if it continues to be dry in Brazil, prospects look better for a Chinese deal, or technical buyers reemerge.  For the week, March soybeans were 8 ½ cents higher at $9.25 ¼, July rallied 9 ¼ cents to $9.51 ¾, and November gained 8 ½ cents to close at $9.64 ¼ per bushel.

WHEAT – The International grain council raised its 18/19 wheat production outlook by 8 million tons to 737 million tons. US Wheat markets are keeping a close eye on Russian wheat activity.  Russian prices have crept higher and analysts are wondering if they slow their export pace due to a smaller than expected wheat crop this year.  US wheat is competitive in world markets now, but Russia still holds a sizeable freight advantage. Traders are also watching Ukrainian wheat exports.  Exports have almost hit the quota for shipping milling wheat for the year and have been asked to submit export plans for the rest of the year. Bloomberg is reporting a new wrinkle on the trade war front.  China might be willing to buy significant quantities of US wheat in order to improve the negotiations and to help offset the trade imbalance. Nothing official but bears watching. Wheat export inspections were ok this week, hitting the middle of expectations this week. Inspections are behind the USDA total by 143 million bushels. HRW wheat made up the largest portion of inspections.

Anna Kaverman

anna@mercerlandmark.com

Market Report

Thursday January 24th, 2019

March 19 corn closed down 1 ¾ at $3.77 and December 2019 closed down 1 ½ at $4.00 ¾. March beans closed up 1 at $9.16 and November 19 closed up ¼ at $9.56 ½. March wheat closed down 4 ½ at $5.21 ½ and July 19 closed down 3 ½ at $5.34. Crude oil closed up $.50 at $53.42.

The corn market continued its struggles amid the shortened week, finishing the day with losses. Corn tried to be a little firmer overnight, but once again struggled to keep the fires burning during the day.  Managed Money traders were viewed net sellers of another 5,000 corn today, which would leave them net long just under 55,000 combined futures and options.

The daily “wax on, wax off,” of China trade negotiation chatter continues, and today was definitely in the “wax off” column.  Major U.S. negotiator Ross stated this morning that the two sides were “miles and miles” away from a complete resolution, which is not surprising given the scope of the talks. Ag traders are merely hoping for a few “scraps” off the table, ie: the promised short-run boost in exports amid the trade truce.  Though the list of shipped commodities has grown, corn business still has not been confirmed. The uncertainty continues to keep traders from fully committing to a bull or bear stance, maintaining a frustrating range chop.

The weekly EIA report was not as bearish-as-feared for ethanol, finding a modest pullback in production and a small build in stocks. Weekly ethanol production of 1.031 million bbl/day was almost 2% lower than the prior report’s six week high. A weather tinge remains around the markets. There is limited concern over big rains in Argentina’s center and south, which could produce some localized flooding on newly-planted crops. Concurrent drying in the NE of Argentina will improve conditions? In Brazil, Mato Grosso do Sul will continue struggling for moisture along with parts of Mato Grosso, Paraguay and Bolivia, until this weekend when showers and thunderstorms evolve.  Farm Futures surprised some with a 90.3 million estimate for 2019. Informa out yesterday was 91.5. By way of comparison, many private analysts were eyeing 93 million type acreage numbers just a few months ago, but higher input costs and firmer-than-expected soy-to-corn ratio have disabused such theories.

The soybean market continued its choppy two-sided trade where the overnight gains failed to hold and a weaker opening after the break also failed to extend. There is a sense that the markets have hit pause as we await the outcome of next week’s trade meeting between the US and China. Will there be an agreement where China commits to significant ag and energy purchase or not? Time will tell but there are significant barriers to reaching an all-encompassing trade deal because of the fundamental disagreement over intellectual property and forced technology transfer.

Both sides are under pressure to get a deal done which would remove the trade tariffs with China’s economy at this point showing much deeper and troubling cracks. Keep in mind, March 1 is the deadline for an agreement to be made or else additional tariffs on Chinese goods will be enacted so there is a strong chance that next week’s highly anticipated face to face is a bust. For now, these remain technically traded markets that are lacking new fundamental insights particularly in the absence of fresh USDA inputs. Acreage is a hot topic of conversation again with Feb days now only a week away. Farm futures released their acreage survey results, this follows Informa’s estimates published yesterday.  The project bean acres -5.5% to 84.6 mln (Inf 86.2).

Brazil’s weather remains very uneven with soybean production estimates on the decline. Cordonierre lowered his Brazilian soybean crop estimate by 1 mmt to 115 mmt vs. 120 mmt last year with a lower bias going forward, he left his Argentine soybean production unchanged at 56 mmt vs. 38 mmt last year with a steady bias going forward. Brazil’s state of Parana which is the second largest soybean producing state after Mato Grosso, lowered their production estimate to 16.8 mmt from 19.1 mmt projected in December. AgRurual reports Brazil soybean harvest overall at 6.1% compared to .8% this time last year and 1.2% for the 5-year avg. Early yield reports have generally been disappointing.

The wheat complex took a bit of a breather today in another low-volume, unenthusiastic trade. Shortly after the European markets opened the complex found some selling. After a couple of positive technical closes for wheat recently, Chicago had a poor technical close today, posting an outside day lower settle. From a technical perspective, another lower close on Friday could be enough to eliminate what the markets have built up earlier in the week, so tomorrow’s settle can be very important. From the fundamental side of things, it has been a good week for US wheat. A plethora of sales have already popped up, and with this being late Jan days and already well into the second half of its export season, demand for US wheat should only pick up over the next few months and that will be the key to sustaining any upward momentum. Firming World wheat values will only accelerate how quickly the US becomes that global supplier for wheat, and with Russian domestic wheat values firming sharply again, it only makes US wheat that much more enticing. A China deal would be the icing on the cake but at this point in time there is no reason to believe that is going to happen anytime soon.

Farm Futures put together a table of projected plantings for this coming year. The survey was from 626 farmers. After putting the data together, it estimates all winter wheat acreage at 31.6 mil, which is very similar to Informa’s estimate of 31.51 mil. The breakdown had HRW wheat acres at 22.8 mil vs 22.2 mil from Informa, SRW wheat acres at 5.6 mil vs 5.9 mil from Informa and White at 3.2 mil vs 3.5 mil from Informa. Spring wheat acres were estimated not nearly as high as Informa, 12.5 mil vs 13.78 mil. Durum acres were estimated at 2.5 mil vs Informa’s 1.87 mil. Overall acreage from Farm Futures survey was set at 46.6 mil vs Informa’s estimate of 47.163 mil acres.

Anna Kaverman

anna@mercerlandmark.com

Market Report

Friday January 18th, 2019

March 19 corn closed up 1 ¾ at $3.81 ¾ and December 2019 closed up ½ at $4.03 ¾. March beans closed up 9 at $9.16 ¾ and November 19 closed up 7 ½ at $9.55 ¾. March wheat closed unchanged at $5.17 ¾ and July 19 closed up ½ at $5.28 ¾. Crude oil closed up $1.68 at $54.04.

FOR THE WEEK ENDED 1-18-19

CORN – Unexpectedly, we had a couple of firework days this past week.  After a quiet start to the week, corn plunged to the bottom of the recent trading range on Tuesday on reports that Trade Representative Lighthizer didn’t see any progress on structural issues in the trade talks with China.  Structural issues include the technology problems that got all this started in the first place.  However, China’s Vice Premier Liu He is scheduled to come to Washington January 30-31 for further high level discussions.  On Thursday, the market roared back to life on rumors that 1) the US had sold wheat to non-state Chinese buyers and  2) the US was considering lifting the tariffs on Chinese goods to calm the markets and entice China to make “real” concessions when they meet in Washington.  Without any reports to confirm export business, the market was left to rely on cash market input, which didn’t reflect any big wheat business being done.  As the bell rang on Friday before the long weekend, there were statements from the US that nothing had been done in relation to lifting tariffs on Chinese goods and from the trade, maybe a cargo of wheat had been sold off the PNW.  As the session progressed, it came to light that China had offered to pick up the pace of US purchases to the tune of $1 trillion over the next 6 years.  US officials were reportedly skeptical of the offer and if true, they would prefer it occur over the next 2 years.

US ethanol production increased this week, but ethanol stocks also rose.  Production was 51,000 bpd higher at 1.051 million bpd, but this was still 1% lower than last year.  Stocks were up 4 million gallons to 981 million gallons.  Weekly export inspections were 39.9 million bushels.  We are 61.4% ahead of last year and need to average 46.1 million bushels/week to hit the USDA’s 2.45-billion-bushel export projection.  China also stated they anticipate one more year of state corn reserve sales.  They expect corn stocks to return to more normal levels after 2019.

March corn rallied this week to its highest level since January 9th and December corn revisited price levels last seen in early November.  For the week, March corn was 3 ½ cents higher at $3.81 ¾, July up 3 cents at $3.97 ¼, and the December contract was 2 ¼ cents higher at $4.03 ¾ per bushel.

OUTLOOK:  Heading into a short trading week with no trading on Monday due to Martin Luther King, Jr. Day, traders remained somewhat cautious on tweets, rumors, and headlines. Without the USDA to verify any export business actually being done, we are left to our own devices and rumor mills.  Corn is still in a sideways pattern despite this week’s gains.

SOYBEANS – Soybeans began the week on a soft note after Brazil received moisture, but not enough to say all their dryness concerns were alleviated.  On Thursday, soybeans benefited from the same rumors/trade chatter that sparked corn higher (stated above).  If we can reach an agreement with China, it could mean additional soybean business.  However, that business could be limited with US soybeans priced higher (even without the tariff) than Brazilian soybeans and Brazil beginning their harvest.  Reportedly, several Brazilian soybean vessels that were looking for homes found them in China this week.  It also makes sense to question China’s demand.  They are still finding new cases of African swine fever in their hogs.  It has now been found in every province in China and has spread to Mongolia.  China reported this past week that 916,000 hogs had been culled.  This may be an understatement as over 100 cases have been verified.   Rabobank believes China’s pig herd could fall as much at 20% this year due to the disease.  According to China, their hog inventory was down 4.8% from a year ago in December and the sow herd was 8.3% lower than a year ago.  China asked for farmers to restock quickly to avoid a shortage of pork and higher prices later in the year.  Due to the ASF, China’s meal prices have fallen to their lowest in three years on weak demand. The last USDA forecast for Chinese soybean imports was 90 mmt.  This number may be called into question on future balance sheets.

Brazil continues to experience dryness in the central and northeastern regions.  How much rain they receive before traders return after the holiday weekend may affect next week’s trading.  Most outlooks for Brazil’s soybean crop fall into the 115 mmt to 118 mmt range. AgRural pegged Brazil’s soybean harvest at 6% complete versus 0.08% last year. Celeres cut their Brazilian soybean production forecast 5 mmt to 117.2 mmt. In Argentina, the BAGE lowered their soybean acreage estimate 200,000 hectares to 17.7 million hectares, or 43.7 million acres, due to heavy rain.

The December NOPA Soybean Crush Report was better than anticipated and set another monthly record for the 14th month in a row.  The December crush was 171.8 million bushels and was the third highest monthly crush ever.  Soyoil stocks were slightly less than expected at 1.498 billion pounds compared to 1.571 billion pounds estimated.  Weekly export inspections were a 7-week high at 39.9 million bushels.  We need to average 35 million bushels per week to achieve the USDA’s 1.90-billion-bushel export outlook.

OUTLOOK:  Next week’s holiday shortened trading week will rely on how much rain Brazil receives, how much is in the forecast, if Argentina can back off excess rain, and what is going on with China.  Looking at the big picture, it is difficult to formulate a scenario where soybeans can surpass this winter’s high.  Even if China returns to the US for soybeans, it will likely only amount to what the government tells their trading house to buy.  Brazilian beans are cheaper than US origin, so only politics would drive purchases from the US.  Without any USDA reports to tell us if China has bought US soybeans in the last three weeks, the popular thought is they have already bought up to 5 mmt since December 1.  For the week, March soybeans rallied 6 ½ cents to $9.16 ¾, July up 6 ¼ cents at $9.42 ½, and November soybeans were 3 ¾ cents higher at $9.55 ¾ per bushel.

The wheat market traded steady to higher Friday with Chicago unchanged. Prices continue to trade in narrow ranges from lack of news and ideas of improving demand. There was chatter that all the chatter about China buying US wheat turned out to be Egyptian business. The jury is still out on Russian exports. Talk is that they plan to curb exports, then the news stories state that they are exporting wheat at a record pace, followed up with officials stating there is no talk of Russian exports backing off. The US Southern Plains braces for snowfall this weekend and seeing frigid temps this week and into the weekend.

Market Report

Wednesday January 16th, 2019

March 19 corn closed up 2 ¾ at $3.74 and December 2019 closed down 5 ¾ at up 2 ¾ at $3.99 ¼. March beans closed up 1 ¼ at $8.94 ½ and November 19 closed unchanged at $9.37 ½. March wheat closed up 1 ½ at $5.12 ½ and July 19 closed up 2 ½ at $5.23. Crude oil closed up $.22 at $52.61.

The corn market managed a somewhat anemic bounce, recovering one-third of the prior day’s losses. To be fair, the market did defend those gains all day, which is a minor victory, and the higher overnight open did leave behind Tuesday’s close. Managed Money traders bought at least 5,000 corn today, which would take their net length back up to an estimated 40,000 combined futures and options. Today was clearly “buy the break” day, particularly for world corn buyers. The most notable was South Korea. Their various major grain buyers picked up 266,000 MT, which was their largest purchase in at least one month. Prices paid suggest U.S. origin.  Turkey and Iran are both in for a good chunk of corn, too. The former will likely go Black Sea, the latter will, too, assuming they can get around sanctions.

The weekly EIA report played out relatively close to our expectations. The surprise was a larger-than-expected bump in production, which rebounded with a vengeance, surging 5% higher after making a nine month low in the prior report.  We were looking for a 3% increase. Weather has receded to a background issue given the variability in Brazil crop conditions.  The dry pockets are mostly in the center south, interior far-south production areas, and the northeast.  Argentina summer crop areas remain in mostly good shape, while South Africa still needs more rain.  Parts of the U.S. Midwest buckling up for another winter storm this weekend.

The soybean market continued to test its key chart support but was unable to break down and instead reversed higher late in the session. It felt like they were trying to break the market into stops but couldn’t get it done. This can be seen as a minor victory of sorts that could promote another short term recovery while the underlying fundamentals have long term demons that have yet to play out. Meal similarly found support and reversed as it approached its uptrend.

The ongoing bullish factors for soybeans are the optimism for a trade agreement with China that removes tariffs and includes sizeable sales commitments. Spotty weather in Brazil has taken off the top end of that crop likely reducing production potential below last year’s record. US crush demand continues to produce monthly records thanks to plentiful bean supplies and profitable margins. The recent slowdown in ethanol demand has firmed distillers values leaving soybean meal as a cheaper alternative protein for feed rations. This has firmed demand for meal in domestic feed channels.

The ongoing bearish factors for soybeans are the supply side realities with US carryout stock most recently projected by the USDA at 955 million bushels, more than double last year’s carryout of 438 million bushels. This is partly due to the trade war which has hit export demand but also and importantly due to overproduction where planting around 90 million acres the past two years with record/near record yields outproducing even the most optimistic demand scenarios. Current price relationships do not imply a sizeable shift away from soybean acres in the US this spring, potentially further inflating US supplies into next year. World supply side realities with Global soybean stocks most recently estimated by the USDA at 115.33 mmt compared to 101.3 mmt last year. Argentina soybean production expected to rebound with recent trade estimates generally falling in a 53-55 mmt range compared to 37.8 mmt last year taking Southern Hemisphere combined production up year over year despite challenges in Brazil and Paraguay. Demand from the world’s biggest soybean buyer, China, is weakening significantly partly due to diversified protein usage during trade war but also, increasingly, due to the expansion of African Swine Fever that has led to a culling of hog herd.

After a rough stretch to the start the week, the wheat complex was able to post marginal gains overnight, and more gratifying, was able to hold those gains during the day. It wasn’t always pretty, but all three classes of wheat were able to post some sort of gains. For wheat, trade is entering a very important time frame. For the past six months the USDA has kept telling us that demand for US wheat will pick up during the second half of the marketing year. Well, here we are. Any wheat purchased now will not get to its destination until mid-March. Wheat futures have drifted back down towards the lower end of its recent range and into an area where the past several times we have seen demand surface. Have not seen it yet, but it is imperative that this trend continues, especially now as we await the government to re-open, so we can start getting USDA reports.

The most significant of the reports being the acreage data. Regardless of what the Russian Ag Minister says, whether they will monitor their wheat exports or whether they say they are not discussing limits on grain exports abroad, as their wheat stocks diminish they will eventually price themselves out of competition. It will be at this time when the US will have to be competitive enough to win some of that business. We already have seen it with the GASC tenders, we now need to start seeing it elsewhere. The longer the US is uncompetitive and/or is unable to win any business, the bigger the chance that wheat futures will find selling on rallies and will be unable to extend. There are no guarantees that China will buy US wheat, and although there are expectations, there is no promise that winter wheat acres will be lower year over year.

Anna Kaverman

anna@mercerlandmark.com

Market Report

Tuesday January 15th, 2019

March 19 corn closed down 7 ¼ at $3.71 ½ and December 2019 closed down 5 ¾ at $3.96 ½. March beans closed down 10 ¼ at $8.93 ¼ and November 19 closed down 9 at $9.37 ½. March wheat closed down 3 ¼ at $5.11 and July 19 closed down 4 at $5.20 ½. Crude oil closed up $1.59 at $52.39.

Early, corn appeared ready to stand alone atop the grain room once again, mustering up decent gains overnight while beans and wheat were softer. It was all downhill from there, though, as corn finished right at the bottom end of a $.10 range. Managed Money traders were viewed net sellers of 15,000 corn today, and will head into tonight net long just under 35,000 combined futures and options.

Hate to say it, but without government reports and a coherent weather story, the ag markets are living and dying with each China rumor. Shortly after the grain open, comments attributed to lead U.S. trade negotiator quickly sent markets into a tailspin. For a couple weeks, the market has been inundated with positive vibes on China. Lighthizer expressed his disappointment in this week’s negotiations. As we have warned, it will take time to hammer out a complete, big-picture trade deal with China given the number of complex issues outstanding. The ag markets are merely hoping for a scrap off the table, such as trade confirms on recent export business. It was confirmed overnight that China booked some U.S. Crude Oil(6 mil bbl to be exact).

There was also a little bearish world news around early.  Ukraine just keeps finding more bushels, proving the old adage “big crops get bigger.” APK-Inform was the latest private analyst to raise their crop projections there. The USDA’s latest estimate from Dec pegged Ukraine corn exports this year at 28 mmt, up almost 10 mmt yr/yr, though a lot of that increase will likely go to Europe (and indeed, already has). Brazil crop conditions remain variable, though they will garner more attention the closer we get to safrinha corn planting. The dry pockets are mostly in the center south, interior far southern production areas, and the northeast. Argentina summer crop areas remain in mostly good shape, while South Africa still needs more rain.

The soybean market broke down for a test of the uptrend that has supported the recovery rally over the past four months. A combination of technical selling, macro selling off a sharp rally in the dollar and a growing sense of frustration at the lack of a trade breakthrough with China led to a tough day for the grains.

The US and China will resume face to face talks in Washington on January 30-31. Talks on Chinese purchases of US ag and energy have progressed but the larger issues of intellectual property and forced transfer of technology remain unresolved as US Trade Rep Lighthizer stated that he ‘saw little progress in last week’s talks with China on structural issues, IP protections’.   That may be the case, but it is also important to remember that both sides are actively negotiating and posturing heading into the next round of talks. Expect to see lots of good cop/bad cop headlines coming from both sides. Meanwhile, China asked some state-run enterprises to avoid business trips to the U.S. and its allies and to take extra precautions to protect their devices if they need to travel.

Wheat price action was a little better for most of the night, but in the hour leading up to the morning pause all three classes of wheat started to breakdown and they would all eventually finish the night flat to slightly lower. The selling leading up to the morning pause seemed to resonate from beans and meal, but the weakness trickled down into corn and wheat. Shortly into the start of the day session a statement was released from US Sen Grassley that said that US Trade Rep Lighthizer suggested there was little progress in last week’s trade talks with China. This was all that was needed to ignite additional selling, but wheat was somewhat immune as most of the weakness was seen in corn and soy.

It is hard to say whether all three classes of wheat found much better support, or there is little interest at pressing wheat at these levels. Maybe a little of both, but it is hard to blame traders for wanting to sit on the sidelines as the longer the government is shutdown, the longer we go with no USDA reports, and that makes it more difficult to maintain any enthusiasm. Without USDA reports, there are not many other influences around to spark a rally. Demand is the one constant motivator, but outside of Japan in for their semi-usual weekly tender, the export lineup is basically nil to start this week. A far cry from what we saw this time last week. We already know the next round of trade talks between the US and China is not scheduled until the end of the month, and when a key representative in the negotiations expresses some disappointment at how talks are moving forward, it should be a red flag.

Anna Kaverman

anna@mercerlandmark.com

Market Report

Monday January 14th, 2019

March 19 corn closed up ¼ at $3.78 ½ and December 2019 closed up ¾ at $4.02 ¼. March beans closed down 6 ¾ at $9.03 ½ and November 19 closed down 5 ½ at $9.46 ½. March wheat closed down 5 ¼ at $5.14 ¼ and July 19 closed down 5 at $5.24 ½. Crude oil closed down $1.11 at $50.80.

The corn market featured a mixed start to the week, trading both sides of unchanged at times, ultimately finishing fractionally better on the day. Though it was very quiet overall, it had to be encouraging for aspiring corn bulls to see the market assume the mantle of “upside leader” in the grain complex of the day, largely fending off weakness in beans and wheat. Managed Money traders were viewed small net buyers today, and will head into tonight net long just under 50,000 combined futures and options.

Fresh news remains hard to come by in corn, particularly with most gov’t reports on hiatus. World corn markets were mostly lower heading into the day. Matif Corn is continuing its recent corrective effort after rallying throughout Dec and into early Jan. China is perhaps more interesting. The Dalian market was weak overnight, and remains near contract lows for the most actively traded May contract. It is difficult to say whether this is due to expectations of ramped up imports (from the U.S.), or is a negative externality from the country’s ongoing battle with African Swine Fever. Possibly a combination of the two. Government procurement efforts on corn continue to lag behind what is typically the case (perhaps due to the lower prices).

The USDA did surprise some by offering up their mid-day grain inspections report. It was believed the release may be delayed due to a snowstorm in DC.  Much like many current market factors in corn, the report was a good/bad news prospect. Corn inspections more than doubled coming out of the holiday week, and was also 30% greater than the equivalent year ago week. The bad news is weekly inspections are still falling short of the level needed to achieve USDA sales goals (now roughly 1.3 mmt/wk). Still, the YTD inspection tallies are in good shape, seen at 19.5 mmt vs. 12.1 mmt shipped out this time last year.  There remains no lack of export interest around the corn market; but buyers are being aggressively courted by other suitors, such as Ukraine and South America.

The soybean market was the weak sister of the grains today (with meal a close second) as we revisit the $9.00 support level on March beans. January futures expired at noon. The weekly charts in the soy complex will get an early boost this week from the roll to March front month. That is particularly important for meal because it will close the gap lower to start the week. Trade volumes were minimal, cash was quiet with no farmer selling. Fresh inputs were sparse.

The primarily influences today were weather, poor Chinese economic data and African Swine Fever. Brazil saw some light weekend rains across the center-west of the country which are certainly welcomed even they don’t solve the overall drought.  Dryness in the center-west and the north-east along with flooding in north-east Argentina are issues to pay attention to but the weekend rains helped the market relax some today.  Chinese data published yesterday showed their economy continues to slow and this had world markets under pressure overnight and into today. Chinese soybean imports in 2018 were 8% lower year over year. Partly due to the trade war but also due to reduced feed demand. Yet another case of ASF has been reported in the Jiangsu province of China as this soy demand killer of a disease continues to spread throughout the country. The concern is that even with a trade war resolution, if you get one, China’s buying habits are being altered by this new reality. The next round of US-Chinese trade talks will take place in Washington on January 30-31 where high level trade representatives including Lighthizer and Liu. March 1 is the current deadline to reach a trade deal or else the US will raise existing tariffs from 10% to 25%.

After a lower finish to the overnight, the wheat complex did try to firm a bit once we moved into the day session. Thanks mostly to the early strength in corn, but as the corn rally fizzled there was nothing left to keep wheat prices firm, and wheat futures drifted aimlessly lower the rest of the day. Volume was very light. Reminiscent to Holiday themed trade, but it is hard to blame traders for sitting on the sidelines as the longer the government is shutdown, the longer we go with no USDA reports, and that makes it more difficult to maintain any enthusiasm.

Without USDA reports, there are not many other influences around to spark a rally. Demand is the one constant motivator, but the export lineup is basically nil to start this week. A far cry from what we saw this time last week. Eventually Russian wheat exports will slow, and more business will come to the US, but no one can say for certain when that will be. Over the weekend the Russian Grain Minister confirmed its total grain export forecast of 42 MMT, and said they are not planning on holding another meeting on grain exports until February. Does not sound like they are too concerned about wheat exports and that was behind Friday’s rally. China can change the dynamic to trade if they commit to US wheat, but the next round of trade negotiation between the US and China is not until the end of the month.

Anna Kaverman

anna@mercerlandmark.com

Market Report

Friday January 11th, 2019

March 19 corn closed up 2 at $3.78 ¼ and December 2019 closed up 2 ½ at $4.01 ½. March beans closed up 3 ½ at $9.10 ¼ and November 19 closed up 4 at $9.52. March wheat closed up 5 ¾ at $5.19 ½ and July 19 closed up 5 ¼ at $5.29 ½. Crude oil closed down $1.00 at $51.91.

FOR THE WEEK ENDED 1-11-19

CORN – Well, it’s official.  The January WASDE, quarterly grain stocks, and winter wheat seeding reports will all be delayed until after the government reopens.  The longest shutdown has been 21 days, which we matched on January 11th.  Add to that the absence of any export sales reports and here we sit in the $3.72 ½ to $3.84 ½ per bushel trading range we’ve been in since December 19th.  The sign up for the Market Facilitation Program will be extended for the same number of days the government was closed.

Demand news was scarce, but there was chatter China would be in the market for US ethanol or DDG’s.  Nothing materialized from the trade talks and there was nothing to suggest business was done in the export numbers.  Weekly ethanol production pulled back 1% to its lowest level in nine months, down 11,000 bpd to 1.0 million bpd.  Ethanol stocks increased 100,000 barrels to 23.3 million barrels.  Margins were down a penny to a negative 5 cents per gallon.

Conab refreshed their Brazilian corn production forecast this week with a small increase to 91.2 mmt.  Safras was higher at 93.4 mmt, and Agroconsult came in at 95.6 mmt.  The USDA in December was using 94.5 mmt. The Rosario Grain Exchanged put Argentina’s corn crop at 44 mmt versus 42-43 mmt last month and the USDA’s 42.5 mmt outlook. China’s corn estimate for this year’s crop caught up to their previous revisions, putting it at 257.3 mmt versus 215 mmt previously.  The last USDA estimate was 256 mmt. China cut their 2018/2019 corn import forecast from 2.5 mmt to 1.5 mmt.  Neither update was unexpected by the trade.

Weekly export inspections continue to be reported, despite the government shutdown.  Corn inspections were 19.7 million bushels, a big disappointment to trade expectations for 25.6-39.4 million bushels.  This was the lowest of the marketing year.  Cumulative exports are up 61% from last year, but for the last five weeks they have been below the 46 million bushels we need to average to hit the USDA’s 2.45 billion bushels export forecast.

If and when we get a WASDE report, the trade is anticipating the US corn carryout at 1.694 billion bushels, down from December’s 1.781 billion-bushel forecast.  World carryout is expected to average 307.32 mmt versus 308.8 mmt in December.  The average trade guess for Argentina’s corn crop is 42.39 mmt and for Brazil 94.31 mmt.

OUTLOOK: For the week, March corn gave back over half of last week’s gains.  This week, March corn was 4 ¾ cents lower at $3.78 ¼, July fell 4 cents to $3.94 ¼, and December dropped 2 ½ cents to $4.01 ½ per bushel.  South American weather and China will continue to be driving force in nearby price direction.

SOYBEANS – It’s sort of surprising how dependent we get on government reports, even though at times we question their accuracy.  Without any progress on getting the US government up and running, the market’s attention focused on South American crop estimates.  Conab published their newest Brazilian soybean production number at 118.8 mmt but left their export forecast at 75 mmt.  This was down 1.3 mmt from their previous estimate, but not low enough versus trade expectations.  Brazil last year produced a record 119.3 mmt of soybeans.  The market slumped lower on the figure and posted double digit losses on the day of the announcement.  For comparison, other Brazilian soybean production estimates also updated this week:  Safras at 115.7 mmt, Agroconsult at 117.6 mmt, and AgRural at 116.9 mmt.  The last USDA number was 122 mmt.  Southern Brazil’s rain profile is improving, but the northeast and central areas need more rain.  However, in Argentina the weather has been favorable for the corn and soybean crops, despite areas that received heavy rain and may need to be replanted.

Nothing concrete was announced at the conclusion of the three days of trade meetings (they were extended one day before the original time frame) in Beijing, but the word was good progress was being made.  Reportedly, a Chinese official will be traveling to the US in the coming week for additional talks, and again more talks are rumored to take place at the end of the month.  Some in the trade have already assumed China has bought up to 5 mmt of US.  But who knows without confirmation from the USDA.  If true, and we see the announcement at a later date, it may have limited impact on prices.  Others believe they not only have bought US beans, but they have bought all they will buy.  Even without the tariff in place, US soybeans are priced at a premium to Brazilian soybeans.  There is also the unanswered question of how much China’s demand has fallen due to the African swine fever across their country and their push to reduce protein feed levels.

Is China’s economy suffering more than ours from the trade war?  China’s PPI rose just 0.9% in December versus an increase of 2.7% in November.  This was the largest month to month decline since late 2015. Weekly export inspections were 24.7 million bushels and neutral to the trade.  Inspections need to average about 35 million bushels per week to achieve the USDA’s 1.9-billion-bushel export target.

The average trade guess for the next WASDE report, whenever that is, for US soybean carryout is 904 million bushels versus 955 million bushels in December.  World soybean carryout is estimated to average 114.36 mmt versus 115.33 mmt in December.  The average trade outlook for Brazil’s soybean crop is 120.13 mmt and 55.29 mmt for Argentina’s bean crop.

OUTLOOK:  The daily closes in March soybeans were like a seesaw this week, up one day, down the next, throughout the week.  For the week, March soybeans lost 11 ¼ cents to settle at $9.10 ¼, July dropped 9 ¾ cents to $9.36 ¼, and November declined a nickel to $9.52 per bushel.  There are many unanswered questions in the soybean market and it doesn’t look like we’ll get any firm answers anytime soon.  Until then, the bulls want to be fed daily.  March soybeans have set up a trading range of $8.80 to $9.30 per bushel awaiting something new to happen with South American weather or China.

Wheat- Egypt’s GASC bought 295,000 tons of Russian wheat for Feb 20-28 shipment, and 120,000 tons of Russian wheat for March 1-10 shipment. Lowest price was price was $263.45/ton C&F. US SRW was the cheapest FOB at $239/ton, which puts it at about a $7-10 premium to Black Sea with freight. The Russian Ag Ministry says their grain exports are up 5.1% from a year ago, at 28.2 million tons. Grain inventories are down 19.4% YoY at 42.4 million tons. US wheat inspections were very poor, coming in well under the low expectation this week. Inspections are be-hind the USDA total by 144 million bushels. Spring wheat made up just over half of the inspections.

Anna Kaverman

anna@mercerlandmark.com

Market Report

Thursday January 10th, 2019

March 19 corn closed down 5 ¾ at $3.76 ¼ and December 2019 closed down 5 at $3.99. March beans closed down 17 ¼ at $9.06 ¾ and November 19 closed down 14 ½ at $9.48. March wheat closed down 6 ¼ at $5.13 ¾ and July 19 closed down 6 ½ at $5.24 ¼. Crude oil closed up $.22 at $52.91.

The markets were clearly primed for good news; suffice to say, the bull did not get fed today. Futures slowly extended losses through the session, ultimately finishing five-plus cents lower.  The market closed into a one week low. Managed Money traders were viewed net sellers of about 10,000 corn today, which would leave them net long 45,000 combined futures and options.

Today was supposed to be “resolution Thursday”.  CONAB was the first to disappoint. Against the recent drumbeat of “hot and dry” in Brazil, many analysts were looking for a surprise reduction of crops. Brazil’s government did indeed reduce soy crop expectations, but perhaps not as much as many private analysts were hoping. They actually increased full year corn estimates fractionally, taking the first crop up to 27.45 mmt vs. 27.37 mmt prior estimate. They maintained a full 18/19 year corn export forecast of 31 mmt, which compares to 23.5 mmt last year, and the USDA currently at 29 mmt. Private analysts at AgroConsult later affirmed the export projection, despite recently reducing their crop estimates on the weather?  There was also some Argentine crop estimates around today; Rosario pegged the corn crop at 44 mmt, up from the prior range estimate of 42-43 (and well above last year’s drought-shortened crop of 32 mmt).  The corn crop is now said to be 86% planted, advancing 3.5% wk/wk.

The second area of disappointment was China. They did release a joint statement following three days of mid-level trade negotiations with the U.S., but it provided no real specificity with regard to potential Chinese commodity purchases. That’s not to say they won’t buy any corn, but the waiting game continues, and commodity traders tend not to be the patient type!  U.S. corn export biz has no doubt slowed some, particularly relative to more rosy forecasts. Some floating the idea China may remove some import duties next month to get the ball rolling. South Korea was finally back in for corn today, picking up a cargo.  Add to that the lack of information amid the U.S. gov’t shutdown, and it is very difficult to rally a market such as corn in a vacuum. Export sales were not released this morning, nor will CFTC positioning data be released tomorrow afternoon.  End-user markets were mixed; spot hogs, spot cattle, and dairy, a little better, while ethanol and deferred hogs were a little lower.

The soybean market broke sharply where besides the well-known supply side realities you had a few developments that helped set the market back off its latest recovery high.

1)  The Chinese response to this week’s trade meeting lacked the specifics on Ag purchases that the market was anticipating would be revealed.  The comments were optimistic and in sync with the US response, but we didn’t get detail on the quantities of Ag to be purchased or the timing of those purchases.

2)  The CONAB estimate on Brazilian soybean production at 118.8 mmt was bigger than the trade is plugging in.  At only .5 mmt below last year’s record crop, the CONAB estimate told the market there are no disasters here. In the absence of a USDA WASDE update this report took on more significance than usual.  To be fair, their estimate as of Jan 1 and doesn’t account for the past 10 days were additional loss was likely in the center west and north east.

3)  The weather forecast continues to promote rains for the second week of the outlook across that key center west region of Brazil.  If they materialize it would help to stabilize production declines.

As the market began to liquidate its recent length in the first hour we found some stops took us down to our lows where we spent the balance of the session trading sideways for the most part.

The products were not immune to the selloff either and the combined meal and oil losses ended up going deeper than the beans so board crush margins lost 2 cents to settle at $1.00/bushel. Elsewhere in the news, AgroConsult estimated Brazil 18/19 Soybean production at 117.6 mmt, that compares to the group’s previous forecast at 122.8 mmt.  They lowered yields to 54 mt/hectare compared to the 57 mt/ha last season. It was noted that Mato Grosso and Parana drought conditions have damaged some 3.5 mln mt of soy. They see Brazil 18/19 Corn production at 95.6 mmt up from last season’s 80.8 mmt.  Brazilian bean exports were est. around 73.0 mmt, and corn exports around 31.0 mln mt

Wheat price action was slightly lower throughout the night and it did not get any better during the day. The optimism that surrounded trade since the first of the year came to a screeching halt today, and all three classes of wheat finished the day between six and seven cents lower. So, what was behind the weakness we saw today? The results of the GASC tender that closed Wednesday was not very encouraging, the plethora of tenders this week have now concluded, the China talks which wrapped up earlier this week resulted in nothing new, the break in the US Dollar has subsided for the time being and because of the government shutdown, we will not get a USDA acreage report tomorrow to possibly confirm expectations of lower acres year over year. When you throw in this morning’s CONAB’s data, which was probably in line with estimates, but still a couple million above where the market is probably trading thus negatively impacted price action in bean and meal, it created a perfect storm and the entire grain floor found selling all day.

Looking ahead to Friday, it will be important for the wheat complex to find some stabilization. From a technical standpoint, today’s break did very little, but another lower settle tomorrow probably changes that. Chicago March traded above but has not been able to settle above the Christmas week highs, and trade will need a settle above those highs to get the bull back to being enthused about wheat. That may be tougher said than done as the export lineup has dried up, the China talks have concluded and there is still no confirmation that China bought or is willing to buy any wheat, and with the government shut down, there are no USDA reports.

If we had a government report on Friday, the average estimates of traders and analysts for total winter wheat acres comes in at around 32.279 mil acres. The total includes 22.727 mil acres of HRW wheat, 6.019 mil acres of SRW wheat and 3.486 mil acres of White. Keep in mind, late last week Informa pegged total Winter wheat seedings much below this average guess – at 31.513 mil acres.

Anna Kaverman

anna@mercerlandmark.com

Market Report

Tuesday January 8th, 2019

March 19 corn closed down 2 ¼ at $3.80 and December 2019 closed down 1 at $4.02 ¾. March beans closed down 5 ¾ at $9.18 ½ and November 19 closed down 3 ¼ at $9.57 ½. March wheat closed up 1 at $5.17 ¾ and July 19 closed up 2 at $5.29. Crude oil closed up $1.29 at $50.11.

Corn bulls were revved up and ready for action as overnight and early trade erased the prior day’s (and Friday’s) highs.  Unfortunately, positive vibes don’t fill Panamax vessels, and the absence of a major statement out of U.S.-China trade negotiations promoted a late sell-off. Managed Money traders were viewed small net sellers again today, which would leave them net long about 45,000 combined futures and options.

China remains the subject. If you like the topic, get ready for more, as the talks have been extended another day through Wednesday. One would think the extension is a positive. But the continued absence of any tangible trade action in corn by the Chinese no doubt disappointed some of the weaker market bulls.  In an apparent concession, China approved six new GMO varieties, including one for corn. This likely adds some validity to the idea that the Chinese will be around our markets at some point for corn. A final pact is still likely many weeks away, but a “mini-deal” that at least spells out some of China’s intended commodity purchases would be welcomed by all.

One of the few government market reports still standing is the weekly EIA energy blast. Expect the report to have overall bearish feature for ethanol, as it so often does in the first week of January. Production will “revert to the mean” some after the prior 3% drop, likely bouncing 2% off of a three month low.  Producer margins have improved off the early December lows, but still remain in negative territory (20-30 cents/bu loss), when including all costs. Modest concern about Brazil and Argentina weather continues to be a feature. Even though most of Brazil has good moisture in place today, there is a good chance many important crop areas will become too dry in the second half of this month without better returning rainfall. The northeast is already dry and the next ten days will build a ridge of high pressure into the interior south drying out those areas next.  Argentina weather will continue to be very good.

The soybean market was unable to sustain its rally momentum and reversed lower off a test of the downtrend and 200 day moving average where the December rally also was turned away.  Fundamentally, there was very little around the market to talk about although volumes were slightly better with the reversal action and index fund roll. The trade talks in Beijing were extended by one more day through tomorrow, which is a positive sign, although the lack of any detail on progress or trade commitments worked against the futures today. Nothing in the cash or spread activity hinted at any new demand.

Nothing changes and for beans, no news is not good news in a market that is counting on new and desperately needed demand revelations to stimulate a rally in a soundly oversupplied fundamental stat scene. As far as the Southern Hemisphere outlook, the forecast continues to promote heat and dryness across Paraguay and a stretch of Brazil from Center-West to the North-East which is likely going to lead to further production declines. As long as that crop is shrinking, we shouldn’t roll over completely and that uncertainty keeps an underlying bid in the market. This afternoon, the USDA extended the deadline for Market Facilitation Program applications beyond January 15th due to the government shutdown. The deadline will be extended for a period of time equal to the number of business days FSA offices were closed, once the shutdown ends. Besides trade talks and hopefully results, the market will continue to key in on weather and in the absence of a USDA report we will sift through Brazil’s CONAB production report on Thursday.

The wheat complex was able to shrug off the weakness coming out of corn and soy and traded slightly higher throughout the day.  All grain markets rely on demand revelations to stimulate trade, and with government offices shut down, we are not going to get it from the USDA. Price action in wheat today was able to benefit from a plethora of tenders coming to fruition over the next 24 hours. Bangladesh is in for wheat, and although most of this business will probably go Russian, we can still win some of it. Algeria is in, and even though most of this business will most likely be French or Black Sea, we could grab a slice of it. Taiwan is in and it will be all US. Jordan is in, but they will probably pass. That is a TON of potential business, and probably the big reason the wheat complex separated itself from corn and soy today. The wheat complex is also still benefitting from the technical outlook on trade. Taking a look at Chicago March, after testing the $5.00 level last Wednesday the market reversed, made a higher high last week and today it was able to take out the weekly high made during Christmas week.

Anna Kaverman

anna@mercerlandmark.com