Blogging by the Bushel
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Market Report

Friday March 2nd, 2018

May 17 corn closed down 1 at $3.85 ¼ and July 18 closed down 1 at $3.92 ½. May soybeans closed up 3 at $10.71 and July closed up 2 ¾ at $10.79 ¼. May wheat closed down 15 ½ at $5.00 and July 18 closed down 14 at $5.14 ½. Crude oil closed up $.29 at $61.09.

FOR THE WEEK ENDED 3-2-18

CORN – Corn has now closed higher in six out of the last seven weeks.  Underlying support from declining crop conditions in Argentina and the fund appetite for length propelled corn to fresh highs.  The May contract hit $3.88 going into the weekend, before breaking its streak of four consecutive higher closes.  For the week, May corn rallied 10 ¾ cents to settle at $3.85 ¼, July was up 10 ¼ cents at $3.92 ½, and the December contract gained 7 cents at $4.04 ¼.  An interesting observation:  in calendar year 2017, December corn traded at or above $4.00 in 28 of the 241 trading days.  The first time above $4.00 was February 13, 2017 and the last time was July 21, 2017.  So far in 2018, we traded at or above $4.00 in the December contract 5 times, every day this week.

Demand for corn continues to be robust.  Weekly export sales were substantially higher than pre-report forecasts.  Sales this week were 69 million bushels, closing the gap versus last year from 12% behind to only 9% behind.  The USDA’s export forecast of 2.05 billion bushels reflects a year/year decline of 10.4%.  It pays to be the cheapest source of corn in the world. Weekly ethanol production fell by 24,000 bpd to 1.044 million bpd.  Ethanol stocks increased 200,000 barrels to 23.0 million barrels.

The BAGE rated 77% of their corn crop as poor/very poor versus 57% on February 15th.  They reported 70% of the crop silking compared to 84% last year.  They left their corn crop estimate for Argentina unchanged at 37 mmt.  The USDA was last at 39 mmt.  Brazil’s first corn crop was reported at 31% harvested versus 29% last year and 33% complete in 2016, as of February 23rd.  The planting of their safrinha corn crop was 46% complete, compared to 58% last year and 74% complete in 2016.

OUTLOOK: Strong demand for the cheapest source of corn in the world, which just happens to be US origin, is contributing to the upswing in prices.  On-going concern over what the effect of dry Argentine conditions and wet Brazilian conditions will have on the final crop size has pushed prices higher.  These two headlines have captured the market’s attention since the calendar flipped to 2018.  The crystal ball isn’t clear enough to say where we stop, but a run toward the magical $4.00 in May and $4.20 in December can’t be ruled out.  If the weather changes, or we end up in some sort of trade war, the tide may turn in a flash.  It seems prudent to reward the market for its action with at least some old crop and new crop sales.

SOYBEANS – May soybeans have now closed higher in 6 out of the last 7 weeks.  Front and center to the strength has been the declining crop in Argentina.  This week, the BAGE cut their Argentine soybean forecast to 44 mmt.  This compares to the USDA’s 54 mmt estimate on the February WASDE report.  The trade is likely trading a crop somewhere between 46-48 mmt.  Speculators are adding to their net long position and have not been compelled to change their ways.   Any change in the Argentine weather forecast could catch many on the wrong side, but it seems every time a decent rain event pops up on the forecast, we are disappointed in coverage and/or quantities.  May beans hit a new contract high at $10.82 ½ per bushel this week and the November contract reached $10.42 ¾ per bushel.  For the week, May beans popped 23 ½ cents higher at $10.71, July rallied 23 ¼ cents to $10.79 ¼, and November managed a 9 ¼ cent increase to $10.37 ¼ per bushel.  The meal market has been the leader, pulling beans with it, and closed $14.60 higher for the week at $392.90 per ton.

Casting a cloud over the positive price action late in the week came out of Washington.  Import duties 25% on steel and 10% on aluminum may be imposed as soon as next week.  Traders are concerned of a trade war that may impact the agricultural sector.  The two biggest exporters of steel to the US are Canada and Brazil.  China is well down the list at number 11, but that doesn’t really ease anyone’s worry.  Put this on your list of what to watch in the coming weeks.

Weekly export sales were above estimates this week at 31.5 million bushels, rebounding after last week’s net cancellations of 4 million bushels.  Old crop sales commitments of 1.674 billion bushels are 13% behind last year.  The USDA is projecting this year’s sales to be down 3.5 % versus last year. China’s commitments, so far this year, are 26.4 mmt, lagging last year by 7.8 mmt.  New crop sales totaled 4.5 million bushels.  Total new crop commitments are 58 million bushels, and now surpass the 55 million bushels on the books last year at this time.  Next week’s sales report should be good with 824 tmt of sales announced to China and unknown this week for the 2017/2018 crop year, and another 123 tmt for 2018/2019.

OUTLOOK:  Be wary of any further rumblings of possible trade retaliations resulting from our newest import tariffs, as well as any change in crop conditions in South America.  These two features will be key to our next move.  As the calendar moves forward, US planting intentions and Midwest weather will become increasingly important to price direction.  The rally we’ve seen in prices since the beginning of the year is giving growers a chance to begin putting on some sales for new crop.  Pricing at new contract highs should be considered.

Wheat

The wheat market saw significant profit taking today despite crop worries in the US winter wheat. There does not seem to be much relief for the HRW next week either. One of the major storylines in the US is dryness in the Southern Plains. Monthly crop conditions showed another decline in the major HRW growing state of Kansas. 49% of the crop is now rated as poor or very poor. The latest drought monitor shows the entire state of Kansas in some degree of drought.

Anna Kaverman

anna@mercerlandmark.com

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