Blogging by the Bushel
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Market Report

Friday May 4th, 2018

July corn closed down 1 ¾ at $4.06 ¼ and December closed down 1 ¼ at $4.21. July soybeans closed down 16 ½ at $10.36 ¾ and November closed down 12 ¼ at $10.37 ¼. July wheat closed down 11 ¾ at $5.26 ¼ and September closed down 11 at $5.41 ¾. Crude oil closed up $1.32 at $69.58.


CORN – Corn action this week was driven by US and South American weather, while beans were tied to weather and politics.  Corn gapped higher from the previous week’s close and really never looked back.  US planting progress was only 17% complete as of April 29th, well behind the 27% average.  The average for May 6th is 44% complete.  Prior to the report, the trade is anticipating progress to hit 35%-37% complete.  Dryness in southern Brazil is affecting their safrinha corn crop in a negative way as they enter pollination.  They have some rain in the forecast for around May 10th, but the trade wants to see it happen. It’s estimated that half of Brazil’s safrinha crop has had less than half of its normal rainfall over the last 30 days.  The USDA’s most recent total Brazilian corn production estimate was 92 mmt.  Private estimates have been coming in around 86 mmt.  Conab will update their numbers on May 10th, hours before the May10th WASDE report.  Their last estimate was 88.6 mmt.  For reference, it’s generally accepted that Brazil’s first corn crop this year was around 26.5 mmt, with the balance safrinha.  Roughly 70% of their corn crop comes from the safrinha crop.  Reductions in Brazil’s corn crop will be reflected in their corn exports.  As their corn exports decrease, US exports should increase.  Excess rainfall in Argentina is delaying their corn harvest. Their corn harvest was 37% complete, as of May 3rd.  It wasn’t too long ago that dryness in Argentina was the problem.  They just haven’t been able to get on the right side of Mother Nature this crop season.

Weekly export sales were near the top of expectations at 40.2 million bushels, bringing total commitments to 2 billion bushels.  This is down 2% from last year, but keeps us on pace to hit the USDA’s 2.225-billion-bushel export target.  We have sold 90% of the USDA’s projection compared to 88% on average. The USDA’s number indicates a 3% decline in year on year exports.   We need sales to average 11 million bushels per week to hit the projection. New crop sales this week were 2 million bushels. Total new crop commitments are 79.2 million bushels, down from last year’s 93 million bushels.

OUTLOOK: Weather and politics should provide corn with support for now. The funds also want to continue to be long corn and look at setbacks as buying opportunities. If we push hard and narrow the planting progress gap, additional acres may be expected to be planted.  The average planting progress for May 6th is 44% complete. The trade will be watching how the USDA treats the Brazilian corn production number on the May 10th WASDE report.  Private estimates are coming in closer to 86 mmt versus the USDA’s last estimate of 92 mmt.  In the last three years, December corn has had a difficult time spending much time above the $4.00 level.  This year with December corn above $4.20, we are about $.30 higher than we usually are in early May.  For the week, July corn rallied $.07 ¾ to $4.06 ¼ and the December contract gained $.06 ½  to $4.21 per bushel.  In the last three years, December corn averaged $3.82 ½ on May 4th.  While we could see higher prices with any crop problem, we are trading nearly 40 cents over that this year.  Something to think about as you make your marketing plans.  The contract high in the December 2018 contract is $4.29 ½ per bushel.

SOYBEANS – Soybeans continue to have the dark cloud of uncertainty surrounding possible implementation of Chinese soybean tariffs loom over them.  A US trade delegation met with Chinese officials May 3-4.  A strange thing happened near the conclusion of the talks.  It was reported near the close on May 3rd that the US and China would have an announcement on May 4th concerning an agreement.  However, this proved to be a premature announcement.  The only thing they agreed to was to continue to talk about their trade issues.  A few sticking points are the US request for China to cut the bilateral trade deficit by $200 billion by 2020, reduce tariffs, and cut subsidies for emerging industries.  In reaction, soybeans gave back the $.15 Thursday rally, and more, during Friday’s session.  Going into the talks, China had said they were not going to make any big concessions to the US.  China has “unofficially” stopped buying US soybeans in recent weeks, instead increasing purchases from South America.  The uneasiness of the situation has raised worries over whether China’s purchases from the US already on the books will be executed.  If so, and the 25% import tariffs goes into effect, would they be grandfathered in and exempt from the tariff?  These unknowns will likely keep a cap on any upside potential for the time being.  The most many were hoping for out of this initial meeting was an agreement to keep talking, which is what we got.

The July soymeal market broke the $400 level this week, trading as high as $406.50 per ton before finding pressure.  Argentina bought more US beans this week, lending credence to their need to source beans to crush.  If they fall short of needed meal to export, business should be pushed to the US. Trade chatter suggests China has covered 70% of their June soybean needs and covered 50% of their July bean needs. China’s soybean crush margins reportedly fell into the red this week for the first time since February.  Also, out of China were reports calling for an emergency campaign to increase soybean production.  The numbers being talked about are a drop in the bucket compared to their total soybean imports.  The early talk was an increase in production in their highest producing province of 22 million bushels.  They import close to 3.5 billion bushels.

Weekly export sales were at the high end of expectations at 15.3 million bushels for new crop and 17.2 million bushels for new crop.  It was noted that the previous week’s old crop sales were revised down 2 million bushels to 11.6 million bushels.  China also cancelled 134 tmt of old crop purchases, which is not unusual for this time of year.  New crop sales included 190 tmt of sales to Argentina.  Total old crop commitments at 2.01 billion bushels are down just 3% from last year.  The USDA is anticipating a 5% drop in year on year exports to 2.065 billion bushels.  Total sales are 98% of the USDA’s forecast compared to 96% on average.  The January-April period saw a 5.4% increase in soybean exports compared to last year and the highest in history for that time frame.  Since the beginning of January, the Brazilian real is down 9% and the Argentine peso is down 23%.

Argentina’s soybean harvest was 53% complete as of May 3rd, according to the BAGE.  Their crop production estimate was left unchanged from last week at 38 mmt.  US soybean planting was 5% complete as of April 29th.  The average for May 6th is 13% complete.

OUTLOOK: The May 10th WASDE may hold surprises for the market.  The Argentine soybean carryout number will hold interest for many as will the Brazilian corn crop forecast.  Will Argentina’s carryout really be 19 mmt as the USDA is saying now, or closer to Oil World’s 7 mmt forecast?  The Argentine soybean crop estimate was 40 mmt last month.  The overriding concern in soybeans is currently the state of affairs with China.  If planting weather is favorable next week, and we hear nothing on China, prices could slip into the May 10th report.  For the week, July soybeans tumbled 19 ½ cents lower to $10.36 ¾ per bushel.  The November contract pulled back 9 ¾ cents to $10.37 ¼ per bushel.  In the last five years, November soybeans have averaged $10.38 per bushel on May 4th, and this year is no different.  The May seasonal for November soybeans is slightly higher in the first third of the month, then lower.  The contract high in the November 2018 contract is $10.60 per bushel.

The HRW wheat tour was conducted this week.  It put the Kansas HRW wheat yield at 37 BPA with a crop size of 243 million bushels.  This puts the crop 27% lower than last year and the smallest since 1989.  The May 10th WASDE report will include the first 2018-2019 balance sheets. The next WASDE report will be released May 10th.  Beginning with this report, the USDA will add a new line to the world wheat and rice balance sheets to show beginning stocks, production, imports, domestic use, exports and ending stocks, after subtracting China’s numbers.  This is being done to better reflect the world situation.  On the April WASDE report, world wheat ending stocks were forecasted at 271 mmt, an all-time high.  China’s ending wheat stocks were forecasted at 127 mmt, nearly half of the total.

Anna Kaverman

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