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Market Report

Wednesday September 26th, 2018

December closed down ¾ at $3.63 and March 19 closed down ¾ at $3.75. November beans closed up 4 ¼ at $8.50 and January 19 closed up 4 at $8.63 ¾. December wheat closed down 3 ¼ at $5.17 ½ and July 19 closed down 3 ¾ at $5.48 ¼. Crude oil closed down $.69 at $71.41

Well, it had to end sometime. Corn featured another quietly mixed performance, though this time, the market spent the vast majority of the day slightly lower. Futures would finish the day with losses. Managed Money traders were viewed small net sellers today, and is expected to head into tonight net short an estimated 125,000 combined futures and options. The markets had a sluggish feel today, with little fresh news to hash out and a major gov’t report due on Friday. “Hurry up and wait”, with a continued emphasis on winding down positions (particularly shorts) ahead of the grain stocks data. Macro traders had a little more ‘fun’ today, as the Fed hiked interest rates 25 bps, as widely expected. The Dollar tried to be firmer most of the day, but in the end, is still plumbing recent lows. The change in momentum of the Dollar has been a modest tailwind to grain prices in recent weeks.

On the weather front, rain expanded across the Midwest yesterday, no doubt causing further interruption to harvest progress.  A mix of rain and sunshine will occur during the next two weeks allowing for harvesting to advance well in many southern areas. Some progress will occur in the north, but they are expected to receive the brunt of the wetter autumn trend.  6-10 & 8-14 day NOAA maps remain very wet and somewhat cool, which will not make for a smooth harvest for many.  Brazil and Argentina weather is relatively normal and remains supportive of good first crop planting progress.

Trade volume was very light with November bean volume about half of yesterday’s total. Beans were supported from headlines promoting both Argentina and Brazil importing US beans in order to replenish domestic reserves to crush and sell the meal back to China. Oil World’s letter estimated 1.8 mmt of beans would be sold to Argentina in the Sept-Feb time frame while Reuters quoted another source saying Brazil would purchase 1.0 mmt. Look for those totals to rise over the coming months as the Chinese government continues to discourage direct purchases of US beans via tariff and harsh inspections due to the trade war and domestic supplies in Argentina and Brazil are running out.   This arbitrage is not a surprise but the sudden focus in the media has brought on some fresh soybean value buying along with short covering as the technical posture of the market stabilizes.

The USDA September 1 quarterly stocks and small grain summary reports will be released on Friday The USDA September 1 quarterly stocks and small grain summary reports will be released on Friday. This is primarily a wheat production report but it will finalize last year’s corn and bean crops, along with the quarterly stocks data. The USDA has revised its estimate of the prior year’s soybean crop in 16 of the last 18 September stocks reports raising the figure nine times and lowering it seven times. Any adjustments are expected to be relatively minor.

The last few days have seen very little in the way of fresh, positive news for the wheat complex, and because of that prices have struggled a bit. Following Tuesday’s poor performance, the markets tried to rebound overnight, and they were enjoying modest overnight gains for much of the evening, but in the hour leading up the morning pause those gains were erased. There was a huge sales announcement in beans during the morning break which gave the soy complex a little boost once trade re-opened for the day session, and that looked to carry over to the corn and wheat markets, but trade was only able to sustain that momentum for a couple hours. A midday collapse took futures lower. Volumes were very light, and the only thing that should probably be taken out of today’s price action is that at least for now, no news is bad news for the wheat markets.

On a more positive front, our export lineup continues to improve, which if nothing else should provide support if we see an extended break. Last week’s sales were not that bad, and if we could get another sales report of around 500 TMT, that would mean sales are moving in the right direction. Until we start seeing the export demand surface, it may be too tough to rally the markets thru the September highs. For now, the market seems to be biding time until the crop report Friday, but price action so far this week seems to be telling us that there will probably be nothing in the report that will give trade that spark to get prices over those Sept highs. In last year’s September’s report, we saw a slight increase in the overall acres planted and harvested from the June report. In August, the USDA gave us an overall winter wheat crop of 1.19 BB with an overall yield of 47.9 bpa.

Anna Kaverman

anna@mercerlandmark.com

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