Blogging by the Bushel
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Market Report

Tuesday August 29th, 2017

September corn closed down 2 ½ at $3.33 ½ and December 17 corn closed down 2 ¼ at $3.48 ¾. November beans closed down 4 at $9.37 ¼ and January 18 closed down 3 ¾ at $9.46 ½. September wheat closed up 2 ¾ at $4.02 ¾ and July 18 closed up ½ at $4.80. Crude oil closed up $.04 at $47.00.

The corn market finished 2-3 cents lower Tuesday. Again. Broken record, indeed. The corn market has declined nine out of the last eleven sessions, skidding to a new low for the year.  Turnaround Tuesday failed to materialize despite an encouraging mid-day bounce. The funds were viewed net sellers of another 10,000 contracts today, which would take their net short in the market close to 125,000. The selling in the markets of late have taken on a more “structural” feel than anything necessarily tied to specific fundamental inputs of the day. Funds appear to want to build back up their short position lost amid summer weather volatility, while farmers are quickly running out of time to price old crop bushels locked up in DP/storage. The end result has been a slow, quite relentless, sell-off. In fact, one could make the argument that some of the weather influences around are modestly friendly and warrant some risk premium. Additional model runs have backed up earlier GFS forecasts that suggest a frost event may impact the upper Midwest in mid-September.  The weekly crop progress report from Monday found 86% of the crop was in the dough stage, while 44% was dented, both behind last year and average.  Need to get to black layer to prevent some yield loss amid a frost. There is also September contract positioning around, as traders jostle to avoid a delivery situation Wednesday night. Mexico continues to help the export cause as they were back in for another 226,000 metric tons this morning, taking their two day take to nearly 400,000 corn.

The soybean market followed through on the outside day reversal yesterday after touching initial resistance against the $9.50 area and the chart tries to shift its momentum lower. If beans are going to join the other grains in seeking deeper levels of support, technical targets would be the recent $9.21 low followed by open objectives in the $9.07 to $9.00 area on November. Increasing crop ratings and generally benign – although not perfect like last year – weather conditions have the market thinking yields are increasing which is limiting the recovery rally. That recovery has been built on the recent demand developments. Demand is good, China is back in our markets including today’s USDA flash sale 198 mt 17/18 beans sold to China. A wildcard on production yet is the potential for a frost event across the upper Midwest starting a week or 10 days out as much below normal temps move in from Canada spread out through the Great Lakes region and brings the risk of crop damaging cold that will be watched closely.  Government maps this afternoon are showing colder and drier for the 6-10 day and 8-14 day outlooks suggesting a less than ideal scenario for finishing crops with the key being how cold temps dip with a potential frost.

The wheat complex was $.04-$.07 lower overnight, but someone was there to buy the opening in both Chicago and KC, and that turned out to be a sign for things to come the rest of the day. Some Mpls longs probably remember how illiquid the Spring market was when they were entering the trade, and today they saw much of the same type of flow while exiting. Sellers were also light when they tried to cover shorts in Chicago. Results of the Egyptian tender came out midday. Not surprising, the US did not win any business. US futures are about $15 a ton lower over that period. but US soft wheat at $100 over would land at around $216. That means the US was around $15 dollars out from winning any business. The US was only around six dollars out in the GASC’s tender two weeks ago, so while World wheat prices fall, the US is getting even less competitive.

Anna Kaverman

anna@mercerlandmark.com

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