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Wednesday June 13th, 2018

July corn closed down 1 ½ at $3.76 and December closed down 1 ¼ at $3.97. July soybeans closed down 18 at $9.36 and November closed down 15 ¾ at $9.58 ¾. July wheat closed down 18 at $5.16 ½ and September closed down 17 ¼ at $5.32 ¾. Crude oil closed up $.24 at $66.52.

Corn prices slumped slightly on spillover weakness from other grains, although losses were mostly minimized. Corn basis bids were steady to mixed Wednesday, accounting for regional variances in supply and demand. Bids trended as much as 6 cents higher and 2 cents lower across Midwestern locations. Informa Economics has lowered its latest 2018 U.S. corn acre estimates from 89.0 million acres last month to 88.706 million acres. Ahead of Thursday morning’s USDA export report, trade analysts expect the agency to report between 31.5 million bushels and 51.2 million bushels in corn export sales for the week ending June 7. French consultancy FranceAgriMer says the country’s 2017/18 corn stocks are up slightly to 110 million bushels – up 3.7% from a month ago.

The soybean market resumed its break, unable to build upon yesterday’s reversal as a modestly higher overnight opening trade turned into another sharply lower settlement and another new low for the move. Favorable growing conditions, the absence of a weather threat, fund liquidation, tech sellers, panic sellers and lack of a Chinese trade deal are all weighing on prices.

The US is preparing a list of tariffs that is scheduled to be published on Friday, the tariffs can legally be enacted at that point or thereafter. If the 25% tariff on $50 billion of Chinese imports is enacted, it is expected that China would immediately retaliate with tariffs on US goods including agriculture. This has been a black cloud hanging over the soybean market since the trade talks began but we are now approaching a critical timing where either China makes a deal or we take the trade war to a new and more painful level for both sides.

China cannot source its soybean needs on South American production alone and it is safe to say they will not disrupt their people’s diets by just going without. The US has the benefit of supporting farmers with government assistance in the case of economic loss due to a tariff situation as the administration has already stated. When a deal is made you will likely see a significant sales intention headline accompanying it for new crop beans among other agricultural products. On a near term basis, China is struggling with too much supply from their aggressive purchases of Brazilian beans but that backlog will work its way through and fourth quarter needs still have to be covered. Even though China has been largely absent from our market (which is seasonally normal for this time of year), other export demand has been quietly decent and we are bridging the gap in USDA export projections and our pace of shipments.  Everyone sees the record crush and overall soybean demand is strong as was reflected in yesterday’s crop report. Elsewhere in the news, Informa acres – corn 88.7 beans 89.9 compared to the USDA last at 88.0 and 89.0 respectively.

Price action tried to follow up Tuesday’s explosive trade with early gains overnight, but the rally quickly fizzled and the markets spent the rest of the night trading lower. The selling continued once we moved into the day session, with prices gradually weakening throughout the day. The bleeding seemed to finally stop during the final hour of the day, but futures remained in the lower end of the day’s range through the close. There was really no story to justify today’s price action, similarly to yesterday when there was no story to justify Tuesday’s post-report move.

It was all about the crop report yesterday, and as we have been saying for the past 24 hours, the data from the report did not justify a rally. Trade wants to talk about US ending stocks being lowered 9 MB. Well, that came on the heels of a 25 mil increase in exports, and there are some that want to talk about the USDA raising that figure a couple more times this year. But, we could not meet our expectations on exports this past year, and the start of the new year and foreseeable future is not very promising. Why the increase then? Maybe because trade wants to talk about World production being lowered. Granted the Russian wheat crop reduction was a big surprise, but most of the other World reductions were expected, and World ending stocks for this year and next year were raised and remain enormously large. Not to mention here in the US, production was increased in all three classes, with the HRW wheat increase probably the biggest surprise of the report. Don’t know what was behind the strong price action Tuesday post-report, but was not surprised at all to see trade give most of that rally back today. Looking ahead to the rest of the week, a big export number in the morning would go a long way to justifying why the USDA raised exports 25 mil yesterday. Nothing over the past ten days leads me to believe we will see one. Friday is the deadline on whether tariff’s will be imposed by the US on China.

Anna Kaverman

anna@mercerlandmark.com

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