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Thursday September 13th, 2018

December closed down 2 at $3.50 ½ and March 19 closed down 2 ¼ at $3.62 ¾. November beans closed down 6 ¾ at $8.33 ¼ and January 19 closed down 6 ½ at $8.47.  December wheat closed down 9 ¾ at $4.97 and July 19 closed down 6 ¾ at $5.38 ¼. Crude oil closed up $1.75 at $68.41.

To little real surprise, the corn market suffered a post-USDA report hangover. Futures tried to be a little firmer overnight and early in the day on profit-taking and bargain-hunting but struggled to hold up amid probable long liquidation from disappointed bulls. Corn finished the day lower into a new life-of-contract low. Managed Money traders were viewed net sellers of another 10,000 corn today and are estimated to head into tonight net short over 140,000 combined futures and options.  European traders apparently believe the USDA more than their own domestic analysts?  Analysts at Strategie Grains sharply reduced corn production estimates to 58.4 mmt, which was slightly below last year’s 59.3 mmt, and lower than the 61.3 mmt forecast in August. They also pegged the EU wheat harvest at the lowest level in six years, despite USDA assertions to the contrary yesterday.

Weekly export sales in corn were unspectacular. 774,200 metric tons, which was within expectations, but toward the low end of them. Most of the business was to Latin America and Japan. The data included 2.93 MMT of “carryover” sales from the now-defunct 17/18 marketing year. 17/18 accumulated exports were pegged 4% higher than 16/17. Not much story in the weather, other than Hurricane Florence, though that has broader implication for livestock than row crops. Late season and harvest weather is excellent for the Plains. A dry spell this week is helping to even out excessive early Sept moisture. Brazil early season planting weather said to be excellent.

The soybean market continues to digest the USDA crop report which was soundly bearish on just about all fronts including bigger yields, production and domestic and global stocks than expected. Beans were building on yesterday’s reversal momentum early on today until President Trump put out a tweet saying that ‘The Wall Street Journal has it wrong, we are under no pressure to make a deal with China, they are under pressure to make a deal with us. Our markets are surging, theirs are collapsing. “We will soon be taking in Billions in Tariffs & making products at home. If we meet, we meet”. This statement threw cold water on the newly revived trade deal optimism and sent beans back into negative territory.

USDA weekly export sales fell within expectations with no real surprises at 694 tmt in old crop 18/19 sales. A total of 2.431 mmt in sales were carried over from the 2017/2018 marketing year, which ended Aug 31. There was 1 cargo shipped to China.   Accumulated exports for 17/18 were 56.381 mmt, down 3 percent from the prior year’s total of 58.117 mmt. Outstanding sales on the books for 18/19 stand at 16.119 mmt compared to 15.842 mmt this time a year ago. Hurricane Florence has slowed some as it moves over N Carolina’s outer banks bringing heavy winds and rain inland which is expected to last through the weekend and head up north the eastern US early next week as the system winds down.  Damage to corn, soybean and cotton crops is expected and there are concerns over the status of the swine and poultry operations in the coastal area.

A second round of tariff-related aid to U.S. farmers could be announced in December, according to the USDA. “The second part will be announced, if necessary, in December and may account for other factors, such as new tariff levels, regional basis effects, or other market conditions that may have mitigated some of the trade damages,” according to a white paper release today.  The explanation from the office of Chief Economist Rob Johansson noted that the “gross trade damage only reflects direct export losses due to the retaliatory tariff imposed on the U.S. commodity. Indirect or secondary effects from the tariff, such as cross-commodity effects, are not reflected in the gross trade damage estimate.

The repercussions from bearish crop report data continued to resonate around the market place today, with all three classes of wheat reversing after a slightly higher start to the overnight and trading on the defensive throughout most of the day. Chicago Dec traded through its support around $5.00 and eventually settled the poorest. For a second month in a row there were a couple parts of the USDA crop report that has baffled traders, which in turn has put a lid on any thought of a rally at least for the time being. Maybe by throwing out some questionable data the USDA is trying to keep our wheat prices in check so that by the end of the year when other parts of the World start looking for wheat, US prices will look enticing and those looking for wheat will have to come to us. That will surely give us the huge second half program everyone is looking for. There was plenty of business around this morning that one would have thought could have brought some stabilization to trade, including some that have already been booked. They will probably capture some of the Iraqi business, but Tunisia and Saudi Arabia are in as well. The most interesting of these tenders is the Saudi tender. The US has just too much of a freight disadvantage, and looking at the numbers, it does not look like US wheat will work.

Anna Kaverman

anna@mercerlandmark.com

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