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Market Report

Monday October 1st, 2018

December closed up 9 ½ at $3.65 ¾ and March 19 closed up 9 ¾ at $3.77 ¾. November beans closed up 12 ¼ at $8.57 ¾ and January 19 closed up 12 ¼ at $8.71 ¾. December wheat closed up ½ at $5.09 ½ and July 19 closed up 3 ¾ at $5.44 ½. Crude oil closed up $2.08 at $75.14.

The corn market threw traders a curveball today, quickly shaking off Friday’s bearish USDA stocks report to post impressive gains.  Futures were overnight, but quickly extended those gains during the day, eventually settling higher. For those keeping score, corn completely reversed Friday’s losses. Managed Money traders were viewed net buyers of 15,000 corn today, and will head into tonight net short an estimated 145,000 combined futures and options. It is almost impossible to pinpoint an exact reason for today’s bounce in corn. In truth, most think a lot of it had to do with “beginning-of-month-and-quarter” spec fund buying. Commodities had another rough quarter, but many financial news publications openly questioned whether it was “enough” coming into today.  Sugar, crude oil, and hogs, all had big days, along with more modest gains in beans and some wheat contracts.

Ag markets caught a shallow bid overnight on an “eleventh hour” deal to include Canada in the new NAFTA pact.  As we have noted in the past, putting “new NAFTA” to bed will likely lead to little/no new corn business, but will preserve a favorable relationship with one of our largest exporter customers, Mexico.  Perhaps it offered an optimism boost that knocking over one trade domino could build momentum on the other deals that have yet to be resolved (Japan, EU, and China, in order of difficulty). One thing that has certainly not suffered in any event is U.S. corn export business, which continues to offer a reassuring hum in the background. Exporters shipped 1.345 MMT of corn for the week ended 9/27, which was virtually unchanged from the prior week, but up from the year ago’s 0.854 mmt.

Another supportive factor to the markets is the wet outlook for the coming week, which could prove quite disruptive to harvest efforts, particularly mid-week on forward. 4-5 inches of rain is expected along the WI/IL border, with 2-3 inch totals extending into Michigan, Eastern Iowa, and Northern Missouri. Flooding could become a concern in some areas, particularly with the 6-10 & 8-14 day maps remaining as wet as we’ve ever seen them.

The soybean market shook off Friday’s stocks report and began October on a strong note by settling at a new 6-week high. A wet weather forecast threatens to delay harvest activity in the Midwest including some parts of the country including S MN in C to N IA that have been struggling with excessive rains through September. Too much moisture for too long of a stretch can threaten crop quality and bring disease issues. The weather forecast promotes rains starting up later this week and continuing through the first half of October at least, cooler temps will also slow down the pace of drying.

Today’s action was very much welcomed after a demoralizing finish to September where the quarterly stocks report uncovered more supply of corn, wheat and beans than expected and sent prices sharply lower. Soybean harvest advanced to 23% complete up from 14% a week ago and compares to 20% this time last year.  The crop is 75% dropping leaves up from 71% a week ago. The crop rating was left unchanged at 68% gte and 10% pvp.

There is optimism over the new trade agreement signed off on between the US and Mexico and now Canada too which was reached late last night just ahead of the deadline to get the agreement signed off on before the new Mexican government takes over in November.  The new NAFTA deal is called the USMCA opens the Canadian domestic dairy market to US dairy farmers and keeps chapter 19 dispute resolution mechanism in its current form.  Soybean and meal trade into Mexico has been robust and this deal should give us some additional trade into Canada but as much as anything, this deal gives the market hope that a resolution with China can also be reached.

The wheat complex was able to battle back from lower price action and finished the day with modest gains. It was puzzling how little effect the strength in corn and soy had on wheat prices today. It was also odd to see very little reaction our US markets had after Russian prices for 12.5 pro wheat rose around $4.00 week over week. Granted, there was nothing friendly in Friday’s crop report, but there was nothing too negative either.

There is an Algerian delegation that is in Russia through Oct 10, and with it brought speculation that Algeria will start importing Russian wheat. Algeria is a country that demands quality wheat, and at this juncture we do not know if Russia could provide the quality needed to satisfy those demands. Not to mention that France will lobby hard to prohibit this from happening as France needs the Algerian demand. Currently, Algeria is the third largest importer of wheat (roughly 7.5 MMT) trailing only Egypt (over 12 MMT) and Indonesia (over 10 MMT). The weekly USDA crop progress this afternoon showed Winter wheat planting progress is at 43% vs 28% last week, 34% this time last year and the five-year average of 40%.

Anna Kaverman

anna@mercerlandmark.com

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