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Friday December 22nd, 2017

March 17 corn closed up 1 at $3.52 ¼ and July 18 closed up 1 ¼ at $3.69. January 18 soybeans closed up 1 ½ at $9.50 ¼ and March 18 closed up 1 ¾ at $9.60 ¾. March wheat closed down 2 at $4.25 and July 18 closed down 1 ¾ at $4.50.  Crude oil closed up $.06 at $58.46.

A happy and safe holiday season to all of you and your families.

FOR THE WEEK ENDED 12-22-17

CORN – After setting a new contract low on the previous Friday at $3.46 ½ per bushel, corn proceeded to match that level on both Monday and Tuesday; in fact, Tuesday’s trading range was identical to Monday’s.  The triple-bottom at $3.46 ½ was able to fend off sellers for the balance of the holiday-type trading week.  March corn closed at its highest level since December 8th.  Fund short-covering was likely a feature for this week’s upswing.  Keep in mind there is an old adage that “triple bottoms (or tops) never hold.”  It’s not out of the realm of possibilities that March corn drifts toward the December 2017 low of $3.35 ¼ per bushel.  Corn volumes during the week were the smallest seen in at least a year as traders lacked interest and headed home for an early start to the holidays.

Weekly export sales exceeded expectations at 61.3 million bushels and was the best in six weeks.  This was the third best weekly sales number in this marketing year.  We are, however, lagging last year by 26%, while the USDA is anticipating a 16% decline in year/year exports.  Corn inspections are down 40% from last year.  The USDA’s export target is 2.925 billion bushels and we are at 997 million bushels.   US corn is the cheapest source of corn on the global scene.  Sorghum export sales were the largest of the year!  Mexico continues to lead the pack on US sorghum purchases.  In related news, grain inspection fees at two of Argentina’s southern ports will drop by 40% under a deal between private port management and local workers.  This should make their corn more competitive in the export arena. Weekly ethanol production at 1.077 million bpd was the third highest ever, even though it was slightly lower week on week.  The year to date grind is up 3.2% from last year, but the USDA is predicting at 1.6% increase in use.

OUTLOOK:  Corn has moved into a sideways, higher pattern after establishing a new contract low, at least for now.  Fund short covering prior to year-end may inspire additional upside, but any upside may be limited by the spillover weakness in soybeans and burdensome corn supplies.  It’s not a stretch to imagine March corn trending toward the December 2017 contract low of $3.35 ¼ per bushel.  In the short run, we could see a pop in prices on fund short covering, but it likely won’t be as much as growers want to see.  For the week, March, July, and December corn all gained 4 ¾ cents to $3.52 ¼, $3.69, and $3.84 ¾ per bushel respectively. More chatter is popping up about the new crop soybean/corn ratio.  It currently sits at 2.53.  This type of number doesn’t really inspire a move out of corn, although the lower cost of planting soybeans plays a role in the decision.  If soybean prices continue to fall and the ratio moves in favor of corn planting, this doesn’t help us solve the oversupply of world corn.  The result could be disappointing corn prices for an extended time.

SOYBEANS – Improving weather conditions in both Argentina and Brazil put the skids on soybean prices again this week.  Strong weekly export sales were a bright spot to the week, but they were unable to overcome fund long liquidation and diminishing South American weather concerns.  Soybeans fell to a three-month low as soybeans closed lower in 11 out of the last 13 trading sessions. It broke a string of six consecutive lower closes with a small bounce into the Christmas weekend.  Funds moved from a net long position to a net short position.  Adding to the negative tone, China announced that effective January 1st, US soybean shipments into the country with foreign material (FM) of less than 1% would receive expedited treatment at unload.  Shipments with FM more than 1% would be subject to additional inspection and/or cleaning.  The new restrictions seemingly only apply to US shipments.  The finding of weed seeds in US cargoes was mentioned as a concern. This may add expense for US shippers and just makes it more difficult to do business.

Production estimates for Brazil aren’t falling.  Abiove, Brazil’s soybean association, left their forecast unchanged at 109.5 mmt.  Safras cut their estimate from 114.7 mmt to 114.6 mmt, but it’s still a huge number. The USDA’s latest estimate was 108 mmt.  Conab is projecting a 109.2 mmt crop.  Last year’s production was a record 114.1 mmt. Argentina passed pension reform this week, driving the peso to an all-time low.  Retirement age for men went from 65 years old to 70 years old, and for women from 60 years old to 63 years old.  Riots and strikes resulted as the pubic expressed their displeasure.   The lower peso usually prompts grower selling and makes their products more competitive.  Weekly export sales were at the high end of expectations at 64 million bushels. China accounted for 90.5% of the total weekly sales. We remain 16% behind last year’s pace.  The USDA is projecting total exports at 2.225 billion bushels and we are at 1.453 billion bushels. This would be a 2.3% increase in year/year exports.  We have 65% of the USDA’s export target on the books, compared to 81% of final exports sold on average by this date.  Soybean inspections year to date are down 13% from last year.  The trade will be expecting a decent sized cut to US soybean exports on the January 12th WASDE report.

OUTLOOK:  The trade should remain thin again this coming week as traders extend their holiday into the new year. Without a weather threat in South America, there is little to prompt buyers to jump into the market. January soybeans touched the September, and marketing year low, of $9.47 ½ per bushel.  March soybeans held above their September low of $9.56 ½, but without food for the bulls, we could make new lows for the move.  On a short-term basis, it will all come down to holiday weather in South America.  For the week, January soybeans were down 17 cents at $9.50 ¼, March fell 17 ¼ cents to $9.60 ¾, July dropped 16 ¾ cents to $9.82 ¼, and November was 14 ½ cents lower at $9.73 ¼ per bushel.

Wheat

Russia believes they will export up to 40 million tons of wheat this year.  This is much larger than the 33 million tons that the USDA is currently expecting.  India is looking to raise taxes on wheat imports.  The raised them from 10% to 20% in November.  This move is trying to support domestic producers. US wheat export sales were outstanding with the best sales total of the year so far. Wheat futures did manage to post a small gain for the week closing 3 ½ cents higher at $3.25

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