Blogging by the Bushel
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FOR THE WEEK ENDED 9-28-18

CORN – The focus of everyone’s attention this week was the quarterly stocks report.  Expectations coming into the report had a 140 million range between 1.96 and 2.1 BB. It was bearish news when the USDA printed Sept 1 stocks of 2.14 BB. Usage in the 4th quarter was a record at 3.165 BB, but that was overshadowed by the burdensome stocks number.  We are starting to see a shift of more usage in the 4th quarter of the marketing year and less in the 1st quarter. Crop conditions showed an uptick of 1% from 68% to 69% in the good/excellent category. Last year was only at 61% good/excellent but the rating did climb all the way through harvest. Corn harvest was 16% complete which is better than 10% last year and better than the 11% five year average. Spotty weather should narrow the advantage in the next week.

Ethanol production continued at a strong level in this week’s EIA report at 1.036 million barrels per day.  Ethanol margins continue to slide and have gone from a couple of cents positive to a negative 5 cents. There are reports of several ethanol plants slowing down production to counter the negative margins. Current corn usage based off the weekly ethanol data is right in line with the USDA’s ethanol target of 5.65 billion bushels.

Corn sales were huge this week, going way above the top end of expectations.  Estimates were between 35.4 and 51.2 million bushels.  This week’s total was a whopping 67.4 million bushels making this the best total since March 8th!  Mexico was the biggest buyer this week and they continue to be the main destination. The rumor mill continues to talk of an E-15 announcement. It was said that it would be revealed this week but once again nothing official was announced.

OUTLOOK – With the quarterly stocks report now in the review mirror the market will be focused on harvest results.  We have almost 2 full weeks until the next WASDE report and harvest activity should be ramping up in that window.  Corn has the most variability and uncertainty about just what the real yields are. Twitter will be buzzing with harvest results but will that be enough to break corn out of the 345-365 range that December corn has been stuck in for a few months.

SOYBEANS – September 1st soybean stocks were 438 MB which was well above the average estimate of 401 million.  Despite the big stocks number, 4th quarter usage was a record at 781 MB. The USDA also revised the 17/18 production number higher by 19 MB to 4.411 billion. Soybean conditions had an improvement of 1% from 67% to 68% in the good/excellent category. Last year was at 60% good/excellent. Soybean harvest was 14% complete which is better than 9% last year and better than the 8% five year average.

Mexico bought 672,000 tons of soybeans that was reported in a flash sale announcement yesterday.  This is the biggest soybean sale since September 2017 when China bought 960,000 tons.  It is also the biggest sale to Mexico since November 2017 when they bought 846,000 tons of corn. Weekly export sales were ok at nearly 32 million bushels. Unknown buyers topped the list this week and we did see another Chinese cancellation of 2.35 million bushels. Soybean planting in Brazil is off to the quickest start in over 5 years. Adequate rains have got producers planting aggressively.  The state of Parana was 18% planted compared to just 2% at this time last year.  The reason that this area is so important is that it is close to the ports. Early planted beans in this area can be harvested and shipped by mid-January which would eat into the tradition window that used to belong to the US. Brazil is shipping every bean they can to China during the trade war. As a result, Brazilian grain trading firm Agribrasil believes that Brazil will import 1 million tons of beans from the US in the coming months.

OUTLOOK – A bearish stocks report will linger with the market as harvest reports continue to pour in.  So far almost every report is a record or near record bean yield, except for average to below reports in the Dakotas. It’s hard to find any reasons to be bullish with ZERO business to China, a heavy stocks report, bigger Brazilian old crop numbers, and a fast start for their new crop.

Wheat

The Russian wheat harvest is wrapping up with about 85% of the crop in the bin. Indonesia is the world’s largest wheat importer. They increased their estimate on the amount of wheat they will need to import this year from 8 to 8.5 million tons. US winter wheat plantings are running ahead of average. The crop is 28% planted topping last year’s 22%, and the five year average of 26%.

In other news – Canada is saying that it will not agree to certain US conditions to move ahead on NAFTA 2.0.  President Trump had wanted a deal to be completed by the end of the month to get fast track approval before the Mexican elections.  It is believed the US congress will not approve a deal the excludes Canada.

Anna Kaverman

anna@mercerlandmark.com

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