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Market Report

Thursday January 25th, 2018

March 17 corn closed down 1 ¼ at $3.55 ¼ and July 18 closed down 1 ¼ at $3.71 ¾. March soybeans closed unchanged at $9.92 ¼ and July closed down ¼ at $10.13 ¼. March wheat closed up 1 ½ at $4.34 ½ and July 18 closed up 1 ½ at $4.59 ¾. Crude oil closed up $.01 at $65.3.

The corn market took another breather today, following Wed’s eye-opening rally with a more subdued performance today. March futures actually traded to a near two month high early as part of a broad-based commodity rally, but the early pop found sellers. Indecisive trade set in thereafter, flipping between fractional gains and losses intraday. Managed Money traders were viewed pretty close to flat on the day, as they hang with a 230,000 contract net short in the market. The story broadly remains the same on the weather-front. Trade is watching to see if another round of “just in time” rains bail out another hot and dry week in Argentina. Exchanges there found farmers planted just 1% of the corn last week, taking the total to 92.4%. The stuff in the ground is reportedly rated over 40% Poor-Very Poor.  Northern Brazil is dry, while the center and south are rainy, delaying soy offtake (and thus second crop corn planting). The south is expected to dry down for a couple weeks. Brazil rains will become less widespread February 1-9 and fieldwork should increase in some central areas, but early indications suggest key crop areas will remain wet. Mexico said to be joining US/Canada in the “trending dry” club, completing the North American set.

The first half of the session today featured the bean and meal markets extending their rallies with front month beans pushing above $10 to $10.02 and front month meal challenging its December highs and nearing the $350 market. Farm selling of beans has picked up on the rally although volumes have not been not huge so far. Then, the rug was pulled out with the mid-day weather update where the GFS showed an improved and badly needed precip outlook for Argentina for week 1 and most notably week 2.  The selling took beans lower but didn’t last however as some may doubt this first look at the change in weather pattern and want to see how future models look. The market finally ended the day sharply unchanged in beans while meal ended its 9-session winning streak with a reversal trade $8 off the high. This becomes a game of verification now. Does the outlook hold and the rains materialize or not? Expect more price volatility as we find out. Another factor is the currency movement where the dollar has fallen out of bed from roughly 95 in November to a new low today to 88.25 before reversing back to higher on the day, settlement pending on sticking the reversal trade. The weakness has been supportive to commodities in general and as the market bounced off its lows you could see struggles in the energies, the metals and the soybean market too. The Brazilian real closed into a new contract high and the recent strength in the currency has offset most of the recent gains in beans to the Brazilian farmer.

The wheat complex, especially Chicago, was all set up to see additional short covering and have another strong day of trade, but when the day session started, it wasn’t the buy button the funds hit it was the sell button. Hard to explain where all the selling came from, but it was seen across the entire grain complex, not just the wheat markets. After the early break stabilized, the rest of the day was spent between unchanged and $.04 higher before settling a couple better across the board. As we look ahead to Friday’s trade, how we settle could be very important. The overnight move in Chicago took values above its 2018 highs (which had previously been $4.37), but we probably need a settle above that level to spark additional short covering. The USDA delayed its weekly export sales report until Friday because of the federal gov’t shutdown. Last week sales were once again at the low end of expectations coming in at 153 MT, with an additional 38 MT of new crop for combined sales of around 190 TMT. Sales should have a better week this week. Look for between 250 and 350 MT.

Anna Kaverman

anna@nercerlandmark.com

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