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Archive for February, 2019

Market Report

Wednesday February 27th, 2019

May 19 corn closed down 2 ¼ at $3.73 ¾ and December 2019 closed down 1 ¾ at $3.94 ½. May beans closed down ¼ at $9.16 ¾ and November 19 closed up ½ at $9.49 ¼. May wheat closed down 1 ½ at $4.66 ¾ and July 19 closed down 2 at $4.73 ¼. Crude oil closed up $1.40 at $57.37.

The corn market kept the pressure on the bull, which is common on “position day” ahead of the delivery cycle. Futures finished the day lower, bouncing back a little late to close off the session’s lows. Markets attempted a bounce overnight, but the “up” board did not survive the first hour of trade. Managed Money funds were believed net sellers of another 20,000 corn today. This was the third consecutive day of such activity which by estimates would leave them net short roughly 110,000 futures and options.

One of the major emerging stories in our view in corn has been the dramatic repositioning of the corn market over the past month. As noted above, funds have decisively flipped to the “short” side of corn. Slowly at first, and more rapidly in recent days after being small net longs into late January. At the same time, the advent of the March delivery cycle has no doubt stimulated many smaller speculators and frustrated bull commercial players to “throw in the towel” on some length. The end result is a cleaner market positioning with some fuel underneath via the fund short. But what spark will ignite it?  Until then, we wait.

The weekly EIA report leaned neutral for ethanol, as expected.  Production rebounded +3.2% off the prior week’s very low level, which was more than the 1-2% increase trade was expecting. A 1.028 mil bbl/day rate would utilize 5.53 billion bushels of corn over a marketing year, which is slightly below the YTD average. USDA Sec Perdue testified to Congress today that the rule-making necessary to allow E-15 ethanol sales year-round may not be complete in time for summer driving season due to the gov’t shutdown. He also noted that if it is late, they “could compensate by declining to enforce the current summer-time ban.”  Not likely to inspire retailer confidence?

The markets will get their first “regular” up-to-date look at weekly sales tomorrow in a couple months. It is likely to find something close to 1 million metric tons of new corn business, but it would not surprise us to see it come in well under that mark. Competition has been fierce, and will not go away anytime soon, especially as we get closer to summer and South America’s “gut slot” corn export period. The recent futures break reawakened South Korea.

The soybean market was unable to hold its early gains and closed a tick lower up front and a couple ticks high in the new crop.  It was a very quiet trade and outside of the roll, trade volume was abysmal. While anticipation of export confirmations to China and the potential for a larger trade agreement with China continues to underpin futures, the lack of a confirm so far this week on the 10 mmt promised from last week and some hawkish testimony from US Trade Rep Lighthizer prevented beans from holding its attempt to bounce back out of technical support today.

Lighthizer’s comments in a nutshell were somewhat sobering to the trade bulls as he reiterated that there will be no deal made that fails to address the structural reforms and enforcement.  He also said that purchases of US goods alone were not enough to resolve the dispute. Keep in mind Lighthizer is the trade hawk/bad cop and don’t be surprised if Mnuchin or somebody else surfaces in the news at some point here with some more positive rhetoric to play the good cop as has been the pattern for months. With 1 day left in the month/calculation period for crop insurance, the avg. price of new crop beans this month has been $9.54 ¼ and corn $4.00 on the nose. The new crop bean/corn ration settled at a new high today of nearly 2.41%.

The overnight wheat rally was unable to carry into the day, and prices moved aimlessly lower throughout the session before settling slightly better in old crop, and slightly lower in new crop. Third time in the past two days that the markets tried to rally off what looked to be profit taking and maybe even some bargain hunters taking a shot at being long wheat at these suppressed prices, only to run into a brick wall of resistance and a market telling those that the break may not be over.

Yesterday’s commitment of trader’s report, which is now only a few weeks out from being current, showed managed money in Chicago wheat are only holding a short position of around 16,000 contracts. Even if you add in the selling of the past few weeks, they are nowhere close to their record short position, which comes in at over 162,000 contracts. If the funds want, they still have plenty of ammo (resources) to pound Chicago wheat prices down even further.

We have an export sales report in the morning. Last week’s culmination report of six weeks came in much larger than expected at 3.574 MMT, with an additional 244 TMT of new crop for a combined sales number of 3.819 MMT. Tomorrow’s data is for just one week, but it nevertheless will be an interesting report. It is impossible to tell if all the sales from a couple weeks ago made last week’s report. The Nigerian tender looked to be there as they were one of the bigger surprises last week. The two cargoes of SRW wheat to Egypt was there, as was the Korean business, but we also had a couple HRW wheat cargoes to Egypt that was not expected, so was that there in error? And what about all the Unknown business?

Anna Kaverman

anna@mercerlandmark.com

Market Report

Tuesday February 19th, 2019

March 19 corn closed down 5 at $3.69 ¾ and December 2019 closed down 2 ½ at $3.96 ¾. March beans closed down 6 ¾ at $9.00 ¾ and November 19 closed down 6 ¼ at $9.45 ¾. March wheat closed down 14 ½ at $4.89 ¾ and July 19 closed down 12 ¾ at $4.96 ½. Crude oil closed up $.47 at $56.45.

After flashing some resilience last week, corn buckled under the pressure of a collapsing wheat market, finishing lower. Today was the lowest close seen for March Corn since Thanksgiving.  Managed Money traders were aggressive today, selling an estimated 20,000 corn. When taking into account the latest CFTC “true-up” (now through end of Jan), we would estimate they are now net short 70,000 combined corn futures and options.

A renewed focus on African Swine Fever also did not help corn market prospects today. The disease has reportedly jumped to two other countries, Vietnam and Romania, with unqualified rumors of a case showing up in Canada, too. The disease has forced widespread culls in China over the past year, crimping feed demand. An outbreak in North America would obviously have similar negative impact on corn feed demand, though domestic biosecurity is believed to be much better than in China. Hog futures finished limit down today, perhaps as traders fear a potential consumer backlash against pork.

South American weather also remains a relative nonevent at present. Improving rainfall in Brazil last week was great for boosting soil moisture and reducing crop stress for many areas. Dryness is still a problem in the northeast where some relief is expected this week. Argentina and South African weather are also expected to be favorably mixed in the coming week, too. The mid-day grain inspections report was “just okay”, finding 941,811 MT in new shipments for the week ended 2/14. This was up almost 200k from the prior week, but on par with the year ago week. It is also nearly 50% below the weekly pace needed to meet current USDA projections. On the bright side, YTD inspections continue to run well ahead of the prior year. 24.2 mmt has been shipped to date, compared to 16.7 mmt sent out this time last year. The recent break has uncovered some export interest, with South Korea picking up some corn.

The soybean market violated its uptrend support but managed to bounce back from session lows to close back above the key $9.00 front month support level. Beans are bending but have not yet broken. Soybean meal established a new contract low but bounced off its low with the spreads leading the way. $300 front month meal once again offered the commercial buyer an opportunity to extend coverage at what has been a value area and because of the price action. The selloff in the soy complex was triggered by fresh African Swine Fever news (and rumors), lack of fresh trade optimism in the headlines, a sobering reminder of our current exports to date, and stabilizing Brazilian production ideas. A restructuring in world wheat values to the downside added a negative influence as well. It may be just a matter of time before beans roll over to better reflect current fundamental realities but today was not the day.

Trade talks with China are underway in Washington this week.  The deadline for tariffs to move from 10% to 25% is one week from Friday. President Trump has indicated he may delay the rise in tariffs if negotiations are showing progress but most reports. It is the potential of reaching an agreement that continues to provide underlying support for soybeans despite the underlying fundamentals. Weekly grain inspections were in line with expectations for beans at 1.031 mmt.

A disappointing day from start to finish, with all three classes of wheat sustaining heavy losses. After a three-day weekend, the wheat complex started the shortened week of trade with mixed price action overnight before eventually finishing with modest losses.

When the markets re-opened for the day session, the focus turned to the fall in World wheat prices. We started to see it last week with the extremely low French offers in the Algerian tender, and by the end of the week the ripple down effect that had with the rest of the World. With the freight disadvantage the US has, we are going to have to be much more aggressive than that with our offers if we are going to want to win any future business and the ramifications of that is what we saw in price action today. The US continues to miss out on business. There were ample opportunities to pick up some business last week, and the US did not win its fair share. We must get more aggressive, or come March 8, the USDA will lower wheat export expectations, and our ending stocks will only grow.

Anna Kaverman

anna@mercerlandmark.com

FOR THE WEEK ENDED 2-15-19

CORN – The more things change, the more they stay the same.  I haven’t written this article for two weeks and this statement still rings true.  March corn has not broken out of the $3.71 to $3.85 trading range it has been in since December 19th.  If you go back to December 1st, it’s only traded a range of $3.71 to $3.87 ¾ per bushel.  It may test one end of the range or the other, but there hasn’t been enough push to break the sideways pattern.

Disappointing weekly export sales and inspections, along with improving Brazilian weather, pressured prices lower for the week.  The Chinese trade talks seemed to be making progress as the week ended and they will be extended into the week of February 18th. Whether an agreement is reached or not, President Trump has indicated he could postpone increasing tariffs on $200 billion worth of goods from 10% to 25% for 60 days if he deems progress is being made. China has asked for a 90-day extension. There are significant hurdles yet to be overcome concerning technology issues.  However, if something is worked out, there may be direct benefits for the corn market through increased purchases of DDGs and ethanol.

Weekly export sales this week were just through January 3rd.  They came in a disappointing 18.1 million bushels.  Total commitments are 19% higher than last year at 1.27 billion bushels.  We need 33.2 million bushels per week to ring the bell on the USDA’s 2.45-billion-bushel export outlook.  One bright side, there were new reported sales of 328 tmt this week.  The next weekly export sales report will cover sales made from January 10 through February 14. Weekly ethanol production was up 62,000 bpd to 1.029 million bpd, the second largest weekly increase on record.  This is still below what we need each week to hit the USDA target, suggesting the USDA may need to lower the ethanol line on subsequent reports.  Ethanol stocks fell 400,000 barrels to 23.5 million barrels.  Margins were up a nickel at a positive one cent per gallon, reversing 20 weeks of negative margins.

The USDA’s long-range outlook released this week indicated 2019/2020 US corn acreage at 92.0 million acres with carryout at 1.603 billion bushels. This year’s USDA corn carryout is estimated at 1.735 billion bushels. IEG Vantage, formerly Informa Economics, formerly Sparks, this week pegged 2019/2020 US corn acreage at 91.6 million acres.  This is 2.5 million acres higher than last year’s 89.1 million planted acres.  Their 2019/2020 corn carryout was forecasted at 1.714 billion bushels.

Conab increased their Brazilian corn outlook .5 mmt to 91.7 mmt versus the USDA’s 94.5 mmt.  In Argentina, the Rosario Grain Exchange increased their corn crop outlook 2.5 mmt to 46.5 mmt and the BAGE is pegging corn production at 45 mmt.  The USDA has Argentina at 46 mmt.

OUTLOOK:  Until we see a catalyst to push corn prices higher or lower, corn may be deemed to remain in its $3.71 to $3.85 per bushel trading range.  Recent action suggests if the path of least resistance for a move may be to the lower side.  For the week, March and July corn contracts were each ½ cent higher at $3.74 ¾ and $3.90 ½ respectively, and December corn was steady at $3.98 ¼ per bushel.

SOYBEANS – South American weather has been improving over the last few weeks, suggesting we may have seen the lowest Brazilian soybean production estimates of the year.  This week, Conab lowered their Brazilian bean forecast 3.5 mmt to 115.3 mmt. Safras cut their Brazilian projection from 115.7 mmt to 115.4 mmt. These are slightly higher than private outlooks.  Brazil’s soybean harvest was a record pace at 24% complete as of February 14 versus 11% complete on average.  In Argentina, the Rosario Grain Exchanged raised their outlook to 52 mmt and BAGE was at 53 mmt.  The USDA is carrying Argentina at 55 mmt.

This week’s weekly export sales announcement only covered through January 3rd.  It contained surprisingly large cancellations by China of 807 tmt and another 444 tmt of cancellations by unknown.  This put net sales at a negative 22.5 million bushels or 612 tmt.  The market reacted negatively, but there was chatter wondering if we will see Chinese purchases show up on next week’s report that will put us current on sales.  Total soybean export commitments at 1.11 billion bushels is down 27% from last year.  We need to average 23.4 million bushels of exports each week to hit the USDA export projection of 1.875 billion bushels. In January, China imported 7.4 mmt of soybeans.  This was an increase of 29% from December, but down 13% from January 2018.

Trade talks with China will be extended into the week of February 18th.  Higher levels sources seem to be more optimistic on the progress being made than at lower levels.  Regardless, this week’s export sales report makes one wonder what kind of soybean purchases could be expected if an agreement is reached.  We are uncompetitive with Brazilian beans into China and it’s unknown how much coverage China already has in place for the summer.  New African swine fever cases are still being discovered in China which will cut demand.

The USDA, in their long-term forecast, is expecting US soybean acreage at 82.5 million acres versus 89.2 million acres last year.  Their 2019/2020 soybean carryout is 723 million bushels. The January NOPA soybean crush report was a record 171.6 million bushels and the fourth largest crush ever.  It significantly exceeded the 169.5-million-bushel estimate.  The market treated it as mildly friendly news.  Soyoil stocks were 1.549 billion bushels versus 1.566 billion bushels estimated.  This was the smallest build in soyoil stocks in 22 years.

OUTLOOK:  For the week, March soybeans were down 7 cents at $9.70 ½, July dropped 7 ¼ cents to $9.35, and November fell a nickel to $9.52 per bushel.  Technical support in the March contract lies at the 100-day moving average of $9.02 per bushel as of the close on February 15th.  If the trade talks continue make progress, we could expect this to hold short-term, but without demand or a change in South American growing conditions, it’s difficult to make a long-term case for higher prices.

WHEAT – US Wheat is competitive again as Egypt bought some US soft wheat in its tender last week.  The interesting part of that transaction was that no Russian wheat was offered and that could be an indication that Russian supplies are now tightening up and raising their values.  The USDA is reporting wheat farmers have enrolled 44.954 million acres of wheat in 2019 subsidy programs. Texas’ wheat crop was rated 31% Good/Excellent, up 4 from last week and 26% was rated Poor/Very Poor, up 5 from last week.

Anna Kaverman

anna@mercerlandmark.com

Market Report

Thursday February 14th, 2019

March 19 corn closed down 4 at $3.74 ¾ and December 2019 closed down 3 ¼ at $3.99 ¼. March beans closed down 13 at $9.03 ½ and November 19 closed down 10 ¾ at $9.48. March wheat closed down 15 ¼ at $5.07 and July 19 closed down 13 ¼ at $5.13 ¼. Crude oil closed up $.48 at $54.79.

It was a heart-breaker of day for the grain markets where just about all the inputs around the news weighed in on one side and tipped prices lower, just not a back breaker. After running the bean stops to the topside just two days ago, today we ran them back to the downside putting the chart right back into its key trend support against $9. Trade war optimism was deflated once again following a pair of media reports. The first report was that the President is considering a 60-day extension on the pause in tariff hikes to allow negotiations to progress without further penalty. The second was a headline from Bloomberg that said; “In closed-door sessions, the sides have failed to narrow the gap around structural reforms to China’s economy that the U.S. has requested”.

Weekly export sales for the week ending Jan 3 fell short of trade expectations although those expectations were overly optimistic considering the holiday timings.  Nevertheless, the feature was soybean cancellations by China -807 tmt and unknown -444 tmt which more than offset other non-Chinese purchases.  That was not a good week for bean export commitments.

Informa published their updated acreage projections with corn acres at 91.6 million up from 89.1 last year, beans 86.0 million vs. 89.2 last year, spring wheat 13.6 million vs. 13.2 last year and cotton 14.6 million vs. 14.1 last year.

Typically, export sales data is a fade, and those percentages probably go up on month old data, but the China cancellations put a wrinkle in that thought process today. It was though wheat would see some early pressure across the entire grain complex once the market re-opened for the day session. But, as has been the case over the past several months, a headline news flash would change the dynamic of trade for the rest of the day. Around mid morning a Bloomberg headline read “China and US said to be far apart on framework for monitoring Chinese action of structural reform”. Most took this as the recent China perspective of how things on the negotiating table are going, and the markets’ reaction was not very friendly.

Granted, export sales this morning was abysmal, coming in at only a combined 161 TMT. And we talked yesterday that if China was not in the report, sales were going to be disappointing. But the prospect of US/China negotiations dragging on for another 90 days is a dagger to the heart of old crop wheat. The wheat complex yearns for demand. The outlook for huge US and World stocks come summertime. Which will only get larger if World weather is better than last year and that should not be too difficult, is a real threat if China does not turn to the US for any wheat.

Informa updated their acreage estimates for the coming year. Looks like they left winter wheat acres alone at 31.290 mil. That puts All Wheat acres at 46.782 mil vs 47.80 mil last year. Keep in mind, throughout the early stages of the Fall months, many traders (including myself) had estimated that wheat acres would top 50 mil this year. But that thought process started to change as we moved through the Fall period and heavy rains saturated fields, with many farmers unable to get their crop in the ground. With the export pace not picking up nearly as much as we had hoped as we have moved into the second half of the export season, and because of that the burdensome stocks that it has created, it was a blessing in disguise that Mother Nature dumped all that rain on the farmer last Fall, or we would be looking at an even larger stocks problem come summertime.

Anna Kaverman

anna@mercerlandmark.com

Market Report

Monday February 11th, 2019

March 19 corn closed down 1 ½ at $3.72 ¾ and December 2019 closed down 1 ½ at $3.97 ¾. March beans closed down 9 ½ at $9.05 and November 19 closed down 8 at $9.49. March wheat closed up 1 at $5.18 ¼ and July 19 closed up ½ at $5.22 ¾. Crude oil closed down $.31 at $52.78.

The corn and soybean markets started the week off on a down note. Beans led the break on follow through from Friday’s crop report. That report for beans while less bearish than feared, still highlighted record domestic and global stocks and today’s price action better reflected that reality than Friday’s. $9.00 front month beans represent key support with the uptrend still intact for now. In the case of corn, the selling today was influenced by the weakness in beans but really had more to do with follow through from the negative technical developments on Friday including an outside day lower and violation of the uptrend. The corn market is long and liquidation that began on Friday continues today.

The lower soybean board tugged meal flat price into negative territory as well although the oil share spreading helped to provided needed underlying support to meal which is already down against contract lows. The meal exports confirmed by the USDA were not much of a factor today. It was a quiet day from the trade war headline front. We would expect that to be the exception and not the rule from now on up to the March 1 deadline. Negotiators are in Beijing this week with the high-level reps stepping in for Thursday Friday as the lower level teams lay the ground work through Wednesday.  Negotiations may return to Washington next week if progress is being made. Time is running short with big hurdles to overcome if an agreement will be made by March 1st.

Weekly grain inspections data for export showed corn inspections of 744 tmt falling short of expectations for closer to 1 mmt, wheat inspections of 562 tmt were a little stronger than expected and soybeans at 1.063 mmt were also a little stronger.  Corn inspections to date are 23.209 mmt compared to 15.736 mmt this time last year, wheat inspections to date are 15.389 mmt vs. 17.143 and beans 22.628 mmt vs. 36.051.

The wheat complex was able to battle back after a tough opening half of the day and finished the session mixed. The stocks data from Friday’s crop report is going to make it difficult to sustain rallies especially in new crop. It is bad enough to see a 1.0 bil carryout, but to get to that number without adjusting exports lower is a huge concern. To make current USDA export projections of 1.0 bil bu, wheat exports will need to average almost 700 TMT per week for the rest of the marketing year, and thus far this year, that has occurred a whopping one time. The market is already projecting an increase year over year in World production. It is almost a necessity for the US to lower their acreage year over year just so some of those stocks could get depleted. If China comes swooping in and buys 5 MMT of wheat everyone will win.

Anna Kaverman

anna@mercerlandmark.com

Market Report

Wednesday February 6th, 2019

March 19 corn closed down ¾ at $3.80 and December 2019 closed down ½ at $4.03. March beans closed up 1 ½ at $9.21 ¾ and November 19 closed up 2 ½ at $9.63. March wheat closed down 1 ¼ at $5.26 and July 19 closed up 1 ½ at $5.32 ¼. Crude oil closed up $.34 at $54.34.

Corn market trade remains extremely choppy and indecisive ahead of Friday’s important USDA reports. In fact, even when compared to the rather subdued sessions of late, this was a particularly dull affair. Managed Money traders were viewed marginal net sellers today, which would leave them net long just under 50,000 combined futures and options.

The only real data of substance to come out today was the weekly EIA report, which actually was quite interesting for all involved, as it was heavily influenced by the historic cold that recently gripped the Midwest. Weekly production of 0.967 million bbl/day of ethanol was a -4.4% drop from the prior report and would be the lowest single week production total seen in well over one year (since October 2017). With the gov’t fully back in business (at least for now), the USDA will release export sales tomorrow. Unfortunately, it will be rather stale data, harkening back to the last week of December. Not worth spending much time discussing, much like the CFTC reports, until they are caught up. The USDA still has not reported a new corn sale since resuming 8 AM daily reporting.

The soybean market continues its choppy overall pattern with a higher flat price settlement for a fourth consecutive session although the bull spreads once again did not participate for a second day which is a red flag. The feature trade once again was soybean oil which took out its key reversal from Friday and resumed its rally into new highs. The USDA flashed 2.603 mmt of beans sold to China and another 274 tmt of beans to unknown when combined with yesterday’s 612 tmt it takes the total confirmed this week to 3.49 mmt out of an expected 5 mmt commitment from last week. This follows 5 mmt that was purchased in December following the G20/Trump-Xi meeting in Argentina.  The crop report on Friday is expected to re-enforce a bear stat scene in soybeans where both domestic and global supplies sit at record highs even when factoring in the smaller Brazilian crop than originally forecast.  Elsewhere in the news, Japan now reports a case of ASF, although a different strain, that has led to a cull of 15,000 pigs.

The wheat rally stalled today for multiple reasons, but probably the most logical, is with the huge data dump the USDA is going to give us Friday, who wants to take on a huge position ahead of those reports? Especially after how quiet trade has been over the past several months. But with futures holding steady in the upper end of its recent range, trade is positioned very nicely in case we do get friendly data that is influential enough to give the markets that breakthrough it has been yearning. Friday, we get the next wave of export sales data, but the only relevance of this report would be if we see something out of the norm as the data is from the week ending December 27.

Friday, we will get US final 2018 Crop Production, Quarterly Grain Stocks data and winter wheat seeding reports. First the bearish side of the report. Analysts are forecasting US 18/19 wheat ending stocks at 989 MB vs the Dec report of 974 MB and it may be even eclipse 1.0 BB as the export program over the first half of the year was abysmal. World ending stocks should see little change, but there too we will probably see a little bigger number than the 268.1 MMT we saw in the December report. Now for some friendly data. USDA quarterly US wheat stocks as of Dec 1, 2018 should come in around 1.957 bil bu vs 2.379 bil bu on Sept 1 and 1.873 bil bu on Dec 1 of 2017. The biggest piece of friendly data should be winter wheat acres. Expectations are for the report to show around 32 mil acres of winter wheat planted vs 32.535 mil last year. Of this total, HRW acres should come in around 22.5 mil, SRW acres around 6 mil and white wheat acres around 3.5 mil for 2019.

Anna Kaverman

anna@mercerlandmark.com

Market Report

Tuesday February 5th, 2019

March 19 corn closed up 1 ½ at $3.80 ¾ and December 2019 closed up 1 at $4.03 ½. March beans closed up 1 ¾ at $9.20 ¼ and November 19 closed up 2 ½ at $9.60 ½. March wheat closed up 1 ½ at $5.27 ¼ and July 19 closed down 2 ½ at $5.30 ¾. Crude oil closed down $.89 at $54.00.

Quietly mixed day in the corn. Early action skewed mostly negative, but the markets turned higher mid-day and maintained that modest bid into the close. Managed Money traders were viewed net buyers of another 5,000 corn today, which would leave them net long an estimated 50,000 combined futures and options.  If you listen real close, you will hear traders shuffling their feet under their desks, as they await the big USDA reports on Friday. Or a resolution on China, perhaps, but that is the “next” issue on the docket at this point. In the mean time, futures continue to struggle with light news flows and interest.  Keep in mind, most traders who want a position have likely already acquired it on the various dips and blips seen over the past few weeks, if not months.

We do get some hard data out of the EIA tomorrow morning. The EIA reports should be interesting sooner or later, given the extreme weather seen in the Midwest over the past week-plus. We suspect it will not appear in this week’s release due to usual reporting delays. In this report, we are looking for production to uptick 1% or perhaps slightly more. Note, in next week’s report, we would be looking for a subsequent 3-4% decline in production off those levels. Blender demand will likely be weaker, while residual flows should be stronger. Weather continues to be a mixed bag for Brazil, along with mostly favorable conditions in Argentina. The long prophesized increase in precip for Brazil appears to be materializing, though southern growing areas could continue to dry down for a time.  Argentina weather will improve with less frequent and less significant rain this week. U.S. gets a little chilly again in parts of the Plains, though not nearly as severe as that seen last week.

The soybean market continues its choppy overall pattern with a higher flat price settlement. The USDA flashed 2.603 mmt of beans sold to China and another 274 tmt of beans to unknown. When combined with yesterday’s 612 tmt it takes the total confirmed this week to 3.49 mmt out of an expected 5 mmt commitment from last week. This follows 5 mmt that was purchased in December (but not yet confirmed) ahead of the G20/Trump-Xi meeting in Argentina.

The crop report on Friday is expected to re-enforce a bear stat scene in soybeans where both domestic and global supplies sit at record highs. The Chinese business is encouraging and if the stars align just right, maybe just maybe we could get a bailout if we reach a deal that removes tariffs and China executes on their purchase commitments (and adds to them) to reduce our domestic oversupply. But that is far from assured as negotiations in Beijing will be critical. If talks fall apart again they could easily wash out those sales and replace with cheaper Brazilian supply. Lurking in the background of all the trade war excitement is the demand black swan of African Swine Fever in China reducing overall demand from the world’s biggest buyer. Chinese markets are closed this week for Lunar New Year holiday.

Friday, we will get US final 2018 Crop Production, Quarterly Grain Stocks data and winter wheat seeding reports. First the bearish side of the report. Analysts are forecasting US 18/19 wheat ending stocks at 989 MB vs the Dec report of 974 MB and it may be even eclipse 1.0 BB as the export program over the first half of the year was abysmal. World ending stocks should see little change, but there too we will probably see a little bigger number than the 268.1 MMT we saw in the December report. Now for some friendly data. USDA quarterly US wheat stocks as of Dec 1, 2018 should come in around 1.957 BB vs 2.379 BB on Sept 1 and 1.873 BB on Dec 1 of 2017. The biggest piece of friendly data should be winter wheat acres. Expectations are for the report to show around 32 MA of winter wheat planted vs 32.535 mil last year. Of this total, HRW acres should come in around 22.5 mil, SRW acres around 6 mil and white wheat acres around 3.5 mil for 2019.

Because of the government shutdown, it does not look like as if we are going to receive crop condition reports for most states, at least in the near future. The only state that has thus far reported was Texas, and they put their state’s winter wheat conditions at 27% G&E and 21% P&VP. Keep in mind, last year during February conditions were only 4% G&E and 73% P&VP, yet they still managed to get a 31 yield and production of 55.8 mil on 4.6 mil planted acres and 1.80 mil harvested acres.

The second installment if the CFTC’s weekly commitment of trader’s report resumed this afternoon as they continue to play catch up.It was from data thru Dec 31, and it was expected to be released on Friday, January 4. Reports going forward will be published in chronological order, with the CFTC expecting to publish one report on Tuesday and another on Friday of each week until the reports are current as per the normal schedule. During the week ending December 31, funds were sellers of a little over 13,100 contracts of Chicago wheat. At that time, it increased their net short position to over 60,200 contracts. As far as managed money, they were sellers of more than 15,000 contracts in Chicago, which at the time, increased their short position to around 32,000 contracts.

Anna Kaverman

anna@mercerlandmark.com

Market Report

Monday February 4th, 2019

March 19 corn closed up 1 at $3.79 ¼ and December 2019 closed up ¼ at $4.02 ½. March beans closed up ¾ at $9.18 ½ and November 19 closed up ¾ at $9.58. March wheat closed up 1 ½ at $5.25 ¾ and July 19 closed up 1 ¼ at $5.33 ¼. Crude oil closed down $.66 at $54.89.

The corn market managed a “slightly better” start to the week, though volumes were light and the ranges tight. There was more talk today about Super Bowl ads than trading, especially with that high-fructose corn syrup ad in the mix. Managed Money traders were viewed net buyers of another 5,000 corn today, which would leave them net long an estimated 45,000 combined futures and options.

Futures continue to bide their time, likely awaiting something concrete on the export front, or the big USDA “data dump” slated for Friday. The rumor was the apparent “delay” in China reporting their official grain import quotas for the year. Some took this to mean that they are holding off in anticipation of larger future business booked with the U.S. Either way, this business has yet to show up in the “hard” data reported by the USDA. Mid-Day Inspections remain very benign for corn, with just 901,214 metric tons shipped for the week ended 1/31.  This was down slightly from the prior week, and almost 20% less than the prior year week.  This takes YTD corn shipments to 22.47 million metric tons, which is well ahead of the prior year’s 14.89 mmt.  In recent weeks, corn exports have mostly been falling short of the ~1.4 mmt/wk pace needed to meet USDA sales forecast. On the weather front, Brazil precipitation remained erratic over the weekend. Temperatures were quite warm. Rain will increase during the middle and latter parts of this week. Mato Grosso second crop corn said to be 30% planted. Argentina’s bottom line is mostly quite good.

The soybean market firmed slightly on renewed export demand from China although the board once again struggled to hold strength into the close. The USDA flashed 612 tmt of old crop beans sold to China which is the first official sales confirmation of the latest round of business. Reportedly, Cofco and Sinograin have each bought 1 mmt purchased as part of the 5 mmt commitment from last week. Trade volumes were sharply reduced from Friday’s high volume session with March beans trading only 70k today vs. 168k Friday.

The feature trade once again was soybean oil where flat price and negate Friday’s outside day lower performance. The USDA released the delayed census crush for November where total crush was 178.1 mb which was about .5 bigger than estimates. Oil stocks were 1.903 bln lbs vs. 2.030 bln expected.  Friday’s crop report is a major report and will feature the final US corn and soybean production numbers, quarterly stocks and winter wheat acres. The trade estimates for the January report are posted below, updated estimates should hit the wires today. The big difference from the January estimates to current trade estimates will be Brazil’s soybean crop where instead of a 120 mmt production estimate, the trade likely pricing in a 115 mmt type of crop compared to the USDA last at 122 mmt back in December. While Brazil’s bean crop may be 5 mmt below last year’s record crop, Argentina’s crop likely at 53-55 mmt is 15-17 mmt BIGGER than last year’s (38 mmt) keeping overall SAM soybean production well ahead of last year. Global and domestic soybean supplies are extremely burdensome. Soybeans have been well supported by optimism over Chinese trade progress and Brazilian production declines, Friday’s report will offer a start reminder of those statistical realities.

After a quiet overnight session that produced slightly weaker trade throughout, the wheat complex caught a bid shortly after the day session began and for a short time it looked as if we were going to see similar price action to Friday. The problem today at possibly keeping that early momentum going may have been simple. Lack of market participants. The Asian markets were closed due to their Lunar Chinese New Year holiday break and we had a relatively quiet news cycle from the weekend. Following the enthusiasm on Friday from the US/China trade negotiations, this morning’s comments from White House advisor Hassett saying we still must be patient to see how much progress can be made on China trade talks, adding that much work still remains to be done with negotiations had to come across as a little disheartening.

A quiet day today for wheat may have not been the worst of things. Tuesday we get Stats Can data and Friday we will finally get winter wheat acreage data, and both reports could be influential and could have an impact on trade. Friday’s report will be substantially more important and probably lead to much greater market volatility. If you take a look at the export lineup to start the week, it is pretty bare, so we are hopeful announcements may be on the horizon. Because of the huge crop report Friday, until we actually see that demand surface, it might prove to be too difficult to extend gains much until later in the week. One thing that will probably continue to happen is that the back months will probably continue to trade weaker than the fronts.

Anna Kaverman

anna@mercerlandmark.com

Market Report

Friday February 1, 2019

March 19 corn closed up 1 ¾ at $3.78 ¼ and December 2019 closed up 2 ¼ at $4.02 ¼. March beans closed up 2 ½ at $9.17 ¾ and November 19 closed up 1 ¾ at $9.57 ¼. March wheat closed up 7 ¾ at $5.24 ¼ and July 19 closed up 5 at $5.32. Crude oil closed up $1.51 at $55.55.

Grains

Over the weekend the USDA said they will NOT release the January WASDE report but instead incorporate that data in the February numbers.  The USDA officially confirmed the quarterly Grain Stocks report, Annual Crop Production report and Winter Wheat Seedings report, all initially slated for release on January 11 and postponed due to the government shutdown, will be released on February 8 along with WASDE supply/demand balance sheet report. Commitment of Traders reports from the CFTC will play catchup by issuing old data every Tuesday and Friday until caught up. The reports will finally be in sync on March 8th.  Yep, almost 6 weeks to catch up. The USDA outlook forum is scheduled to take place on Feb 21-22.  The temporary funding measure goes until Feb 15th, so the outlook forum is not a certainty. World Trade Organization (WTO) expected to launch an inquiry into whether the U.S. duties on Chinese goods break a requirement that WTO members give the same tariff treatment to other countries. This could become an issue as China has sent key people to the US to continue negotiations on the tariff war. The U.S. Justice Department unsealed criminal charges Monday against Chinese tech company Huawei and several subsidiaries, alleging the company stole trade secrets, lied to banks about its business and violated U.S. sanctions. Not encouraging for trade negotiations. Huawei is the second largest manufacturer of smart phones behind Samsung, then Apple is 3rd.  According to the Congressional Budget Office, Producer payment are expected to reach $17.2 billion for the 2019 fiscal year. The highest level since 2005, when payments totaled $18.8 billion. The total could be higher if Congress includes $3 billion in Ag disaster aid.

Corn- IMEA says Mato Grosso safrinha corn planting is well ahead of normal at 15% complete vs. 7% on average and 7% last year. With the USDA back up and running we saw the first flash sale announcement in a while on Tuesday with 138,000 tons of corn to South Korea.  The export sales data for this week is dated 12/20.  The corn numbers were very good with the 3rd best sales total of the year with big sales to Mexico.

Soybeans- The soybean market continues to be very reactionary to any possible changes in the trade war with China. With a trade delegation from China in Washington this week, the market was very focused on any comments from the meeting. A statement from a Chinese negotiator on how many beans they would buy stirred up the market. The comment was first reported as China will buy 5 million tons a day.  That was corrected to China will buy 5 million tons today.  And that was corrected to China has bought 5 million tons to date.  It’s all in the translation I guess, but the market was left to wonder whether new sales were coming or if they statements were made in hindsight. The trade was ripe with talk of new buying of about a million tons on Friday and the market jumped up 16 cents.  The rally was met with aggressive selling from the farmer both in the US and Brazil and that really knocked the wind out of beans as they ended up only 2 cents higher on the day. For the week, March soybeans lost 7 ½ cents.

Soybean inspections were good at just over 34 million bushels. So far soybean inspections are right on pace with the USDA export target. The delayed export sales data we saw for 12/20/18 was really good but it included the goodwill soybean purchases that China used to soften trade negotiations.

In Brazil, the Mato Grosso bean harvest is 25.6% complete vs 12.4% last year.  AgRural puts all of Brazil’s bean harvest at 13% complete vs. 3.8% last year. The hot and dry weather is pushing the beans to an even master maturity and harvest is in full swing. The vessel lineup at Brazilian ports are huge and ready to ship the newly harvested beans.

The African Swine Fever in China continues to spread and is still a major issue for them.  There has been a major drop in the soybean meal price in China and the disease is being blamed for lower hog numbers.  This could also have a material impact on the soybean import forecast if the disease continues to roll through the country.

Wheat- SovEcon raised their 2019 wheat production estimate to 80 million tons up from 77.3 million tons. However, Russia’s ag ministry cut their wheat export forecast to 36 mmt, down 1 mmt from their previous estimate.  Their total grain export outlook was left unchanged at 42 mmt. Egypt issued a new wheat tender with US SRW coming in with the cheapest FOB value at $243/ton.  However, when freight is added in, at least 7 other offers from France, Romania, and Russia were cheaper then the US.  Egypt ended up buying 360,000 tons split evenly between France and Romania. The delayed export sales data this week was just ok for wheat, but it did have the wheat business we did with Egypt factored in.

Anna Kaverman

anna@mercerlandmark.com