Blogging by the Bushel
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Market Report

Friday August 25th, 2017

September corn closed down 3 ¼ at $3.38 ¾ and December 17 corn closed down 2 ¾ at $3.53 ½. November beans closed down 2 at $9.44 ½ and January 18 closed down 1 ¾ at $9.53 ½. September wheat closed up ½ at $4.09 ½ and July 18 closed up ½ at $4.85 ½. Crude oil closed up $.42 at $48.12.

FOR THE WEEK ENDED 8-25-17

Corn closed unchanged or lower every day this week as weather issues were pushed to the sidelines, seasonal pressure kicked in, and the Farm Journal Midwest Crop Tour didn’t hold any big surprises. New contract lows were seen in the September at $3.38, December at $3.52 ½, and March at $3.65 ½ per bushel.  In post-weekly export sales trading, corn was able to grab the coattails of soybeans to stop the bleeding for a short time.  Traders are still anticipating lower corn yields than the USDA’s 169.5 BPA August projection, and the crop tour was confirming that direction.  However, the crop tour has a history of underestimating the final USDA yield and there haven’t been any disastrous pictures or stories from the road.  Last year, December 2016 corn made its contract low on August 31, 2016 at $3.14 ¾ per bushel.  Seasonally, corn trends lower in September. Old crop corn is still being sold across the scale at elevators around the Midwest.  None of this inspires thoughts for a quick corn rally.

The crop tour estimated the US corn yield at 167.1 BPA compared to the August USDA 169.5 BPA forecast.  They pegged US corn production at 13.953 billion bushels versus the USDA’s 14.153 billion bushels.  The tour’s corn yield estimate for the US has been below the USDA’s final number for five straight years.

As expected, Brazil approved a 20% tax on ethanol imports over 600 million liters annually (160 million gallons).  In the first six months of the calendar year, Brazil’s ethanol imports were up 330% from the previous year. The US has exported 276 million gallons to Brazil from January through June 2017.  The tax is set to be in place for two years, at which time it will be re-evaluated, according to their Agriculture Ministry.  US weekly ethanol production was down slightly from 1.059 million bpd to 1.052 million bpd.

Weekly exports were lackluster at 4 million bushels for old crop and 16.7 million bushels for new crop.  Old crop sales total 2.227 billion bushels compared to the USDA projection for 2.225 billion bushels.  Total new crop commitments of 242.6 million bushels are only 55% of where we were last year and are at the lowest point for mid-August in the last 12 years.  New crop sales are only 13% of the USDA’s 1.850 billion bushel outlook compared to 24% on average at this time of year.

Contrary to corn, soybeans extended the uptrend that began last week as demand reappeared for new crop, and the crop tour was consistent in finding lower pod counts than last year.  Old crop export sales cancellations were announced early in the week, but new crop sales were there to take their place.  China is thought to need to purchase a significant quantity for October shipment and the US is competitive with South America for that time slot.  The belief that soybean yields will still benefit from rainfall likely limited the upside.

The Farm Journal Midwest crop tour estimated the US soybean yield at 48.5 BPA and production at 4.331 billion bushels.  In their calculations, they raised harvested soybean acreage by 500,000 acres to 89.231 million acres.  The USDA’s August balance sheet used a yield of 49.4 BPA for production of 4.381 billion bushels.  The numbers will likely be viewed as bearish since the tour has underestimated the final yield number in each of the last five years.

Weekly export sales for old crop were net cancellations of 14.7 million bushels, bringing total old crop commitments to 2.231 billion bushels.  Assuming 75-85 million bushels will get rolled over into new crop, this year’s export category is in line with the USDA’s August forecast of 2.150 billion bushels.   New crop sales were impressive at 73.8 million bushels.  This brings total new crop commitments to 365 million bushels.  This is still well below last year’s 635 million bushels on the books in mid-August and remains the 9th lowest total for this time of year.

The US Department of Commerce is initiating import duties of 64%-68% on Argentine imports and a 41%-66% tax on Indonesian biodiesel imports after finding they benefit from subsidies in their countries of origin and from the US RFS program.  This is expected to shut-off biodiesel imports from those countries.  The tariff rates were higher than the 40% tariff the trade had been expecting.  In response, Argentina said they will explore all available options of possible legal action.

The wheat markets spent most of the day higher on rising US export interest but turned lower to end the trading session. US wheat shipping disruptions will be likely in the next few days as hurricane Harvey made landfall in Texas.  Russia will supply 200,000 tons of milling wheat to Bangladesh between September and December. Algeria bought 590,000 tons of milling wheat for November shipment. This helped the European wheat futures to rise Friday, erasing losses that began at the beginning of the week and culminated in contract lows on Wednesday. The European Union’s expected 2017/18 wheat crop production was lifted to 139.4 million tons from 138.6 million tons a month ago.

Anna Kaverman

anna@mercerlandmark.com

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