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Friday September 21st, 2018

December closed up 4 ¾ at $3.57 ¼ and March 19 closed up 4 ½ at $3.69 ¼. November beans closed down 3 at $8.47 ¼ and January 19 closed down 2 ¾ at $8.61 ¼. December wheat closed down 2 ¼ at $5.21 ¾ and July 19 closed down ½ at $5.55 ¾. Crude oil closed up $.31 at $70.37.

FOR THE WEEK ENDED 9-21-18

CORN – The corn market got off to a weak start on Monday and Tuesday, shedding 8 ½ cents over the two sessions.  But a big, late week rally ensued to see the December contract close 5 ½ cents higher for the week.  I believe that the rally was fueled by news out of Argentina.  In their latest budget proposal, the Argentinian government could tax grain exports up to 33%.  Corn and wheat were at a zero tax rate until this month when the government put on new taxes at roughly 10.5%.  The Argentine peso is historically weak right now and the government feels like the farmers are making extra money with the weakened exchange rate. They feel its justified to raise taxes so farmers pay their fair share.  Argentina exports 27 million tons of corn making them a major player. If taxes are increased to the maximum level, it would create more opportunities for US corn exports in the world market.

Corn harvest is off to a good start.  So far, 9% of the crop has been taken off the fields.  The 5 year average is 6%, and last year at this time the harvest was 7% done.  The weather should be conducive for an active harvest in the eastern corn belt.  Minnesota, Wisconsin, and the Dakotas have been extremely wet and will keep the harvest slow in the upper Midwest. Crop conditions for corn held steady this week at 68% good/excellent.  This is slightly better than the 5 year average of 66%.

Ethanol production continues to run at a high level.  Weekly production numbers have topped 1 million barrels per day since April. Ethanol margins have been trending lower and lower for a while now and have now reached zero, forcing facilities to make tough decisions. Several ethanol plants announce this week that they are either closing or being idled until margins improve. Corn exports were very good this week.  Sales topped 54 million bushels and were the best sales in the past 8 weeks. Mexico was the best buyer this week and they continue to be the number one destination for US corn exports.

OUTLOOK – The next quarterly stocks report will be released next Friday.  This report has held some surprises in the past and created some big market moves.  The market will be trading harvest reports early in the week before squaring up ahead of the stocks report and month end next Friday.

SOYBEANS – The soybeans followed the price action of the corn market this week.  A slow start to the week was met with a big rally on Wednesday and Thursday.  I believe that the bean rally was tied to the Argentina situation as well.  We are also starting to hear talk about the planted acreage for next year.  Informa came out with an increase in corn to 93 million acres, but a huge cut to bean acres at just over 82 million. That is huge change that we haven’t seen in while and is certainly a friendly input. The tariff war is moving in the wrong direction. President Trump said he will impose new 10% tariffs on $200 billion of Chinese goods beginning September 24th.  These tariffs will increase to 25% at the end of the year.  China is expected to respond in kind.  Trump said if any retaliatory action is taken against our farmers, then he will immediately pursue and additional $267 billion of additional tariffs. The tariff situation remains the biggest bearish input for the soybean market.

Soybean harvest is underway. In the first reading of the year the crop was 6% harvested.  This is ahead of both last year’s 4% and the 5 year average of 3%.  Weather will be a factor in the upcoming week as eastern areas are dry and ready, but the upper Midwest has received too much rain. Soybean exports continue to disappoint but that is not a big surprise given that China has been absent from the market for so long.  The only export activity with China this week was a very small cancellation.  Crop conditions declined by 1% to 67% good/excellent this week.

OUTLOOK – The bean market feels tied to headlines and tweets, plus the quarterly stocks report next Friday.  When you look at the price action of the futures over the past month, it is either a very choppy or very quiet day, without a happy medium.  Some analysts are saying the market is untradeable, but I think you need to ready to execute your marketing plan if the market gives you the right opportunity.

Wheat

Freezing temps hit multiple areas of the wheat growing area of Australia. It is unknown at this point how much damage has been done.  The EU has dramatically reduced its soft wheat production estimate. In June they were at 138.8 million tons but have lowered that to 129.9 million tons currently. Russian consultancy firm IKAR cut Russian wheat production down to 69.2 million tons.  The USDA just raised Russian production from 68 to 71 million tons in the September WASDE report last week.

Anna Kaverman

anna@mercerlandmark.com

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