Blogging by the Bushel
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Market Report

Thursday June 7th, 2018

July corn closed down 2 at $3.76 ¼ and December closed down 3 at $3.96 ¾. July soybeans closed down 20 at $$9.74 ¼ and November closed down 18 ¾ at $9.94 ¾. July wheat closed up 7 at $5.26 ¾ and September closed up 6 ¾ at $5.44 ¼. Crude oil closed up $1.19 at $65.89.

No rest for corn, as futures eroded again today. Heading into Friday, corn is sporting $.15 losses, and the July contract is trading more than $.36 off the highs made just two short weeks ago. Corn tried to be firmer early but found itself weighed down by a 20+ cent break in beans. Managed Money traders continued to hit the sell button today, selling another 15,000 corn.  By some estimates, this could leave them net long less than 100,000 combined futures and options. CFTC data tomorrow night will be extremely helpful to try and tighten these estimates down.

The weekly export sales report maintained recent trends, with combined old and new crop sales topping 1 mmt. 838,600 metric tons (mt) for 17/18 and 418,300 mt for 18/19.  Mexico and Vietnam were the top buyers in old crop, while nearly half of the 18/19 sales were to “unknown”. South Korea continues on a tear, with additional export interest noted for US corn for summer and beyond. Some of this business should hit the next weekly report. Though exports remain a positive story, it has not been a particularly market-moving one. Corn continues to be driven by long liquidation (technicals, “Trade War” fears) and a favorable start to the U.S. growing season.

Speaking of the devil, timely rain fell on portions of Iowa Wednesday, kicking off what should be five days of good weather and rains across most of the Midwest. Some concerns that the precip could be a little erratic. The Plains could trend hot and dry. GFS model runs are warm and wet, while the Euro model continues to trend a little dryer overall. In other words, not a lot of change from Wednesday, except perhaps a little more heat in the forward outlook. World weather watchers still most concerned with Europe and Russia drying. Northern China also trending a little dry after mostly good growing weather this year. Brazil harvest will expand later this month, while Argentina’s first crop harvest crawls along at its usual sluggish pace.

The soybean market collapsed as a combination of favorable early growing conditions, disappointing export activity, trade uncertainty, technical selling and fund liquidation.  All of this negative influence has pushed prices down to a 5-month low on July and a 4-month low on November in a high volume trade.   The July contract has been leading the break all along reflecting weak export activity and also because this is where the fund length is parked. Managed money funds continue to liquidate length in beans and meal which was parked up front in the July contract. 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 seasonal temps and continue to develop favorably. The forecast lacks a threat.

Soybean weekly export sales totaled just 200 mt with 165 mt of that being old crop which is off 40% from last week and 5% from the 4-week average. The most important takeaway from this report is in the fine print where soybean shipments to date total 46.604 mmt vs. 51.475 mmt this time last year. The deficit in exports relative to last year’s pace equals 179 million bushels where the USDA is currently projecting a 109 million bushel reduction year over year. The US needs to pick up the pace in order to close that 70 million bushel gap otherwise it will flow directly into the bottom line inflating our ending stocks which are currently projected at a hefty 530 million bushels. This will be a real challenge because China reportedly has already covered 95% of their soybean import needs for July, 80% for August and 40% for September with the resumption of Chinese interest dependent on a trade dispute resolution and at that point new business would likely fall into new crop timings. The Brazilian real also works against us here with the currency falling to new lows again today which incentivizes more aggressive selling of beans in that country.

The wheat complex posted modest gains today as day two of the liquidation in the wheat/corn spreads once again took center stage. There are still some concerns over FSU and EU wheat production, but don’t think that has been driving trade. Over the past two days Chicago wheat has rallied $.17 and the European wheat contract is unchanged. If trade was so concerned about the Russian and Kazakhstan wheat crops, the Matif market would be the one leading. Keep in mind, beans are down $.27 and corn is down more than $.07 over the past couple of days and rarely do you see the wheat market distance itself from corn and beans.

Anna Kaverman

anna@mercerlandmark.com

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