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Market Report

Wednesday June 6th, 2018

July corn closed down 5 ½ at $3.78 ¼ and December closed down 4 ¼ at $3.99 ¾. July soybeans closed down 6 at $9.94 ¼ and November closed down 7 at $10.13 ½. July wheat closed up 9 ¾ at $5.19 ¾ and September closed up 10 at $5.37 ½. Crude oil closed down $.76 at $64.70.

After a Tuesday breather, the bear took charge of the corn market again, pushing values down to new lows. The declines were somewhat impressive, given double-digit gains in some wheat contracts, though some suspect the corn weakness was tied to “get me out” of “long corn, short wheat” seasonal trades.  Either way, July Corn is now $.34 below the high from May 24th.  Managed Money traders were viewed net sellers of 20,000 corn, which would leave them still net long about 110,000 combined futures and options.

Welcome to summer weather markets.  A slightly improved weather outlook likely gets the credit for the corn knock out today, though no doubt in aggregate the market simply suffers from too many longs. The five day outlook is suggesting widespread coverage for most of the Midwest, headlined by three plus inch locally-heavy precip totals for Central Iowa. The outlook past that point remains somewhat up in the air, though it seems the wetter GFS model is beginning to get a little more play than the dryer Euro one. The southern reaches of the Belt are expected to dry out next week, which will bear some watching. Not much weather premium left in the markets. World weather watchers mostly focusing on Eastern Europe and Russia, where it is dry with only some chances for rain relief in the short-run. Brazil harvest will expand later this month, while Argentina’s first crop harvest crawls along at its usual sluggish pace.

Ethanol was an active topic of discussion today. The Trump camp apparently abandoned their most recent stab at biofuel policy reform. The “RIN-for-export-gallon” component of the plan received near-unanimous criticism from both farm and ethanol interests. Though an RVP Waiver would have been nice, the issue pales in comparison to what the ethanol crowd would have had to surrender to get it. The weekly EIA report today found the expected “steady” week for production. A 1.04 mil bbl/day ethanol production rate contributes to a marketing year average ethanol grind of 5.62 billion. Unfortunately for ethanol, the EIA “re-discovered” the ethanol stocks “lost” last week. The 3% build applied pressure to ethanol, with futures trading to two month lows.

The soybean market extended its break to a new low with an outside day lower in both old and new crop. No news is not good news in the case of the struggling soybean market where fresh export sales announcements are lacking and trade negotiations with China keep the black cloud of uncertainty hovering over the bean demand going forward. Funds are estimated to be holding around 53k soybean longs. There is plenty of moisture in 5-day GFS outlook, 6-10 day and 8-14 day maps also include rains for most of the corn belt which will help the crops endure the rising temps and develop favorably.

Meal is oversold technically and coming into a count so some caution is advised in pressing the market here. Meal has a story that will play out longer term but for now money flows are driving the show. Funds hold around 90k meal long and now the Goldman Roll is starting which pressure the nearby contracts where the index funds park their positions. In trade news, nothing new to report with China. The market is watching to see what the White House does with yesterday’s $70 billion proposal by China. June 15th is currently scheduled as the date to enact the $50 billion in tariffs on China. It should be an interesting 10 days in front of us.

It is difficult to figure when a specific trade finally gets to a point in time or gets to a specific level in which a trader just does not want to lose any more money, and throw in the towel and give up on it. That sure seemed to look like what happened today for wheat. The seasonal trade recommendation from a couple weeks ago, buying corn and selling wheat, looked to have a mass exodus this morning after the spread raced out to almost twenty cents higher during the opening hour of the day.

Oklahoma hard wheat harvest is basically done as combines are now moving into Kansas. Oklahoma yields are said to be around 15 bpa in the west, and 20-40 bpa in the center of the state. Early yield talk out of South Central Kansas is ranging between 30-35 bpa, but it is too early to know the Southwest part of the state. Combines are making great progress due to a lot of abandoned fields. Soft wheat harvest is moving along more slowly. Quality seems to be good and yields are normal. Domestic basis levels firming here even as export bids are showing signs of weakening.

Anna Kaverman

anna@mercerlandmark.com

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