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Market Report

Wednesday July 11th, 2018

September corn closed down 7 ¾ at $3.40 and December closed down 7 ½ at $3.53 ¼. August soybeans closed down 22 ¾ at $8.33 and November closed down 23 ¼ at $8.48 ¼. September wheat closed down 20 ¼ at $4.71 ¾ and July 19 closed down 15 ½ at $5.27 ¾. Crude oil down $3.70 at $68.86.

With an escalation of “Trade Wars” the corn market opened lower and gradually extended losses throughout the day. Futures would eventually close lower, falling to new lows for the move in all actively-traded contracts. Corn futures have finished lower every day this week and have declined almost $.80 from the May high. Managed Money traders were viewed net sellers of just over 15,000 corn today, which would take their position to net short almost 70,000 combined futures and options.

The seemingly never-ending saga of “Trade Wars” opened a new chapter overnight. The measure is clearly designed to get China to come back to the negotiating table; we see the reaction in corn as more of a “kneejerk” macro response rather than anything fundamentally significant for the marketplace. This strategy was not a complete surprise, as it was in-line with ideas mooted this spring, but the timing of it was surprising, as there was no forewarning.

Weather is not offering anything for the bull to chew on. It’s hot, really hot for some and dry across the Midwest, but the center of the Belt is due to get multiple opportunities for a drink over the next several days. The change in the forecast from an extended period of that hot and dry, to one that has a definite expiration so far has proved durable. 6-10 & 8-14 day maps did introduce a change late today, taking out some of the rains from the prior day runs, but it is also expected to be accompanied by cooler temps. No story here, yet. Many believe the market is trading 180 bpa plus type yield, though we continue to warn that could be difficult to achieve, given modest problems in N Missouri, Michigan, and C Wisconsin, along with potential flood damage along the IA/NE/MN border, and less than ideal crop conditions in the Delta/SE.

The soybean market was not alone in its sharp selloff today as broad based commodity selling swallowed the grains, meats, metals, energies and softs by the escalating trade war between the US and China. Beans continue to search for a bottom which has been elusive with new lows established again today. The products held up better than Benign growing weather, fund selling as well as trade uncertainty have all continue to press beans.

Tomorrow we’ll get a USDA report which can at time bring needed focus to the underlying stats. Not that the report is expected to be bullish for beans but it will serve as a reminder that we have disassociated the price on the board from the fundamentals of the market place largely due to an outside influence. US production will increase on the increased acreage from the June 30th report (corn +1.1 to 89.128 and beans +.58 to 89.557) but the avg. est. for increases in yields may not pan out, it is very unusual for the USDA to increase yields in this report.

Yesterday afternoon the US proposed a 10% tariff on an additional $200 billion in Chinese goods imported into the US.  There is a 4-week comment period before those tariffs can be enacted while the previously approved $16 billion from the initial $50 billion still have not yet been put in place. There are no open negotiations between the two countries taking place today. China is vowing a full retaliation to the US tariffs which could require moving beyond tariffs such as imposing new taxes and added regulation on U.S. companies, slowing deal approvals, or encouraging citizens to boycott American products.

More tariff talk, more talk of yields and protein coming in better than expected, and more selling to a complex that already has seen plenty of that recently. The encouraging news is that there is a crop report tomorrow. Not that traders are expecting friendly data. It is just that on five of the last six crop report days, wheat futures have finished the day higher. In a week in which we have already seen SRW wheat futures lose $.43, HRW wheat futures lose $.39 and Spring wheat futures lose $.33, it makes it awfully difficult to get a bearish response to the USDA data, even if the data is not friendly. This morning’s news that Russian lowered wheat production and export estimates gave our wheat markets only a momentary reprieve, and when the selling returned and the overnight lows were violated, the selling intensified.

Before the crop report tomorrow morning we will get export sales. The past few weeks have been pretty good, but with the Holiday last week, look for sales this week to taper off. Last week’s sales were at the high end of expectations at 440 MT. Look for sales tomorrow to come in between 300 and 400 MT.

Anna Kaverman

anna@mercerlandmark.com

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