Blogging by the Bushel
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Market Report

Friday May 25th, 2018

July corn closed up 1 ¾ at $4.06 and December closed up 2 ½ at $4.25. July soybeans closed up 5 ¾ at $10.41 ½ and November closed up 6 at $10.53 ½. July wheat closed up 12 ¾ at $5.43 and September closed up 12 ¾ at $5.59 ¾. Crude oil closed down $2.97 at $67.61.

The corn market glided into the long weekend with gains, no doubt benefitting from yet another buying binge in the wheat market. Futures generally maintained a firmer tone throughout, finishing just below session highs. For the week, futures notched just over $.03 gains, holding the “outside week reversal” higher trade. CFTC Commitment of Traders data for the week ended 5/22 found fairly flat fund positioning in corn.  There were just 12k “new” longs and 10k “new” shorts, resulting in a net change of 2,000 new net length in the market. When including mixed action since then, we would estimate they are heading into the weekend net long just over 215,000 combined futures and options.

Given an unusually warm bias, traders suspect plenty of the “behind” acres in the northern plains will get planted, just in the nick of time to avoid crop insurance issues. Early conditions should be quite good. In Brazil, analysts are still trying to grapple with a less-than-ideal safrinha corn crop this year.  AgroConsult was the latest to opine, pegging the second crop at 57 mmt vs. 60.2 mmt in prior estimates and 67 mmt last year.  With 26 mmt in first crop, that would make for an 83 mmt total crop, 14 mmt less than last year.  Some talk around that Argentina may resume an export tax on corn, as the gov’t there looks for money.  Could have a bearing on corn planting decisions in their next season this winter, but high South American prices could overcome this obstacle.

The soybean market traded higher on Chinese purchases and tight SA supplies of beans from the trucker strike. The products were mixed with soymeal up three bucks and soyoil down 37 points. CIF premiums were unchanged for May and mixed for J/J (down 1-2 cents / up 1 cent). Brazilian trucker’s road blockage protest is in its 5th day, disrupting grain movement for pork and poultry processing facilities, soybean crushing plants and export facilities. They rejected the government’s proposal to reduce diesel prices for the next 30 days. Brazil’s government has requested military intervention, to begin removing the roadblocks from the main arteries, to allow products to move again. The USDA announced the sale of 312,000 tonnes of US soybeans to China for 2018-19 and 165,000 tonnes of optional origin soybeans to China for 2018-19.

Trade across the wheat complex fared much better today than yesterday, with prices extending overnight gains early, then staying firm throughout the rest of the day. KC was the leader of the complex today, maybe signaling that the big fund short that had been in Chicago has now liquidated its position. The HRW wheat contract ended the day $.15 higher, and for the week it finished more than $.25 higher. It was the highest weekly close since July of last year. Twice this week we saw the volume of trade in Chicago wheat futures exceed over 200,000 contracts. Thursday’s volume may have been a record at 283,396. Open interest in Chicago wheat futures since last Friday has increased a shade under 60,000 contracts. Farmer selling has been a big part of it, as it was strong Tuesday, and downright overwhelming Thursday.

Weekend weather will play a major role to how futures start the week Monday night. Black Sea, Australia, Canada, China and the US weather will all be monitored closely. Here in the US, temps across the southwest are expected to soar above 100 degrees. Granted, this area of the HRW wheat belt has been an issue for the past several months, but the scorching heat will not do the crop any favors. It has been mentioned several times that the USDA is just way too high in their early estimates for Kansas. Either the 7.3 mil harvested acres estimate or 37 yield estimates will come down. But what if the Colorado crop gets below 80 mil bu, Oklahoma under 50 mil bu and Texas under 40 mil bu? The recent rally in wheat futures has taken US HRW wheat values more than a dollar out from being competitive with the rest of the World. But it may not matter if the HRW wheat crop diminishes as much as we think it possibly could. We will not get an update on that until the end of June, so it’s still five weeks away. Plenty of time to see several flushes (downside moves) before then.

Anna Kaverman

anna@mercerlandmark.com

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