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Market Report

Friday April 13th, 2018

May 17 corn closed down 2 ½ at $3.86 ¼ and July 18 closed down 2 ¾ at $3.94 ½. May soybeans closed down 6 ½ at $10.54 ¼ and July closed down 6 ¾ at $10.65. May wheat closed down 8 ½ at $4.72 ½ and July 18 closed down 9 at $4.89 ¼. Crude oil closed up $.38 at $67.33.

FOR THE WEEK ENDED 4-13-18

CORN – Another report week, this time the release of the monthly WASDE.  The day before the report, May corn matched the previous week’s high at $3.92 ½ per bushel.  The neutral report didn’t provide a lot of price direction, but prices faded the balance of the week.  Corn was caught between a rallying soybean market and weakening wheat markets.

Results of the March WASDE report included a 50 million bushel cut to feed/residual and a 5-million-bushel reduction in FSI.  Exports were unchanged at 2.225 billion bushels as was corn for ethanol at 5.575 billion bushels.  Ending stocks for 2017/208 rose 55 million bushels to 2.182 billion bushels.  The average trade estimate was 2.196 billion bushels.  World ending stocks fell 1.39 mmt to 197.78 mmt, the smallest since 2013/2014.   The average estimate was 197 mmt. Argentina’s corn crop was estimated at 33 mmt, down 3 mmt from last month.  Brazil’s crop was cut 2.5 mmt to 92 mmt.  The BAGE and the Rosario Grain Exchange are carrying Argentina’s corn crop at 32 mmt.  Argentina’s corn harvest was estimated at 31% complete versus 21% on average.  Conab is pegging Brazil’s corn crop at 88.6 mmt. Brazil’s first corn harvest was pegged at 66% complete versus 64% last year.  The US attaché in Brazil is forecasting their corn crop at 89 mmt, well below the USDA’s 92 mmt outlook.

Weekly export sales were below the pre-report estimates at just 33.1 million bushels for old crop and 2.2 million bushels for new crop.  The sales were above the 15.3 million needed per week to hit the USDA’s 2.225-billion-bushel target.  We are just 2% behind last year’s total commitments when the USDA is projecting a 3% year on year decline in exports.  Weekly ethanol production was down 4,000 bpd to 1.034 million bpd.  Stocks were 600,000 barrels lower at 21.8 million barrels.  Margins improved 4 cents per gallon to 12 cents per gallon.

It may be safe to say we won’t have an earlier than normal planting season this year, but it’s probably too early to say we’ll have a late planting season.  The average corn planting progress for April 15th is 15% complete.  The average planting progress is 25% by April 22nd.  As of April 8th, corn planting in the US was 2% complete, spot on with the average.

OUTLOOK: Uncertain planting weather and underlying good demand likely prevented further losses in the corn market this week.  For the week, May corn fell 2 ¼ cents to $3.86 ¼, July was down 2 ½ cents at $3.94 ½, and December dropped 1 ¾ cents to $4.10 ¾ per bushel.  US planting weather will attract more attention in the coming weeks.  If we continue to be delayed, prices should stay in the upper end of the recent trading ranges. The next WASDE report will be released May 10th.

SOYBEANS – Unlike corn, soybeans shot higher to begin the week.  Gains were cut going into the weekend on profit taking and a lack of fund buying.  Strength was derived from good demand for US soybeans, fading fears of a trade war with China, and a slightly bullish WASDE report.  We have now rebounded back to pre-tariff talk price levels.  The tariff threats pushed Brazilian soybean premiums higher and ultimately made them uncompetitive.  Enter US beans as the cheapest in the world.  Argentina bought 240 tmt of new crop 2018/2019 US soybeans during the week, the first such sale since 2008/2009.  There was reportedly interest even from Brazil.  However, as the concerns eased, so did Brazilian values.

The March WASDE report showed few changes: crush was increased 10 million bushels to 1.97 billion bushels, seed and residual were each reduced 3 million bushels.  Exports were left alone at 2.065 billion bushels.  Ending stocks were up 5 million bushels to 550 million bushels.  The average trade estimate was for a 20-million-bushel increase to 575 million bushels. World ending stocks decreased 3.6 mmt to 90.8 mmt.  The average trade estimate was 90.8 mmt. Argentina’s soybean crop estimate was slashed 7 mmt to 40 mmt and Brazil’s was pumped up 2 mmt to 115 mmt.  The average trade estimates were 42.1 mmt and 115.6 mmt, respectively.

China imported 5.66 mmt of soybeans in March, up slightly from 5.42 mmt imported in February.  In the first quarter of 2018, China has imported 19.57 mmt of soybeans, up just 0.2% from the previous year.  In the first six months of the marketing year, China has imported 43.6 mmt of soybeans.  The USDA is anticipating them to import 97 mmt this year.  For them to reach that target, their monthly imports will need to be at record levels from here on out.

Weekly export sales were record large for this week at 55.5 million bushels for old crop and an impressive 35.1 million bushels for new crop.  The new crop sales were the largest for the year so far.  Old crop total commitments are only 4% behind last year when the USDA is expecting a 5% decline in year on year exports.  We need weekly sales of 6.8 million bushels to achieve the USDA’s 2.065-billion-bushel forecast.  New crop commitments are 122 million bushels versus 98 million bushels on the books last year at this point.

OUTLOOK:  Support from Argentina’s purchases of US soybeans this week helped propel prices higher.  Good demand in general was also supportive.  If we see exports begin to fade, it will weigh on prices, so continue to monitor demand. Nearby soybeans hit new highs for the recent rally this week, before pulling back slightly into the weekend.  For the week, May soybeans rallied 20 ½ cents to $10.54 ¼, July was up 20 ¼ cents at $10.65, and November gained 16 ¼ cents at $10.49 ½ per bushel.  May meal fell $3.50 to $382.80 per ton and May soyoil was down a fraction at $.3148 per pound.  Weather and demand will be the drivers next week.

Winter wheat crop conditions declined again. In the second full rating of the spring, the good+excellent category fell from 32% to 30%. This is the lowest the rating has been for this week since 1996. The wheat market is more concerned with the forecast for rains then the damage inflicted from dry and cold temps. Upcoming rain events took the wheat market down by 20 cents from the highs set on Tuesday. Only one change for the US wheat balance sheet on the WASDE report and that was a cut of 30 million bushels to the feed/residual category. World stocks were 3 million tons above the average guess, adding to a very bearish world supply scenario.

Anna Kaverman

anna@mercerlandmark.com

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