Blogging by the Bushel
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Market Report

Wednesday July 25th, 2018

September corn closed up 7 ¼ at $3.59 ¼ and December closed up 7 ¼ at $3.73 ¼. August soybeans closed up 2 ¾ at $8.60 ¾ and November closed up 2 ½ at $8.75 ¾. September wheat closed up 32 ½ at $5.43 ¾ and July 19 closed up 25 ½ at $5.84 ¼. Crude oil closed up $.82 at $68.01.

The corn market was content to ride an ascendant wheat market’s coattails today, finishing higher. Yesterday, the market never traded higher, and today, the market never traded lower. Managed Money was viewed net buyers of about 15,000 contracts today, which would leave them net short roughly 100,000 combined corn futures and options heading into tonight.

In truth, there was not a lot of corn-specific news around today at least during the session. After the close, it was announced that the E.U. and U.S. managed to strike a trade deal. While we think the current $1+ discount in U.S. beans to most world importers is the best inducement to buy, signs of positive movement to avert “Trade War” tariffs should cheer up the ag markets. Next up, Mexico?  Maybe. China could be the toughest nut to crack, after the “deal-no-deal” about-face seen back in May.

Weekly EIA data this morning unexpectedly found a new eight month high in U.S. ethanol production. Production inched another 1% higher wk/wk to a 1.074 mil bbl/day rate, which continues to put the corn-for-ethanol grind on a trajectory to exceed current USDA 17/18 forecasts by at least 25 million bushels.

The U.S. weather front remains fairly non-descript, though “trouble spots” that missed out on recent rains will need to be monitored given erratic (at best) precip expected over the next couple of weeks. Below-average temps are expected to continue, which will keep pollinating crops on a favorable trajectory in most areas.  On the world scene, “hot and dry” will continue in Germany, which is the primary focus of the EU markets. South American harvest weather will continue favorable.

The soybean market fought off a weaker overnight and opening trade to extend the rally to a new high close. It was a wheat show today here at the CBOT and the limit move in wheat helped to float all the boats to a certain degree and that support was welcomed in the absence of any fresh fundamental inputs to feed the soybean bull. Strong export and crush demand and a shifting technical posture are supporting the recovery while big crop potential and long term trade uncertainty limits enthusiasm.  Volumes were off from yesterday but still stronger than what they have been.

Tomorrow we’ll get the weekly export sales report where the trade is estimating 400 – 900 tmt. Traders will be looking for additional sales confirmations of new crop US beans into Argentina where to date they have 720 mt on the books and that number will continue to grow thanks to their reduced crop this year. We will also be looking for Chinese/unknown cancellations where China has 638 mt old crop sales open on the books along with 1.332 mmt in the new crop. Un known which likely includes a high percentage of Chinese sales is holding 3.122 mmt old crop and 4.517 mmt new crop.

Wheat was the feature market today with CBOT futures reaching limit up and synthetically traded a penny above at one point.  The rally was led by the fronts as fund shorts were chased out. The spark in this wheat rally is European crop production. The EU soft wheat crop was reduced by another 2.5 mmt, which puts them at 130 mmt compared to last year’s crop of 141.8 mmt and the USDA at 145.0 mmt. Most of this cut today came out of Germany’s crop but further reductions are anticipated with the extreme heat and dryness that has stresses large portions of the growing region. When you factor in Russia’s poor crop and Australia’s struggles the world wheat crop is going to be short this year which is increasing ideas of US export demand later on in the year. That is, unless we price ourselves out of the competition. This tightening of supply is seen in world trade values. In addition, the US spring wheat crop tour is underway and the first day yield report in N Dakota of 38.9 bpa was stronger than last year’s yield of course but disappointing relative to expectations.

Anna Kaverman

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