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Friday January 5th, 2018

March 17 corn closed up ¼ at $3.51 ¼ and July 18 closed down ¼ at $3.67 ½. March soybeans closed up 3 at $9.70 ¾ and July closed up 3 at $9.91. March wheat closed down 3 ¼ at $4.30 ¾ and July 18 closed down 3 ½ at $4.55 ¾. Crude oil closed down $.49 at $61.41.

FOR THE WEEK ENDED 1-5-18

CORN – Another short trading week as everyone returned from their holidays, and no one seemed very interested.  Since news this week was severely lacking, let’s take a look back at 2017.  On the continuous corn chart, nearby corn traded a small $.66 range for the year from $3.28 ½ to $3.94 ½ per bushel.  On a year to year closing basis, nearby corn closed out 2016 at $3.52 per bushel and settled 2017 at $3.50 ¾ per bushel, down 1 ¼ cents per bushel.  The 2018 calendar year began on a slow note, trading from $3.50 ¼ to $3.54 ¾ per bushel this week.  It has only traded from $3.50 to $3.54 ¾ per bushel since December 22nd!  It’s no small wonder that grower sales have been slow and many are sitting on the sidelines hoping the WASDE January 12th report will provide some tradeable action.

Weekly export sales were the lowest of the marketing year at a dismal 4 million bushels!  This is horrible even for a holiday week.  We remained 25% behind last year’s total commitments.  We have sold 1.05 billion bushels or 55% of the target versus 1.4 billion bushels last year (61% of the final) and compared to the USDA’s 1.925 billion bushel target.  The USDA’s number is a 16% decline in year on year exports.  We’re going to need to average about 25 million bushels of sales per week to achieve the current USDA number.

Weekly ethanol production fell by 58,000 bpd to 1.032 million bpd, the largest weekly decline since at least 2010.  Ethanol stocks were up 600,000 barrels to 22.6 million barrels, the first increase in a month.  Margins recovered a nickel to a positive 2 cents per gallon.  Most traders are penciling in a slightly higher ethanol usage number for the January report; however, a slightly larger production figure may balance it out.

There was renewed chatter in the market this week about a delay to Brazil’s soybean harvest.  It’s expected they may only have 1% of their soybeans harvested in Mato Grosso by January 20th, compared to 5% last year.  Why is this important to corn?  Much of the early harvested soybean acres in this region get planted to corn.  If soybean harvest is slower, there is the possibility of intended corn acres switching to cotton.

OUTLOOK:  At the end of the week, some wondered why we even bothered to trade corn this week.  For the week, March corn was up ½ cent at $3.51 ¼, July eked out a ¼ cent gain at $3.67 ½, and December was ½ cent higher at $3.84 ½ per bushel. Another slow week ahead of the January 12th may be expected with March corn confined to a rough $3.45 to $3.55 per bushel range.  Funds remain net short, which may provide support, but South American weather will be the hot topic.  Poor exports and higher ethanol stocks may limit any upside.

SOYBEANS – Without the supportive concern stemming from dryness in areas of Argentina, I’m not sure what we would have traded this week.  March soybeans have rallied off their December 29th low of $9.54 ¾ per bushel to this week’s high of $9.77 per bushel, driven mainly by South America’s changing weather forecasts.  Argentina did receive rain before the weekend, with another round expected January 11-12.  Areas of concern have shrunk, but the trade wants more reassurance.  Overall, Brazil’s conditions look fine.  Some reports put forth the possibility that Brazil’s crop could surpass last year’s record 114.1 mmt crop.  The average estimate is currently 110.2 mmt compared to the current USDA estimate of 108 mmt.

The Buenos Aires Grain Exchange estimates that 2.25 million hectares or 5.56 million acres of soybeans still need to be planted of the 18.1-million-hectare estimate.  Argentina’s soybeans are 87% planted compared to 89% on average.  Argentina’s export tax on soybeans was cut 0.5% to 29.5% as of January 1st and will be reduced an additional 0.5% per month for the next two years.  One private consultant put two-thirds of Brazil’s soybeans in the blooming stage and 30% setting or filling pods.  Brazil’s soybean exports in December were estimated at a new monthly record at 2.3 mmt.

Weekly export sales, like in corn, were a marketing year low at just 20.4 million bushels.  With 1.5 billion bushels of sales on the books, we are 14% behind last year’s pace.  The USDA is projecting a 2.3% increase in export this year at 2.225 billion bushels.  We need to average a record high 21.1 million bushels of sales per week to hit the USDA’s figure.  Last year, we averaged 13.1 million bushels from this date forward.  This puts in play for a 25-50 million bushel cut (or more) in exports on future USDA reports.  With the new 1% FM standard for US beans into China, without additional testing/conditioning, we are losing business to Brazil.  China reported that from January through November, the US only supplied 31% of the 86.9 mmt of soybean imports into that country.  For comparison, last year we accounted for 34%.

OUTLOOK:  For the week, March soybeans were 9 cents higher at $9.70 ¾, July gained 7 ¾ cents to $9.91, and November soybeans jumped 9 ½ cents to $9.85 ¼ per bushel.   This week, March soybeans traded from $9.58 ¾ to $9.77 per bushel.  Recapping the 2017 calendar year on the continuous soybean chart:  the trading range was from a low of $9.00 ¼ to a high of $10.80 per bushel; it closed 2016 at $9.96 ½ and 2017 at $9.51 ¾ per bushel for a decline of 44 ¾ cents.

Argentina’s actual and forecasted weather will stay in the headlines as we approach the January 12th WASDE report.  Expectations for the report will likely lean toward a bigger carryout by cutting exports.  The December low in March soybeans at $9.54 ¾ is seen as first support, but bets will be off if South American forecasts turn wetter.  First resistance is seen from $9.80 to $9.90 per bushel, but again, weather will be the determinate.

Anna Kaverman

anna@mercerlandmark.com

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