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Market Report

Monday January 22nd, 2018

March 17 corn closed down ½ at $3.52 and July 18 closed unchanged at $3.69. March soybeans closed up 7 at $9.84 ¼ and July closed up 7 ½ at $10.05 ¾. March wheat closed up 3 at $4.25 ¾ and July 18 closed up 3 ¼ at $4.52. Crude oil closed up $.27 at $63.43.

Corn traders were buckling in for an exciting start to the week.  Futures left Friday’s close Sunday night, and finished a couple cents higher heading into the break. Then, the status quo set in. Corn steadily surrendered those gains, briefly traded lower on the day, before stabilizing into the close. The end result was a “sharply unchanged” performance. Managed Money traders were likely small net buyers on the day, which would imply they are heading into tonight net short 240,000 futures and options. The Argentina growing weather continues, thanks to competing periods of “hot and dry” and “just in time” rains. This weekend was particularly confusing, as some areas (mostly north of the major growing regions) received torrential rains, while others went almost completely without. Those that went without generally have enough soil moisture to limp along for a week or so. Some storm potential seen early this week, but the 6-10 day looks dry. Early Brazil soy harvest also running a bit behind normal. But it’s probably too early to worry there, given “optimal” second crop planting period extends for at least another 30-40 days.

Soybeans extended their gains for a 6th consecutive session as production uncertainty in Argentina due to stressful crop conditions and a rough near-term weather forecast has the market pricing in weather risk premium. The USDA is last estimating Argentina’s soybean crop at 56 mmt with some talking production could slip to 50-52 mmt when all is said and done due to the adverse weather and smaller planted acres. Fortunately, Argentina holds significant old crop supplies and Brazil’s new crop may be underestimated as much as 4 mmt by the USDA at 110 mmt last so global inventories are very strong and can handle a production shortfall as long as it doesn’t turn into a disaster.  The job of the market is to get things right and with significant fund short open interest you have the potential to run further than otherwise might be warranted – the weekly chart shows room to the $10.00-$10.15 area next.  Until the forecasts show relief that market is unlikely to lie down.

The wheat complex surprisingly saw firm price action overnight with Chicago leading the way. Last week the rally Chicago began to stall as it neared the area of its pre-report trading range of $4.24-$4.35. Although we may not have seen the selling overnight, during the day there sure seemed to be scale up selling, and trade was unable to extend their overnight gains during the day. Similar to the overnight, Chicago fared the best and finished the day higher. There was not a lot of fresh news over the weekend or throughout the day for the wheat complex so today’s price action was for the most part uneventful. Rains over the coming week continue to miss much of the center and southern plains, and the fear of dry conditions impacting a crop that already seems to have been hit with different adverse weather conditions several times already this season may have kept a bid under the market. Combine that with Russian wheat prices continuing to rise – is said to be at a three-month high – there are some positive signs to trade. However, we are still only a little over a week removed from a crop report that provided not so friendly data. Seasonal trend is neutral to slightly negative for wheat.

Anna Kaverman

anna@mercerlandmark.com

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