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Market Report

Tuesday May 8th, 2018

July corn closed up 2 ½ at $4.03 ¼ and December closed up 3 at $4.19 ½. July soybeans closed up 8 ¾ at $10.20 ¼ and November closed up 7 ¼ at $10.25 ¼. July wheat closed up 3 at $5.14 ½ and September closed up 2 ¾ at $5.31 ½. Crude oil closed down $1.65 at $68.97.

“Turnaround Tuesday” was the theme of the day, with some markets faring better than others. Corn posted $.02-$.03 gains and made up for roughly half of the prior day’s declines. Corn tried to soften a touch overnight, going stop-hunting below $4 in the July, but the market quickly bounced back into the dawn and never really faltered from that point on. Managed Money traders were viewed net buyers of about 5,000 corn today, and will head into tonight net long about 215,000 combined futures and options.

“Fake News” was abundant today, with everyone trying their best to tweet and twit ahead of biofuel policy meetings and the Iran nuke deal press conference. Today’s biofuel meeting attempted to maintain the “win win” cheerleading for ethanol and refining interests, though once again, the ethanol camp does not appear to be feeling particularly victorious. Instead of focusing on a “RIN price cap”, the refiner boys are now calling for ethanol exports to be counted in some fashion toward domestic biofuel mandates. In exchange, the ethanol camp will get their RVP waiver that would allow year-round sales of E-15 (they are currently heavily restricted in the summer). The EPA/USDA have also been tasked with investigating some of the “small refiner hardship exemptions” issued of late that have pressured RIN prices.  Ethanol did not react much to the deal.

Weather influences are viewed mixed to leaning bearish.  Northern hemisphere farmers should have a nice mix of rain and sunshine to plant crops, particularly toward the middle of this month.  Yesterday’s report found U.S. corn was at least 39% planted heading into this week, which is not too far away from 44% average. A wetter pattern this week will disrupt progress for a time, but better conditions are expected into next week.  Traders are in a holding pattern on South America, with better weather expected later this week and late next week.  Argentina is supposed to dry out, while dry southern Brazil safrinha crop areas could finally see some rain relief?

Traders are positioning ahead of the May WASDE, due Thursday.  The focus of the report will be the USDA’s first look at the 18/19 balance sheet. With that in mind, it is difficult to envision a bearish report for new crop corn, when plugging, in “trend-line” yields and the planting intentions number of 88 million. That being said, the market “sees” it, with an average 18/19 U.S. carryout forecast of 1.63 billion heading in. The range is quite wide – 1.467 bil to 1.907 bil, so there is certainly some disagreement. World corn carryout is expected to downtick another notch, mostly due to South American production adjustments.

The soybean and meal markets stabilized the sharp break from yesterday with a bounce back turnaround Tuesday performance.   The bean and meal charts both flirted with key support levels that held allowing for a technical recovery trade although there is room for debate on just how convincing that recovery effort was. Fundamentally, the key news was that Chinese trade representatives will be in Washington next week to resume trade discussions. Presidents Xi and Trump spoke on the phone expressing mutual interest in resolving the trade dispute and this helped the market regain its footing. It has been an interesting week already with plenty to look forward to still with the crop report on Thursday. Weather forecasts feature plenty of moisture for the coming week that will slow down planting efforts with the states of concern being the Dakotas and MN.  Fortunately, a drier bias evolves for those states in the 6-10 day ad 8-14 day outlook with plenty of warmth that should allow crops to get put into the ground.

The wheat complex battled back from lower price action throughout much of the night and traded higher throughout the day. There continues to be limited friendly news around for wheat. Granted we saw a minor bounce today, but with the US Dollar steadily rising, Russian weather said to be better than what is being reported, US wheat prices nowhere near competitive with the rest of the World and overall winter wheat conditions that have not shown any further deterioration week over week in almost a month, it will make rallies difficult to hold. At least until the crop report Thursday morning. Look for the choppy trade and possibly more of the same inter-wheat market type spreading to continue leading up to the report.

Keep an eye on a couple issues that may develop down the road in wheat. The HRW wheat crop is certainly lower than when we started the crop last fall. At this time, it is very difficult to predict the acreage abandonment. There is a great deal of concern that most of the remaining old crop is sub 10.5 protein and minimum 58-pound test weight. The new crop may develop a higher protein based on lack of tillering and fewer heads to fill. However, the stress on this crop is capable of creating a lower test weight that is certainly less desirable.

Expectations for US all wheat production varies greatly depending on who you talk to. Many groups do not like predicting what the government is going to say, instead opting to predict what the final total will be and adjust throughout the year. The USDA already surprised trade with a larger than expected Spring wheat planting acreage number in the March report, and in the April report World wheat production and carryout increased for a second consecutive month, into new record highs. So, what will the USDA surprise us with Thursday’s report.

Anna Kaverman

anna@mercerlandmark.com

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