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Market Report

Tuesday April 10th, 2018

May 17 corn closed down 1 ½ at $3.89 ¼ and July 18 closed down 1 ¼ at $3.97 ¾. May soybeans closed up 3 at $10.50 and July closed up 2 ¾ at $10.60 ¼. May wheat closed up 1 ¼ at $4.92 and July 18 closed up 2 ½ at $5.08 ½. Crude oil closed up $2.01 at $65.44.

“Report day” did not move the needle much in corn today.  Despite a few interesting moves, the USDA data offered no real surprises relative to trade expectations, at least in corn.  Managed Money traders were viewed close to flat on the day, as they hang with net long of 190,000 combined futures and options.

The April WASDE is rarely a market-mover, and fully lived up to its dull reputation, though the balance sheet did feature a few changes worth noting.  The USDA moved closer to private estimates on South American corn and bean crops. They trimmed Argentina corn another 3 mmt to 33 mmt (vs. 41 last year) and Brazil corn -2.5 mmt to 92 mmt (vs. 98.5 last year). With the March Quarterly Stocks data fully in mind, the USDA raised domestic (U.S.) carryout projections to 2.182 BB from 2.127 in March (and 2.350 last year). The feed and residual category took most of the brunt of the damage, and was reduced 50 MB from prior despite evidence of strong animal feed usage. Despite the U.S. bump, world corn carryout down ticked another notch to 197.8 mmt from 199.2 mmt in March (and 231 last year).  Fundamentals continue to move in the “right” direction for corn, though the report played out extremely close to expectations.

Elsewhere, export interest for U.S. corn remains active, particularly out of the usual suspects in Latin America and Asia. Ethanol margins improved again today, as the trade begins to focus more on positive seasonality and less on future export jitters. China will begin their reserve auctions in earnest Thurs-Fri, offering a large quantity of 2014 vintage supply.  Turkey is rumored to be considering reducing or eliminating grain tariffs to boost livestock fodder supplies.

Soybeans finished higher today but well off session highs as bullish news from the USDA  report and new export sales failed to keep traders from taking profits. November held up a little better than May but was unable to break through last week’s contract highs. Futures surged to double digit gains on the morning open, after USDA reported new sales, including 10.25 MB of old crop to Argentina and 9.3 MB of new crop to China and unknown destinations. The deals with Argentina were the largest in some 20 years, as the world’ largest soy product exporter tries to maintain production despite a crop that down 30% from last year. USDA slashed another 257 million bushels off its estimate today following the country’s severe drought, but added 74 million to the size of the crop in Brazil.

Still, it was the bottom line on the U.S. balance sheet that got the market’s attention. While traders braced for an increase due to weaker exports, the government held its forecast of sales steady, cutting 5 million bushels off carryout. Stronger crush helped by the Argentine drought offset lower see and residual usage. At 550 million bushels, however, carryout would still be large, which appeared to temper bulls by the close.

It was Crop report day, and typically, this early April report is non-influential for wheat. Much of the report for wheat saw only very minor changes. The surprise came from World stocks, raising them another 2.33 MMT. Came primarily from increased production in the Middle East. Meaning, there was nothing in the report that was bullish wheat. Price action reacted accordingly, with the knee-jerk reaction. But the markets quickly rebounded, meaning there were buyers looking to buy that break. It also means that these buyers probably are not trading the data from the report, but weather, and conditions here in the US.

Conditions were expected to worsen by around 1% in both G&E and P&VP, and nationally, they slipped 2% in G&E and 5% in P&VP. However, much of the slippage especially in P&VP came in two states, Montana and Oklahoma. The slippage in G&E mostly came in three states, Arkansas, Idaho and Oregon. Kansas conditions actually improved 3% in both G&E and P&VP week over week, and recently, the Kansas conditions usually has taken precedence over how the markets react. So, the initial knee-jerk reaction was a slightly higher start in HRW, and a slightly lower start in SRW because of the overall conditions, but it wasn’t long before the KC markets started to react to the Kansas conditions. Looking ahead to the rest of the week. If nothing else, today’s report reminded us that there is no shortage of wheat around the World, despite the potential problems here in the US. Technically, the market is respecting the gaps left on Monday. It will be important to continue that trend the rest of the week.

Anna Kaverman

anna@mercerlandmark.com

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