Blogging by the Bushel
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Market Report

Wednesday October 11th, 2017

December 17 corn closed down 3 ¼ at $3.46 and March 18 closed down 3 ¼ at $3.59 ½. November beans closed down ¾ at $9.65 ¼ and January 18 closed down ¼ at $9.76. December wheat closed down 2 at $4.33 ¼ and July 18 closed down 4 ½ at $4.78 ½. Crude oil closed up $.37 at $51.60.

The corn market featured a little more “excitement” Wednesday, though prices did not go in a particularly encouraging direction. Corn finished, closing within mere pennies of the reversal lows from the last day of August. Volume numbers improved today, but remain relatively light, particularly since today was “position day” in front of one of the most important USDA reports of the year. Funds were net sellers of just under 10,000 corn today, which would take their net short up to 185,000 combined futures and options. Traders seemed to be on a mission ahead of the October crop report tomorrow. If option markets were any indication, a big reaction is not expected, but this is a report infamous for curveballs. The USDA has more data at their disposal, which will give some added weight to their production prognostication. The broad market is angling toward yet another “yield up-tick” in this report. Average guess is a 170 bpa yield in a 168.7 to 171.5 bpa range, which compares to the USDA’s Sept estimate of 169.9 bpa. One x-factor could be “harvested acres”, which some believe could be trimmed back from the 83.5 mil in Sept. Despite steady-to-better production expectations, most believe 17/18 US carryout will be decreased to 2.29 BB vs. 2.335 BB in Sept, likely owing to reduced carry-in hinted at by the Sept Quarterly Stocks report.  World carryout will be an afterthought, but most also expect a very small decline there as well. Keep an eye on Brazil, which could see a downtick in production given early planting difficulties.

The soybean market had a quiet pre-report performance where prices remain in a two-sided limited range trade recently (roughly $9.50 to $9.87) brought on by a healthy balance of supply and demand that creates buyers on breaks and sellers on rallies. To break this pattern it would take a USDA surprise or a weather threat in the Southern Hemisphere as the most likely drivers. The USDA flashed a bunch of new sales today with 132 mt beans to unknown and 264 beans to China, all old crop 17/18 in another clear signal that low prices stimulate better demand. In tomorrow’s report trade will be looking to see if the USDA continues their trend of increasing corn and soybean yields.  With the avg. estimates already looking for a .2 bpa increase in both to 170.1 corn and 50.0 beans it would likely require a much bigger jump to 170.5 to 171.0 for corn or 50.5 to 51.0 in beans to give the markets a significant bear reaction while a steady to lower yield projection by the USDA would be supportive. US ending stocks are expected to tighten by around 30 mb to 447 mb.  World soybean carryouts are expected to tighten by 1 mmt to 96.5 mmt.

The wheat complex saw slightly lower price action throughout the night and that trend would carry into the day for both the HRW and SRW wheat contracts. Trade today was a little disappointing. Granted the European wheat contract has been a drag on prices here in the US as Matif wheat has not seen a higher close in over a week and has dropped more than five Euros during this recent break. But there has been an abundance of tenders around this week, starting with Egypt Tuesday morning, the USDA reporting 104 MT HRW sold to Mexico today, Tunisia and Japan in Thursday, Iraq and Ethiopia are in next week, Latin interest surfacing for wheat with Mexico and Colombia active. The fact that wheat has struggled to find a bid the past few days could be an indication that the market is leaning towards bearish data in tomorrow’s crop report. However the report is more of a corn and soybean report than wheat. Expect the wheat complex to be a follower after the data is released. If there is a surprise in the report for wheat it would come in 2017/18 US ending stocks. It has been the surprise of the report the past two months. Back in August many were expecting around a 30 MB reduction from July, with some thinking as much as 50 MB or more, yet the USDA only gave us a 5 MB reduction down to 933 mil. Then last month many were looking for a minor reduction, maybe 10 to 15 MB, yet the USDA left stocks unchanged at 933 MB. After the Sept 29 crop report, traders are now anticipating an increase in US ending stocks of between 10 and 15 MB. The avg guess for 2017/18 World wheat ending stocks are said to be around 262.80 MMT, which is slightly below September’s 263.14.

Anna Kaverman

anna@mercerlandmark.com

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