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Friday April 6th, 2018

May 17 corn closed down 1 at $3.88 ½ and July 18 closed up down 1 ¼ at $3.97. May soybeans closed up 2 ½ at $10.33 ¾ and July closed up 2 ¾ at $10.44 ¾. May wheat closed up 7 ½ at $4.72 ¼ and July 18 closed up 7 ¼ at $4.88 ½. Crude oil closed down $1.44 at $62.10.

FOR THE WEEK ENDED 4-6-18

CORN – Corn followed the same path as the soybeans this week.  Corn will be affected by the proposed Chinese import tariffs, but China isn’t a major importer of US corn.  China has only imported 200 tmt and 700 tmt of US corn in the last two years.  May corn traded to a low of $3.72 and December to a low of $3.96 per bushel, neither one taking out their March lows.  The market’s attitude in corn has been to buy breaks until proven wrong, and that mentality has continued.

Other corn news this week included the EPA expanding RFS waivers for refiners.  For 2017, 25 refiners received hardship waivers.  In a typical year, 6-8 hardship waivers are granted.  There are 57 refiners that have capacity under 75,000 bpd, which is the threshold to qualify for a waiver.  Argentina’s corn harvest was 21.6% complete as of April 5th and Brazil’s first corn crop harvest at 60% complete. The BAGE left their corn estimate at 32 mmt. Weekly export sales were poor and the lowest in the last 12 weeks at just 35.4 million bushels.  We stayed at 2% behind last year’s total commitments.  The USDA is projecting year on year exports to be down 3% this year.  We need to sell 16.1 million per week to hit the USDA’s current 2.225-billion-bushel export target.

The average trade estimates for the April 10th WASDE report: corn carryout at 2.189 BB versus 2.127 billion last month. The Grain Stocks as of March 1 was a bearish number and will be incorporated into the April balance sheets.  World carryout is estimated at 197.3 mmt versus 199.2 mmt last month.  Both Argentina’s and Brazil’s corn estimates are expected to fall.  Argentina’s corn crop is estimated at 33.3 mmt versus 36 mmt last month.  Brazil’s corn crop is expected to come in at 91.6 mmt versus 94.5 mmt last month.

SOYBEANS – We’ll start with beans this week since most of the recent news has a more direct effect on this market versus corn.  It’s bad enough we try to out-trade Mother Nature and all her forecasters, but now we’re having to trade politics front and center.  After a “shocking” bullish Prospective Planting report on March 29th, we came back from the 3-day weekend to the calm before the storm.  Gains were extended early in the week, before China announced their list of proposed US goods on which they would put a 25% import tax.  The list of 106 products included soybeans, corn, sorghum, airplanes, automobiles, to name a few.  The market responded with a plunge lower at mid-week.  May soybeans traded as low as $9.83 ½ per bushel and November soybeans to $9.97 ¾ per bushel, their lowest levels in both since early February.

A Purdue University study commissioned by the US Soybean Export Council said US exports to China could fall by 33% with a 10% tariff and 71% with a 30% tariff.  China accounts for 60% of US soybean exports. Prices rebounded the following day as the market absorbed the news and the fact that a comment period on the proposed tariffs is needed to take place in the US before implementation.  China indicated they would also wait to set an effective date for their new import tariffs until the US did.  Brazil’s soybean premiums skyrocketed in response to the trade war posturing between the US and China.  Brazil would benefit from the conflict with higher soybean demand from China.  US soybeans became the cheapest source in the world on the fluctuations.  Traditional South American customers may be pushed to the US by both price and execution

Then the next shoe dropped.  President Trump asked US trade advisors to consider $100 billion in additional tariffs on Chinese goods.  The markets again plummeted, but not by as much as at mid-week.  Prices clawed their way off the overnight lows as the day progressed on Friday and managed to close in the black.   In the end, it’s believed South America can’t supply all the soybeans China will need over the next twelve months.  But that doesn’t mean they won’t try.  Customers that would usually buy from South America may be inclined to take advantage of cheaper US beans.  And that’s what we saw.  At the end of the week, the USDA announced the sale of 65 mmt of beans to Mexico for both old and new crop, plus 327 tmt of old crop beans sold to unknown and 131 tmt of new crop beans to unknown.  For the week, a total of 522 tmt of old crop beans and 520.3 tmt of new crop beans had been reported in the USDA’s daily report.  Also interesting was trade talk that US soybeans work on paper into Argentina.  The US buys South American soybeans periodically to fill slots, so why not the other way around?

The market was whipsawed by tariff threats this week and anything else was pushed aside.  Other news included the BAGE cutting their Argentine soybean production estimate by 1.5 mmt to 38 mmt.    The USDA’s last number was 47 mmt, but it’s expected it will be cut on the next report.  Argentina’s soybean harvest was put at 9% complete and Brazil’s at 77% complete.  The average trade estimates for the April 10th WASDE report:  US ending soybean stocks at 574 million bushels versus 555 million last month.  World soybean ending stocks are pegged at 93 mmt versus 94.40 mmt last month.  Argentina’s bean crop is estimated at 42.1 mmt.  Brazil’s soybean crop is estimated at 115.6 mmt versus 113 mmt last month.

Weekly export sales were excellent and the biggest in the last 11 weeks at 41.6 million bushels.  Total commitments at 7% behind last year.  The USDA is calling for a 5% decline in year to year exports.  We need to average 9 million bushels of sales per week to achieve the USDA’s current 2.065-billion-bushel forecast. The February NASS Crush Report indicated 165 million soybeans were crushed, a record for the month.  Soyoil stocks were larger than expected at 2.4 billion pounds.

OUTLOOK:  For the week, May soybeans were down 11 cents at $10.33 ¾, July was 10 ¾ cents lower at $10.44 ¾, and November soybeans fell 14 ½ cents to $10.33 ¼ per bushel.  The May beans traded a weekly range of $9.83 ½ to $10.60 ½ and the November beans traded from $9.97 ¾ to $10.60 per bushel.  May soymeal was up $2.30 per ton for the week at $386.30 and May soyoil was down $.0034 at $.3153 per pound.  The trade will be watching the political shenanigans and US weather ahead of the April WASDE report on April 10th.  The market showed us this week that there are wrenches that can still be thrown at us.  US weather should gain in trading prominence as will new business coming our way.  For now, it’s all about political posturing, with no dates announced for any tariffs to take effect.  Negotiations may work the issues out before any tariff is enacted, but you never know.

WHEAT – Not much to say in the way of wheat other than conditions continue to support all wheat. Russian winter wheat crops are doing well.  92% of the crop is good or satisfactory, while only 8% is rated in poor condition.  In the US, winter wheat crop conditions are down sharply.  In the first full report of the spring, condition were on at 32% good/excellent.  This is down sharply from the last rating last fall when the good/excellent category was at 50%.

Anna Kaverman

Anna@mercerlandmark.com

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