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Market Report

Tuesday March 13th, 2018

May 17 corn closed up 1 at $3.91 ¾ and July 18 closed up 1 ½ at $3.99 ¾. May soybeans closed up 7 ¾ at $10.48 ¾ and July closed up 8 ½ at $10.59 ½. May wheat closed down 4 ¼ at $4.86 ½ and July 18 closed down 3 at $5.04 ½.  Crude oil closed down $.58 at $60.75.

The question of the day in corn: do you “buy” yesterday’s reversal higher or “sell” today’s rally attempt? The corn market was in bull mode early, with futures trading as much as $.05 higher mid-day. After wheat cooled off, so did corn. Managed Money traders were net buyers of a little over 10k corn today, which would leave them net long 230,000 combined futures and options.

“Policy relief” may have given both corn and ethanol a boost on the open. Bankruptcy courts were said to be leaning toward a settlement for a Philadelphia refiner short some $300 million worth of RIN credit obligations. The current deal suggests the gov’t would “disappear” a decent chunk of that obligation.  Ethanol lobbyists are said to be preparing a formal complaint. As usual, “no news is good news” on the RFS. The other headline was the EPA Admin blaming speculators for elevated RIN costs.  In reality, RIN carryout has tightened amid refiner reluctance to blend above 10%. Tomorrow’s weekly EIA report should show ethanol production hanging right near last week’s levels.  Demand should improve seasonally, which should swing ethanol stocks back to a small net draw.

Export business continues to offer a satisfying rumble in the background of the corn market. The USDA this morning confirmed the purchase of 210,000 MT of corn to South Korea, though it is listed as optional origin. Private Korean firms remain active in the markets, booking corn for late spring. Turkey was said to pass on their international tender. A large (and growing) outstanding sales book suggests we will quickly improve on a lackluster shipping pace to date.

Soybeans followed yesterday’s reversal with another positive performance as we stabilize the recent slide that took the market $.50 off the highs. It was a very quiet trading session reflected in the low volume in May beans which was the lightest in 5-weeks. Fresh fundamental news was even lighter. Uncertainty about Argentina’s final production persists which is a good reason for beans to trade cautiously here and see how the growing season finishes up. The trade is generally plugging in a 42-44 mmt type of crop for Argentina and assuming we get the forecasted rains over the next couple weeks it should solidify those reduced production ideas. With the help of Brazil’s record or near record crop and very healthy old crop supplies globally, there would be no reason for the recent highs in beans or meal to be seriously challenged. If the rains don’t show all bets are off. Look for more of a two-sided trade to develop near term with an increasing focus on US acreage heading into the report at the end of the month.

Around an hour into the session Monday night the wheat complex prices rallied to a couple cents higher, and trade would remain bid the rest of the night. This trend carried into the day with Chicago futures rallying higher and KC futures rallying. Then the midday maps came out. What it showed was a shift in the weather pattern for two weeks out. Some meteorologists are downplaying the possible change, but the GFS model shows a drastic change that if it materializes, will provide the entire state of Oklahoma, part of the Texas panhandle and southern Kansas with one to two-inch rains. This change looked to be the catalyst that took Chicago off its highs.

Condition reports Monday afternoon was a mixed bag, with Texas and Oklahoma seeing some improvement, while the Kansas crop slipped a bit. Coming into the morning, the forecast called for above normal temps and limited chances of precip for the rest of the month across much of the HRW area. The thinking was the 35-cent break over the past several days may have been all the flushing the wheat complex needed. The possible shift in the weather pattern in the midday maps may change that thinking. Especially if other weather models start picking up that same shift in pattern. Stay tuned. Regardless, we are beginning to see business pick up a little this week, which should give the complex some support on breaks.

Anna Kaverman

anna@mercerlandmark.com

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