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Thursday May 3rd, 2018

July corn closed up 3 at $4.08 and December closed up 2 ½ at $4.22 ¼. July soybeans closed up 10 ¼ at $10.53 ¼ and November closed up 8 ¾ at $10.49 ½. July wheat closed up 11 ¼ at $5.38 and September closed up 10 ½ at $5.52 ¾. Crude oil closed up $.49 at $68.26.

Corn found support from dryness in southern Brazil’s safrinha region, but gains were limited by planting progress in the US.  Key reversal higher in corn today. Better corn basis at the Gulf, beans mixed.  Eastern processors pushing for beans, not so much in the West.  Brazilian bean and meal basis lower. Sorghum boats originally headed from the US to China are still looking for homes to avoid the import “deposit” of 178.6%.

There are times that only a couple of words can spark a rally or cause the bottom to fall out of a market and the soybean market reacted strongly to the words ‘pretty positive’ with a sharp rally late in today’s session. ‘Pretty positive’ was the brief yet telling response by the US trade representative Calabria following the first day of trade talks. Soybeans didn’t need to hear any more as buyers took the market from $.06-$.08 lower to $.10-$.12 higher. These talks wrap tomorrow and there should be some additional information and headlines around. While no resolution was expected this week, today’s comment is certainly a ‘positive’ signal. There were additional rumors of an announcement of a deal to be made tonight but that has not been confirmed.

What would a trade deal mean to the soybean market? Considering July soybeans settled $.04 higher than where they settled before the tariff threat announcement almost one month ago and November beans are $.07, it may not mean all that much. You may see some initial headline buying enthusiasm but just like the knee jerk response that sold the market off sharply in early April, any sharp rally would likely not be lasting. In terms of physical trade, we should see Brazilian export basis relax but that doesn’t mean there will necessarily be cancellations of Brazilian purchases or a resulting flood of buying US beans near term. China was very proactive in getting covered with May needs seen at nearly 100% already, 70% of June and 50% of July and paid a price to do it, but seasonally, this is still Brazil’s market until we get to later in the summer when Brazil normally hands the baton back to the US exporter. Net-net, it should not be a major difference maker other than it can put the market’s mind at ease that the sales commitments already on the books are more likely to be executed after all rather than cancelled.

Elsewhere in the news, soybean weekly export sales totaled 886 mt (416 old crop) which was on the upper end of the range of expectations. The old crop sales were up 12% from last week but down 58% from the recent 4-week avg.

Wheat futures traded lower throughout the night, but rebounded during the day to post solid gains across the board. World weather concerns, results from the KC crop tour and money flows are all being attributed to the wheat market’s ability to settle right off its session’s highs.

The Kansas hard wheat tour wrapped up, and after the three-day tour, they estimate an overall yield in Kansas of 37 bpa, and a crop of 243.3 MB. Last year’s crop had a 48 yield and total production was 333.6 MB. This year’s 37 yield estimate might be a little optimistic, but the recent rains will surely help. If the production estimate of 243.3 MB is accurate, it would be the lowest output from the state of Kansas since 1989 when they had a 213.6 MB crop. Estimates for the Nebraska wheat crop was 43.7 MB, down from 46.92 MB last year, and the estimated yield average is 43 bu/acre. Keep in mind, planted acres have gone down in each of the past five years, and last year’s Nebraska’s yield was 46. In Colorado, the estimated yield was only 35 bu/acre, which is a little bit of a surprise since last year’s yield was 43 and weekly condition reports have almost mirrored last year. Production in Colorado was estimated at 70 MB, down from 86.86 MB last year. Scouts did not tour Colorado like in past years. Expect that yield and production number to go up. In Oklahoma, scout’s assessment of the HRW wheat crop was about as bad as expected, because of drought conditions, poor root systems, few tillers and small heads. Abandonment is said to be around 46%. They put harvested acres at a little over 2.3 mil and a yield of roughly 25 to give us a total production figure of 58.4 mil. That would be the second lowest production number on record. Last year Oklahoma harvested 2.9 mil acres and had a yield of 34 for total production of 98.6 mil.

Export sales this morning were in line with expectations, coming in at 235 MT old crop, with an additional 210 MT of new crop sales to take the combined total to around 445 MT. Total sales are 864 MB vs 1028 last year and projections of 925.

Anna Kaverman

anna@mercerlandmark.com

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