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Wednesday August 29th, 2018

September corn closed up ¼ at $3.41 ¼ and December closed up ¼ at $3.56 ½.  November beans closed up 2 ¾ at $8.36 and January 19 closed up 2 ¾ at $8.49 ¼. September wheat closed up 17 ½ at $5.15 ¾ and July 19 closed up 13 ½ at $5.67 ¾. Crude oil closed up $.95 at $69.17.

“Limp” performance in the corn today. Futures were able to muster up fractional gains despite a double digit rally in wheat. Corn traded in a tight $.04 range. Managed Money traders were viewed net sellers of about 5,000 corn today and will head into tonight net short about 90,000 combined futures and options. The corn market continues to suffer from a terminal lack of headline news. This is especially apparent given the excitement recently in beans (big supplies!) and wheat (Russian export ban?!). Finishing weather is relatively benign; big storms seen overnight in the central Midwest. Reports of harvest in Kansas and Missouri, though the latter likely got rained out today.  Some concern building that the wetter forward weather picture could interfere with the harvest season.

The soybean market is trying to stabilize against the July lows and managed a modest reversal trade today. It was a struggle for beans to hold strength but at this point you are just looking for a signal that we can build off of and perhaps today’s small gains against this key support area could be the start of a technical recovery trade. Fundamentally, there isn’t much positive to talk about with production and supply overwhelming demand and longer term, exports are less certain with the trade tariffs from China. A Chinese delegation is in IA today for the annual agricultural tour that has in the past led to signed deals for sizeable soybean export sales commitments (last year was 12 mmt) but this year the trade tariffs mean that no commitments will be made.  Canadian Foreign Minister Freeland is in Washington for trade talks and looking to make a deal to rejoin the US-Mexican trade pact, formerly known as NAFTA. There is a push to get a trilateral agreement in place but as of this afternoon there were still unresolved issues and talks are ongoing.  Trump says talks with Canada are going ‘really well’ and that he’s optimistic that they ‘very much want to make the deal’ before Friday’s deadline.

The overnight rally which seemed to have originated from another round of rumors of Russian wheat export restrictions received some credibility mid-morning and that changed the dynamic of trade over the rest of the day. If you recall, just a few weeks ago this became a hot topic of conversation after talk surfaced that following a meeting with Russian exporters, the Russian Ag Ministry was thinking about curbing total grain exports this coming year to 30 MMT. The Ministry quickly tried to defuse the situation by saying that they did not discuss curbs on grain exports this coming year in that meeting. This morning, Russian export restriction talk once again surfaced, and when Reuters carried a headline that said the Ag Ministry was going to meet with grain exporters on September 3 to discuss the situation, there was more substance behind it just being talk. In the meeting next week, it is expected that the Russian Ag Ministry will curb total grain exports to 30 MMT and limit wheat exports to 25 MMT. If trade exceeds this total, there will be an export tax levied, and it will be large.

It will be interesting to see how this effects price action moving forward. The European wheat market reacted the strongest, rallying to more than 6 Euro’s higher. The thinking was, as long as Matif prices stayed firm, the rumors were more reality. But as we moved into the day session the rally started to fade. US prices had fallen more than $.10 off its highs and Matif wheat had slipped three Euros, but the Reuters headlines reinvigorated trade and price action remained near its highs the rest of the session. We have to remember, Russia had a monster crop last year and they reaped its rewards by exporting some 42 MMT of wheat. The two years prior Russia exported roughly 27 MMT and 25 MMT of wheat. So, the larger concern may be what is the USDA going to do about their export expectations. They have Russian exports for this coming year pegged at 35 MMT. We now know that is not going to happen.

Anna Kaverman

anna@mercerlandmark.com

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