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Monday June 4th, 2018

July corn closed down 10 ¾ at $3.80 ¾ and December closed down 10 ½ at $4.01 ¼. July soybeans closed down 19 ½ at $10.01 ¾ and November closed down 18 ¼ at $10.19 ½. July wheat closed down 18 at $5.05 ¼ and September closed down 18 at $5.22 ¾. Crude oil closed down $1.09 at $64.68.

The writing was on the wall already Sunday night, and the bear kept consistent pressure on the markets all day long, too. Corn futures would finish right down against their lows, posting net losses in 2018-dated contracts. Today marked the lowest close since February for the July contract, which has broken over $.30 off their highs in less than two weeks’ time. Managed Money traders were viewed net sellers of 35,000 futures, though no doubt sliding through a number of option strikes will greatly increase that total when factoring in options. That could leave them net long just 120,000 combined futures and options heading into tonight.

Crop Progress data after the close likely played out very close to expectations. Corn condition ratings dipped slightly, as it is difficult to improve on “perfection”. National Good-Excellent ratings slipped 1% wk/wk, while Poor-Very Poor was unchanged.  G-E of 78% and P-VP of 3% compares to 68% G-E and 6% P-VP seen this week in 2017. The USDA pegged planting at 97% complete, implying 2.6 million acres remained heading into this weekend.  Over half of the total was found in four states: Michigan (450k), Ohio (345k), PA (343k), and WI (424k). The next week is not particularly threatening (some rain in the Heart of the Belt), though we note both the 6-10 & 8-14 day maps trend “hot” and “mixed” for precip. More than a few areas starting to trend a little dry in the early-going. Mid-day runs were generally a little dryer in the extended forecast, though the market did not seem to care. Argentina’s corn harvest continues to crawl along, though a recent upswing in farm selling there could motivate them to speed up a little.  Brazil may be swinging to a little “too much” rain in the short-run as analysts still struggle to quantify that second crop harvest. There were rumors early the Trump administration would publish a public comment tied to the most recent biofuel policy summit, but we did not see anything official as we went to press.  Monthly Grain Crushing report found 445 MB of corn went into the ethanol grind in April, up from 432 MB last year.

The soybean market continued its flush lower today taking July beans for another test of $10 and closing the recent upside gap created off the positive trade deal vibes a couple weeks ago.  Today’s trade vibe is the opposite as the harsh realities of negotiations put the market in a foul mood. Compounding the selling is favorable early season weather and fund liquidation led by the fronts. The weather forecasts are wetter for the near term than they were going home on Friday with another round of rain seen for later this week before a drier and more normal precip with above normal temps in the 6-10 day and 8-14 day outlook. The crop progress report this afternoon showed corn planting is 97% complete which is 2% ahead of the 5 yr avg. The states with the most acres unplanted are MI (450), WI (424), OH (345) and PN (343) – total acres unplanted stands at 2.6 million.

In trade news, over the weekend China and the United States held another round of trade talks in Beijing that reportedly included ‘positive and concrete progress in agriculture and energy’ according to a statement released at the conclusion of the meeting by Chinese media. Importantly, the statement emphasized that the results achieved between China and the US should be based on the condition that the two sides meet each other halfway and agree not to engage in a trade war. If the US introduces trade sanctions, specifically the threatened tariffs, all the economic and trade achievements negotiated by the two sides will not take effect which is what the market is keyed in on. US tariffs are scheduled to be implemented on or shortly after June 15th. Elsewhere in the news, The USDA flashed 114 tmt of new crop beans to Mexico.  All export demand is welcomed but until we come to a resolution with China there will be a black cloud hanging over the market.

It was a rough start to the week for the wheat complex, with trade posting double digit losses. A big harvest weekend, combined with continued trade war talk with China were a couple of the bigger reasons behind the weakness in trade, but the commitment of trader’s report Friday afternoon showing the large spec (funds) and managed money holding a larger long position in wheat than expected was also a factor, especially as futures continued to break down. What can get the wheat market out of its recent funk? First, crop progress/condition reports. Overall expectations were for winter wheat conditions to be unchanged week over week, but they fell 1% and it could have been more. Winter wheat conditions came in at 37% G&E and 35% P&VP vs last week when they were 38% G&E and 34% P&VP. Both HRW and SRW wheat classes each fell slightly. HRW wheat conditions dropped to only 19% G&E vs 20% last week and SRW wheat fell to 67% G&E vs 68% last week.

Anna Kaverman

anna@mercerlandmark.com

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