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Market Report

Wednesday December 27th, 2017

March 17 corn closed up 1 at $3.53 ¾ and July 18 closed up 1 at $3.70 ½. January 18 soybeans closed down 3 ¾ at $9.55 ½ and March 18 closed down 3 at $9.67 ½. March wheat closed up 5 ¾ at $4.28 and July 18 closed up 6 at $4.54 ½.  Crude oil closed down $.31 at $59.69.

The corn market continued to rack up small gains in another quiet, holiday-tinged session. Futures tacked on another $.01, rallying for seven consecutive trading days. Granted, that sounds more impressive than reality. It has only amounted to a net $.07 gain (+2%). The fund traders remained small net buyers, and we estimate they will head into tonight net short close to 240,000 combined futures and options. By and large, it was a very quiet news day. At least tomorrow, we will have ethanol to talk about. Tomorrow’s weekly EIA report – delayed for the holiday is expected to be rather benign. On the weather front, short-run conditions in South America generally appear favorable, though a dryer trend is expected to return to Argentina after the weekend, which will bear watching into yet another long weekend. Recent rains should help promote planting of the last one-third of the Argy corn crop. Brazil conditions still look good.  US Midwest and Plains are quite chilly; this prompted some short-covering in wheat of the day, which helped corn a little.

Soybeans traded higher in the overnight session with ideas of extending its recovery trade but were unable to sustain the bid after the break and reversed lower along with the products.  Volume was slightly better than yesterday but it continues to be a thin environment. Soybean meal fought off severe sell pressure mid-day to prevent a breakdown of its fall support shelf and an outside day lower. This recovery in meal could have been related to reports of an explosion at an Argentine crush/export facility in Rosario. December markets are notoriously difficult to trade with thin participation, end of year positioning and choppy action that can be full of false signals and head fakes. In the news, the USDA flashed 110 mt of beans sold to China for 17/18.  Whether the new rules on foreign material percent will affect unloading of US soybean shipment to China from next Jan remains to be seen but some crushers have slowed down due to this uncertainty. Reuters reports that half of US soybean exported to China so far this year would not pass the new FM requirements rule for 2018. South American weather in general turns from a few weeks of improving conditions for the dry areas of Argentina and S Brazil to a little hotter and a little drier again – certainly not ideal but not a major crop problem either.  In a La Nina environment, the market is likely to be more respectful of drying conditions and a little more cautious.

Price action overnight across the wheat complex was very similar to what we saw during much of the day Tuesday. As we moved into the day session, price action turned into the exact opposite of what we saw Tuesday. If you recall, during yesterday’s trade the wheat complex had every opportunity to rally as trade in the soy complex was strong and there was a lot of talk about the extreme cold temps in the center of the country with many areas seeing sub-zero readings. Yet, wheat struggled to find a bid and ended its streak of seeing higher highs at seven consecutive days. Today, the soy complex unraveled after its firm start to the day, and the weather situation did not change, yet prices across the wheat complex steadily firmed throughout the session. Granted it is very early in the winter season, but temps in some areas across Nebraska were -10 to -15. Much of Iowa was -5 to -10. There was very light snow cover to protect some of the hard wheat areas and the soft wheat areas had 1-2 inches so this may have protected some winter wheat. Estimates put 10-15% of the hard wheat belt at risk, and this cold spell is expected to last for the next week. Only two trading days left in the year, and funds in wheat hold an extremely short position. The short covering rally may not be done.

Anna Kaverman

anna@mercerlandmark.com

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