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Tuesday September 25th, 2018

December closed up 3 ¼ at $3.63 ¾ and March 19 closed up 3 ¼ at $3.75 ¾. November beans closed up 4 ¾ at $8.45 ¾ and January 19 closed up 4 ½ at $8.59 ¾. December wheat closed down 6 ¼ at $5.20 ¾ and July 19 closed down 7 ¼ at $5.52. Crude oil closed up $.34 at $72.10.

Five day winning streak?? Trade was more mixed today, with markets taking a mid-day swan-dive on the back of wheat weakness, but corn stuck the landing on another higher close, finishing three cents better. Corn has rallied $.20 in one week. Managed Money traders were viewed net buyers of 10,000 corn today, which would leave them net short an estimated 120,000 combined futures and options heading into tonight.

There was a distinct lack of fresh news around today, but as we’ve touched on recently, the week ahead will not lack for data inputs. No doubt we are witnessing some short-covering ahead of the Quarterly Stocks data Friday. Corn open interest has shrunk each of the past three sessions. A weaker dollar, despite the strong likelihood of another Fed rate hike tomorrow, is also not hurting. Export interest was brisk before, but US corn getting a couple percent cheaper sure won’t hurt. Sure enough, the USDA found another 240,000 MT of corn sold to Mexico under daily reporting requirements today.

Harvest delays are also likely sparking some “buy” interest. Farmers in the Delta are reporting getting rained out, while the next three days will keep the Eastern Belt soggy (though the upper and western Midwest will dry out some). This fits within a central theme of an overall wet stretch of weather, but dry enough for long enough in many areas to be able to allow for some fieldwork. USDA data yesterday suggested 16% of the U.S. crop has been harvested.  Yes, this is ahead of normal, but sluggish relative to current maturity.

A sleepy, yet modestly higher overnight session turned interesting after the break. Beans ran their buy stops above $8.50 but ran out of gas short of the 40 day moving average at $8.61 and settled $.12 off the day’s high. The rally was sparked by news that China is starting to buy more Argentine soybeans because of China’s trade war with the United States, and Argentina will in turn purchase more U.S. soybeans to meet its own needs, according to Oil World. This arbitrage has been widely expected although the name brand of Oil World may have lent more credence to the headlines. They estimate that soybean shipments from Argentina to China may reach 1.8 mmt between September 2018 and February 2019 compared to zero a year ago as Argentina typically crushes the beans and ships the products.

This lead to a sharp rally with driven in large part by short covering and even though we traded into one-month highs, farm selling was minimal in beans. Meal rallied sharply off this news as well but similarly struggled to hold its gains the balance of the session. Additional export demand news came out of the USDA’s Global Agricultural Information Network where they report that Germany’s recent drought heavily affected grain, rapeseed and forage production and as a result are expected to strongly increase imports of soybeans, soybean meal and to become a net grain importer. Informa reportedly increased their estimate of Brazil’s soybean crop to 122 mmt vs. 121 mmt last month, planted area at 36.2 mln hectares down slightly from 36.45 but increased yield due to favorable planting environment.

In trade news, The US and S Korea signed a renewed trade agreement yesterday at the UN Generally Assembly meeting in NYC.  South Korea is the sixth-largest export market for U.S. agriculture, buying $6.9 billion worth of farm goods last year, according to the American Farm Bureau Federation. China said it’s open to talking on the trade dispute, but it needs the U.S. to show sincerity and not put a knife at Beijing’s throat. The U.S. trade restrictions are responsible for the stalled talks and any resumption is up to them, according to China’s vice commerce minister.

There was not a whole lot in the way of fresh, positive news around the wheat complex overnight and throughout the day, and prices struggled because of it. Trade finished the overnight, but several fresh tender announcements leading up to the morning pause gave the markets a little boost and futures settled well off their lows. The momentum was short-lived and once we moved into the day session prices were unable to move higher even with corn rallying. As the rally in those markets stalled, and the gains eroded, wheat futures started to unravel.

As mentioned earlier, as we move into the Fall months our export lineup is beginning to look a whole lot better than it did during the summer months. Countries are becoming less aggressive in their pricing as their stocks dwindle. Japan is back in for their weekly tender for US, Aussie and Canadian wheat, Taiwan is in next week for a couple cargoes of US wheat and Bangladesh is in for wheat. Make no mistake, this is what our trade is waiting for, and until we start seeing additional export demand surface, it will make it increasingly difficult to sustain any momentum built during rallies. Does not mean the markets cannot rally $.15-$.20 from where we are at, it just means that too much of an extended rally will price our market out of competition. For now, the market seems to be biding time until the crop report Friday.

Anna Kaverman

anna@mercerlandmark.com

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