Blogging by the Bushel
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Market Report

Monday February 12th, 2018

March 17 corn closed up 5 at $3.67 and July 18 closed up 5 at $3.82 ½. March soybeans closed up 18 ¾ at $10.01 ¾ and July closed up 18 ½ at $10.22. March wheat closed up 15 at $4.64 and July 18 closed up 14 ¾ at $4.89 ½. Crude oil closed up $.09 at $59.08.

Corn managed to maintain this strength into the day. Futures closed right at the highs of the day, boasting $.05 gains and coming within a freckle of taking out the recent post-report spike trade. Managed Money funds were viewed net buyers of 20,000 corn today, and when factoring in the most recent CFTC surprise, would imply they are only 50,000 net short corn.

Argentina was the subject, as weekend rains generally fell short of expectations. A cool down into Sunday may have helped a little, but a soaker is what is needed, and that did not happen.  There are some more showers in the forecast for the weekend, but they are expected to also fall short of the mark for most. Most expect a turn to better conditions into March, but some permanent damage is expected between now and then.  Before getting too revved up, keep in mind that Argentina is a “residual” supplier of corn to the world. Losing a few million metric tons there is not a game-changer, but no doubt could help US exporters win some more business. South Korea dived into the world corn markets overnight after passing on a tender last week. They cited high prices at the time, but ended up paying close to $10/mt more than they would have originally.

Elsewhere, Brazil weather remains mostly good.  Farmers appear to be dancing around intermittent rains to get first crop corn harvested and second crop corn planted. Recent soil moisture increases in the Gulf of Mexico coast states has improved planting moisture for corn that will begin soon. China soil moisture is also good for early corn planting to begin next month.  The heart of the Corn Belt received big snows over the weekend which will help their situation, too.

The soybean market rallied sharply on Argentina weather or more specifically, disappointment in the weekend rain event – gapping higher in the overnight, closing that gap midday, and firming back near the highs into the close for the biggest one-day rally on March beans since the October 12th crop report.  Meal is the leader due to Argentina’s position as the global leader in meal exports, it also gapped higher on the chart but never came close to closing that gap like beans did. Beans slipped some due to a midday outlook suggesting better rains for the upcoming weekend along with some farmer selling with beans challenging their January highs although the farm selling wasn’t nearly as active in beans as the corn selling was. The trade had been talking the Argentine bean crop size of 50-52 mmt in recent weeks compared to the USDA latest at 54 mmt assuming we got some better relief over the weekend. Now, estimates are slipping to the 45-46 mmt range weather pending. Obviously, things are trending the wrong way in Argentina and widespread rains are needed to help stabilize production potential. Fortunately, Brazil still appears on track for record or near record production.

The story of US soybean demand is one where crush demand is rising and maxing out in order to produce meal but this is not enough to counter waning soybean export demand which has been disappointing due to a low protein US crop, competitive Brazilian supply and an outlook that is likely to get worse before it gets better. In the news, China cancelled 455 mt of US bean purchases in another sign of potential trade retaliation but the fact is they can replace those purchases with cheaper new crop Brazilian beans that don’t appear to have the protein deficit of the US crop. This is a normal seasonal transition so the timing is optimal to rattle sabers with minimal real-world impact on trade or risk.  The USDA did announce new sales of 198 mt old crop and 116 mt new crop to unknown.

After a couple days of trading the crop report data, the wheat markets, and the entire grain complex in general, is back to trading weather. Argentine rains seemed to miss the southern region of that country, sending beans and meal racing higher overnight. For wheat, the negative slant that the crop report data gave us on Thursday, combined with 6 to 10 day and 8 to 14 day maps showing much above precip expected across much of HRW wheat country was enough to help settle futures $.15 off its highs on Friday. However, we saw little moisture this past weekend across the HRW wheat belt. That gave a positive slant to trade for the weather bull. As World wheat prices continue to rise, it is almost a given that US wheat futures will follow along. And we still have a large spec in Chicago that holds a significant short. Many positive spins to a wheat complex today, in which any or all could have been behind today’s strength. Looking forward, depending on how much precip the HRW wheat belt receives this week – or if the rains from the 6 to 10 day and 8 to 14 day even materialize, may go a long way in determining if this early week rally was a wonderful selling opportunity, or just the beginning of another leg up.

Anna Kaverman

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