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Tuesday September 4th, 2018

December closed up 3 ¼ at $3.68 ¼ and March 19 up 2 ½ at $3.79 ¾.  November beans closed up ¾ at $8.44 ¼ and January 19 closed up ¼ at $8.57. December wheat closed down 14 at $5.31 ½ and July 19 closed down 8 ¼ at $5.62. Crude oil closed down $.19 at $69.56.

Solid start to the week in corn, fighting off an “early down” to close out the day higher. Corn was the sole survivor in the grains. Managed Money funds were viewed net sellers of 5,000 corn, which would leave them net short 55,000 combined futures and options.

In a departure from the “light news” days of the past couple weeks, there was an over-abundance of headlines around this morning. The most interesting of the bunch is the situation in South America. Reports the Argentine gov’t would re-impose corn export taxes to raise funds amid a currency crisis sent the market scurrying higher Friday. Though the direct impact of the 10.5% tax can be debated some believe “new lows” in the Argy Peso and close to it in the Brazil real are the story here. All other things equal, a falling currency makes a country’s exports more appealing, but it also significantly raises the cost of imported goods. Given that corn typically has much higher input costs (fertilizer)than beans, this could serve to reduce incentives to plant corn acres in South America. Analysts are broadly looking for 2-3% yr/yr increases in Brazil, and were looking for larger gains in Argentina, so there is certainly room to backtrack in coming weeks.

After the close, Crop Progress data uncovered a small downtick in corn ratings, along with continued rapid maturation of the crop. U.S. corn ratings slipped 1% wk/wk to 67%, which still compares favorably to 61% last year. The national decline may have been a surprise within the context of the state-by-states, which generally had more improvements than not. The USDA may still be catching up with the imbalance between state and national ratings in prior reports. At any rate, we are in the waning days of condition reporting, as farmers begin to gas up their combines in the southern reaches of the Midwest. 75% of the corn crop has dented, which is 15% greater than average.  First national harvest report is due out next week.

Beans were a two-sided market but managed a second consecutive higher close for the first time in three weeks. The feature trade was meal which was well supported through the session. Argentina’s export tax restructuring was a positive input implying additional US export demand and we also saw fund flows coming back in with the start of the month. Managed money had sold out of nearly half of their long position in the latest COT report that encapsulates trade through last Tuesday (sold 25.2k, net long 27.4k). This all helped to overshadow the eighth confirmed outbreak of African swine fever in China. The break to the $300 area satisfied daily and weekly Price Count objectives and, for the moment, is proving to be a value area one more time.

Weekly soybean export inspections totaled 769 tmt down from 908 tmt last week but up from 712 tmt this week last year. This concludes the old crop marketing year (there will be some adjustments to the numbers) with total bean exports of 56.279 mmt vs. 57.848 mmt a year ago. This represents a 58 million bushel reduction in exports year over year which is darn close to the current USDA projection falling short of last year by 56 million. African swine fever continues to spread with China reporting its eight outbreak in the country since the disease was first discovered in hog herds last month.  Chinese agriculture researcher recently was quoted saying the outbreaks will only have short term impact on pork supplies and pork sales, but expects those effects to decline over time as quality control improves in the industry

What a difference a weekend makes. Going home Friday trade across the wheat complex was becoming a bit more optimistic that two meetings slated for Monday afternoon in two different regions of the World was going to possibly start providing some stability to a market place that was yearning for just that – some stability. The result of the Argentine meeting was exactly what was expected, a four-peso per dollar export tax (basically 10%) but it is a specialty tax that fluctuates as their currency strengthens or weakens. This export tax is designed to raise funds amid a currency crisis in Argentina and will stay in effect until December of 2020. Keep in mind, Argentina is expected to export between 14-15 MMT of wheat this coming year (export program starts late Dec or early Jan). The outcome of the meeting held Monday afternoon between the Russian Ag Minister and exporters was almost identical to the Ministry’s prior meetings with exporters, in that for the time being there will be no curbs on wheat exports and they were still waiting for permission to sell 1.5 MMT of grain from state stocks.

Anna Kaverman

anna@mercerlandmark.com

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