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Market Report

Tuesday March 6th, 2018

May 17 corn closed up 1 at $3.88 ¼ and July 18 closed up 1 at $3.95 ½. May soybeans closed down 2 ¾ at $10.74 ¾ and July closed down 2 ¾ at $10.83. May wheat closed down 2 ¼ at $5.07 and July 18 closed down 2 at $5.21 ¼.  Crude oil closed up $.06 at $62.45.

The corn market extended its win streak to eight of the last ten days, finishing Tuesday with small gains. Action was mixed today, flitting between small losses and “sharply unchanged” for most of the session before finding some late buying yet again.  Managed Money traders were viewed net buyers of another 7,500 corn today, which would put them net long close to 170,000 combined futures and options.

Exports were in the news early, with South Korea paying $223/mt early morning for a cargo of corn. They had tendered for 165,000, but only agreed to buy 60,000 mt. It’s not a secret why, it’s the price. On February 12th, they paid $205/mt for similar quantities of corn, which is an increase of about 9%.  In that time, futures have rallied 4%; the balance likely accounts for higher rail freight. Turkey is also in for corn, but that business will likely go to Black Sea due to freight advantages. A probable stronger shipping pace into the second half of our corn market year should quickly help corn exporters gain ground on last year (currently 18.9 vs. 27.4 last year).  This will likely be especially true given South American offers being pulled back some in response to Argentina’s drought.

Speaking of weather, excepting a few rains in the north (where they are not needed), Argentina was mostly dry once again. Most of the country is not expected to get enough rain over the next week to stop the decline in crop production potentials. Mid-March seems to be the best odds for a general soaker, but it could be too late for many fields. Brazil remains more mixed, as farmers try their best to dance around rains to plant second crop corn. The far south is catching some of the Argentine drought.

The soybean market took a breather today in the old crop even as new crop pushed into new highs. Soybean oil gained on meal moving the share to a 5-session high, oil was also supported by a bounce in palm oil off its lows. In terms of weather, nothing has changed as the forecasts offer little relief to the ongoing drought in Argentina for the near term. Until you can stabilize production ideas for that crop the bean and meal rallies are likely to have underlying support. The crop report on Thursday inches another day closer where those Southern Hemisphere crops will be spotlighted (Argentine beans down hard, Brazil beans up but not enough to offset). US crush could be bumped higher thanks to the sharp rally in margins although further export reductions may be somewhat clouded with the very recent resumption of Chinese/unknown exports totaling 1.090 mmt old crop over the past couple weeks.  Cash sources indicate China continues to shop US beans.

The slightly better condition reports Monday afternoon set the tone for the overnight trade, and the selling intensified during the early part of the day. Both Chicago and KC fell lower before catching their breath, stabilizing and starting to dig out of its deep hole. Mpls continues to distance itself from both the HRW and SRW wheat markets – on rallies and on breaks. Spring wheat prices only slipped lower, and was the first to rally. By late morning futures had moved $.15 off its lows, and prices remained slightly higher through the close. Chicago and KC were not as fortunate, but they both were able to rally around $.12 off its lows and post only a slightly lower settle. Trade just had too many negative components to it today. Even the Egyptian tender had some negative overtures to it. Granted, the GASC paid up a little for the wheat they bought this morning, but US soft wheat prices, which were very comparable to Russian wheat prices a few weeks ago, has all of a sudden become $20 more expensive.

Crop Report Thursday. The data should carry very little weight for future price direction in wheat. Analysts expect the report to show US 2017/18 wheat ending stocks very little changed from the 1.009 bil bu in February. The report is expected to also show very little change in 2017/18 global wheat ending stocks from the February report which was estimated at 266.1 MMT.

Anna Kaverman

anna@mercerlandmark.com

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