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FOR THE WEEK ENDED 6-8-18

CORN – July corn tumbled to its lowest level since February, and December since March, as it searched for bullish news, but found very little.  Losses mirrored the previous week’s decline.  This week, July corn dropped 13 ¾ cents to $3.77 ¾ per bushel.  It has fallen 28 ¼ cents in the last two weeks.  December corn skated 13 ¾ cents lower to $3.98 per bushel.  New crop corn has lost 27 cents in the last two weeks.  Demand for corn remains its strongest proponent, but it fought an uphill battle with favorable crop conditions and fund liquidation.  It’s estimated South Korea bought 1 mmt of US corn during the week.  Support from weather issues has abandoned it, at least for the time being.  Trade issues have had a negative tone. Argentina’s corn is the cheapest in the world for our September/October gut slot period.   Most growers are hoping someone, other than themselves, has a hot, dry spell.  The next round of hope for a rally is the June 12th WASDE report.

Weekly export sales were very good at 33 million bushels.  Total old crop commitments of 2.18 billion bushels are up 2% from last year.  The USDA’s export projection of 2.225 billion bushels is a year on year decline of 3%. The export forecast may need to be increased on the June WASDE report. New crop sales were excellent at 16.5 million bushels, bringing total commitments to 121 million bushels.  Last year we were at just 107.9 million bushels.  The USDA’s last outlook for 2018/2019 was for a 5.6% decline in exports.  Weekly ethanol production was steady at 1.041 million bpd.  Stocks were up 634,000 barrels at 21.9 million barrels.  Margins were unchanged at 14 cents per gallon.

Mexico is enacting a 10% tariff until July 5th, then a 20% tariff on pork products beginning July 5th, but until then there is a first come, first serve duty-free quota for 350,000 tons of pork leg and shoulder cuts open to any origin.  Where do NAFTA negotiations stand?  Your guess is probably as good as anyone else.  It’s suggested President Trump may try to negotiate separate agreements with Mexico and Canada.  However, the news changes constantly, so it’s worthless to try and predict where we go from here.

US corn ratings were 1% lower to 78% good/excellent as of June 3rd.  While off to a terrific start, there is no correlation between early crop conditions and the final yield.  Corn emergence was 86% compared to 83% on average.  IKAR slashed their Russian corn production forecast from 13.5 mmt to 12.8 mmt.  This is sharply lower than the USDA’s 19 mmt outlook.

The average trade estimates for the June 12th reports: 2017/2018 US ending stocks of 2.162 billion bushels versus 2.182 billion last month; 2018/2019 US ending stocks at 1.65 billion bushels versus 1.682 billion last month; 2017/2018 world ending stocks 193.7 mmt versus 194.9 mmt previously; 2018/2019 world ending stocks 157 mmt versus 159.2 mmt previously; Brazil’s corn 83.8 mmt versus 87.0 mmt last month; Argentina’s corn at 32.4 mmt versus 33 mmt previously.

OUTLOOK: Many are looking to the June 12th monthly crop report to provide a spark to the market, based on the expectation for lower US and world carryout numbers.  The crop is far from made, but it’s too early to kill it.  Varying weather forecasts will keep traders on their toes, just like usual for this time of year.  Political turns and weather forecasts will dominate price direction.

SOYBEANS – Wow, soybeans rolled over in style this week as weather cooperated for crop development, funds liquidated, and nothing bullish was gleaned from the world of politics.  July soybeans traded to their lowest level since last August and November beans since January as beans were down every day this week.  July soybeans plunged 52 cents lower for the week to $9.69 ¼ and November crashed 48 cents lower to $9.89 ¾ per bushel.  In the last two weeks, July beans have lost 72 ¼ cents and November 63 ¾ cents. July meal tumbled $16.40 this week to $357.80 per ton and soyoil pulled back 67 ticks to $.3052 per pound.  Brazil’s currency hit a two-year low this week, making it attractive for growers there to sell both this and next year’s crops.  Argentina’s currency downtrend has led to more talk about acreage expansion next year.

China imported 9.69 mmt of soybeans in May, a May record and the second largest for any month ever.  They have imported 60.26 mmt in this marketing year, up from 59.19 mmt in the same period last year.  Based on this rate of purchase, their soybean imports would reach 96.5 mmt, which is in line with the USDA’s 97 mmt forecast.  For the calendar year, they have imported 36.12 mmt, down 2.6% for the same period last year.  China’s bean stocks reached a record 8.18 mmt this week.  This is approximately one month’s demand. China is set to begin domestic soybean auctions from reserves June 14th. It will offer 300 tmt of 2012 and 2013 reserves in the first auction.  Brazil shipped China 9.76 mmt of beans in May.  This equated to nearly 80% of Brazil’s 12.35 mmt May soybean exports.  Brazil’s May bean exports were a record for any month.  The Rosario Grain Exchange cut Argentina’s bean crop estimate 2 mmt to 35 mmt.  This compares to the USDA’s last forecast of 39 mmt.

Weekly export sales were the third lowest of the marketing year at 6.1 million bushels.  Old crop commitments are down 5% from last year at 2.04 billion bushels.  The USDA’s is forecasting a year on year decrease of 5% in exports to 2.065 billion bushels for 2017/2018.  New crop sales were only 1.3 million bushels.  Total new crop sales at 233.8 million bushels are still well ahead of last year’s 114.7-million-bushel pace.  The USDA is predicting a year on year export increase of nearly 11% for 2018/2019.

The initial soybean crop rating of the year as of June 3rd was 75% good/excellent, tying 2010 as the best start ever.  Planting was 87% complete versus the 75% average.  Emergence was 68% versus 52% on average.

The average trade estimates for the June 12th report:  2017/2018 US ending stocks at 520 million bushels vs. 530 million last month; 2018/2019 US ending stocks at 423 million bushels vs. 415 million last month; 2017/2018 world ending stocks 91.3 mmt vs. 92.2 mmt previously; 2018/2019 world ending stocks 87.7 mmt vs. 86.7 mmt last time; 2017/2018 Brazilian production at 117.4 mmt vs. 117.0 mmt last month; 2017/2018 Argentine production at 37.6 mmt vs. 39.0 mmt last month.

OUTLOOK: There were reports this week that the US and China had reached an agreement to ease sanctions on ZTE, a Chinese technology company.  ZTE would pay a $1 billion fine and pay for an in-house compliance team staffed by US exports, but there was no confirmation that China had agreed to make additional commodity purchases.  Continue to monitor weather, crop conditions, world political events, and fund liquidation.  The price decline may have been overdone prior to the June 12th report.  Be ready to play catch up on rallies or at least to place some downside protection.

The wheat market has been very volatile.  World-wide weather has been the driver of the markets with Canada, Australia, Russia, and the US all dry. The world can easily absorb a small reduction in one country but when multiple countries appear to have issues the markets are now very quick to react.  Even though July wheat futures had a 35 cent range this week the overall change was only a small loss of 3.25 cents for the week. HRW harvest should start to really start to ramp up next week as the hot and dry weather has accelerated the maturity of the crop.

Anna Kaverman

anna@mercerlandmark.com

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