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Thursday May 31st, 2018

July corn closed up ½ at $3.94 and December closed up ½ at $4.13 ¾. July soybeans closed down 4 ½ at $10.18 ½ and November closed down 2 ¼ at $10.34 ¼. July wheat closed up 4 ¼ at $5.26 ¼ and September closed up 4 at $5.43. Crude oil closed down $1.17 at $66.91.

The corn market started the day in fine fashion, trading as much as $.05 higher early in the day session. When that early buying petered out, corn settled into an aimless drift. Some selling on the close tamped the market back down to nearly unchanged, barely notching a fractionally higher settlement. Managed Money traders were viewed net sellers of about 5,000 corn today, and have liquidated roughly 50,000 contracts over the past three sessions. Traders expecting an export sales release this morning went home disappointed; it was pushed back one day due to the Monday holiday. Another “solid” week of new business is expected. Trade negotiations remain a large part of the intraday discourse in the market, and today was no exception. Metals tariffs on key US trade partners are set to go into effect tomorrow. US negotiators landed in China today and NAFTA is still up in the air. The lack of clarity on these positions continue to exert a negative influence on the trade, though actual corn export business done is, and likely will continue to be, brisk into early summer.

Coming into today, the short-run weather picture appeared quite favorable for developing US crops; cooler temps and widespread rains.  Mid/late day runs put a little more heat and a little less rain in, though, which could help the markets a little. Black Sea and many parts of Europe are still in need of some rain. Recent moisture in Brazil will likely be too late to represent a huge “game-changer” on yields, with estimates likely to come in the low 80′s versus 97 last year. Argentina corn harvest progress inched higher, advancing 2% to 37% complete.

The soybean market closed lower in the fronts in a quiet end of the month trading session featuring weakness in the spreads that helped to support the deferred months. The ongoing weakness in the spreads reflects the absence of old crop export activity. Trade negotiations are back in the headlines with the White House announcing steel and aluminum tariffs for Europe, Canada and Mexico taking effect tomorrow. Mexico turned right around and placed retaliatory tariffs dollar for dollar targeting pork legs, apples, grapes and cheeses as well as steel with Canada following suite announcing tariffs on whiskey, orange juice and other food products as well as steel and aluminum. The US tariffs were initially threatened earlier but had been given a 2-month exemption which has now concluded. The US exported $24.5 billion dollars of Ag and related products to Canada in 2017, $24.1 billion to China, and $19.5 billion to Mexico. Besides the hog market closing $2 lower on this news, the trade uncertainty also negatively impacted the soybean market psychology even though they were not mentioned specifically by Mexico or Canada.

The Brazilian truck strike has concluded but logistics have been slow to normalize with some road blockages lingering.  Some estimate it could be 7-10 days before the flow of goods at the ports return to normal? Delays to Brazilian export loadings has firmed export basis and could result in some nearby fill in business out of the US but no trade has been reported so far.

Prices started the night a little lower and they continued to gradually weaken through the European opening. One of the major differences was that the Spring wheat market was not following the HRW or SRW wheat markets lower. Shortly into the day it was the Chicago market that took over the leadership role. Considering the reluctance of the soy complex, and even to an extent the corn market to trade higher or maintain early gains, it was a solid performance by the SRW wheat market. With the southern regions of Russia dry over the next ten days, Ukraine only getting some light and periodic showers, and wheat prices more than $.30 off its recent highs, maybe that was enough of a wheat break at least for now. Ongoing rhetoric out of the White House centering on US trade negotiations with China, Canada and Mexico will keep rallies in check until those are resolved. And, still think the COT report Friday afternoon might have a negative impact on trade come early next week. Last week, the CFTC clearly missed much of the buying from the prior Tuesday’s trade. Do not be surprised if the report this Friday shows the fund length in Chicago much larger than everyone thinks. That would put the negative spin to trade Sunday night unless of course the forecast remains very hot and dry.

Anna Kaverman

anna@mercerlandmark.com

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