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Market Report

Monday August 6th, 2018

September corn closed up 1 ¼ at $3.71 and December closed up 1 at $3.85 ¼. November beans closed down 8 ¾ at $8.93 ½ and January 19 closed down 8 ¾ at $9.05. September wheat closed up 18 ¼ at $5.74 ½ and July 19 closed up 13 at $6.10 ¾. Crude oil closed up $.59 at $67.94.

Corn was the middle child of the grain room today, caught between double digit gains in wheat and double digit (for most of the day) losses in soybeans.  The end result was a $.01 higher close Monday in a rather “disinterested” day of trade. Less than 200,000 futures traded, even less than Friday. Funds were viewed net buyers of about 5,000 corn today, which would leave them net short just 55,000 combined futures and options.

Crop Progress data after the close was expected. In corn, though no doubt the 3% G-E decline in beans will capture the headlines. Corn Good-Excellent ratings fell just 1% wk/wk. The trade was looking for a 1-2% decline. Notable state downgrades included PA (-10% G-E wk/wk), the Dakotas (each off -5% G-E), and Missouri (off -7%). States that improved included bit-player Colorado (up 9% G-E), North Carolina (+5% G-E), and Ohio (+5% G-E).  National corn G-E ratings of 71% and P-VP of 10% compares to the year ago week’s 60% and 13%. The accelerated progress of the crop continues to be a feature; 96% was silking and 57% was in the dough stage, the latter of which was 20% ahead of the five year average.  12% of the corn crop was dented, versus 6% average and 6% year ago.

On the weather front, the feature early week is likely the wetter 8-14 day outlook, which applied some overnight pressure to beans. The last 30 days or so has been dry in more spots than not, which could end up taking the top end off corn yields in areas that didn’t have great subsoil moisture going in. Rains over the next five days are forecast to benefit the Eastern Belt, though much of the Western Belt will likely go without.  None of this will likely impact Friday’s USDA report estimates, which is strictly an ear count.

The soybean market set back as we consolidate trade in this $9.00 area for the moment on November. Look for the market to be supported in the overnight by bigger than expected drop in this afternoon’s condition ratings. The keys to the markets at the moment (in no particular order) are trade and trade negotiations, weather and Friday’s crop report. For the bull, you can point to strong domestic demand from both the exporter and crusher. For the bear, you can point to unresolved trade disputes that leave long term trade with China in limbo while we maintain adequate old crop supply and keep an eye on another potential bin buster in the field.

If a trade deal is reached, you could realistically see beans rally $.50 – $1.00 from current levels in the blink of an eye as any agreement likely comes with the benefits of sizeable export commitments as well as certainty and relief. If you cannot make a deal, prices likely continue to languish with limited upside although with last month’s lows I think we have already priced in the fear and panic driven worst-case scenario. Beans face additional headwinds with a crop report on Friday that will highlight stats that are not bullish, particularly with new crop demand numbers that assume there will not be a deal with China and the expectations that the USDA will raise yields due to favorable crop ratings and growing conditions for the most part to this point.

Rains yesterday and into Tuesday are going to bring some needed moisture to crops before a drier bias sets for the Midwest the balance of the week. Bean conditions reflecting some of the recent heat and overall dryness notably in parts of IA, MO and the Dakotas with gte ratings off 3 to 67% gte but still strong overall compared to 60% last year. The states that saw the greatest deterioration were IA -3, KY -5, MS -5, MO -6, NC -8, ND -9, SD -4 and TN -3.  States that saw the most improvement were AR +2, MI +3 and OH +7. The crop is 75% setting pods vs. 60% last week and 63% this time last year.

The twelve consecutive lower starts to a week seems like a distant memory as the wheat complex has posted back-to-back strong performances to start a week for the first time since May. Today’s gains surpassed last week’s strong start, which may be an omen for what lies ahead for the wheat complex this week. With conditions down double from what they were expecting, do not be surprised if Spring wheat re-establishes itself as the leader of the complex tomorrow. With all the production reductions in countries around the World, the wheat complex has distanced itself away from the rest of the grain complex (corn only a $.01 and beans, meal and oil all lower). It is crop report week, and Friday’s report could be a very dynamic report for wheat.

The biggest piece of news as we started the session today was the fact we had another strong move out of Black Sea wheat prices. The strength coming out of the European markets provided a spark to the US wheat markets, which saw modest overnight gains quickly turn into double digit gains within the first few minutes of the day session.

Spring wheat conditions were down 4% double what was expected as the USDA may be playing a little catch up with the Spring wheat tour data from a couple of weeks ago. The 74%G&E rating is still well above last year’s rating we saw at this time 32% G&E. Idaho was the only state to see some improvement, with every other state declining some. Spring wheat harvest moved up 9 and is now 13% complete vs 22% this time last year and the five-year avg of 14%.

Anna Kaverman

anna@mercerlandmark.com

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