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Market Report

Wednesday October 3rd, 2018

December closed down 2 ¾ at $3.64 ¾ and March 19 closed down 2 ¾ at $3.76 ¾. November beans closed down 4 ½ at $8.61 ½ and January 19 closed down 4 ¾ at $8.75 ¾. December wheat closed down 4 at $5.15 ¼ and July 19 closed down 2 ¼ at $5.52 ¼. Crude oil closed up $1.20 at $76.24.

After defying gravity for most of the week, the corn market fell back, finishing the day with losses. The market spent most of the day straddling unchanged but seemed to succumb to mid-day hedge pressure. Interest was apparent today in the December 2019 contract, with that contract crossing the magic $4 barrier yesterday. Managed Money traders were viewed net sellers of about 8,000 corn, which would leave them net short just under 150,000 futures and options.

The USDA tried to offer the corn market an assist early, reporting a sizable daily announced sale of 230,000 MT of corn to Japan. Not that many doubt strong interest in U.S. corn exports at this point. The weekly report tomorrow morning should find a “less exciting” week than the last, though still quite good at an estimated 1.0 to 1.3 MMT. The usual suspects remain around for U.S. corn. The report of the day was the weekly EIA, and it ended up with modestly bearish feature. Production slipped -2% this week, which was right in-line with our forecast, and would imply yearly corn-for-ethanol usage of 5.46 BB. The surprise came in the stocks data. The EIA found a +3.6% increase in ethanol

On the weather front, much of the Midwest was dry Tuesday and harvesting likely advanced well in areas that have not seen significant rain this week. The two-week outlook has not changed much since Tuesday and many areas will see another one or two days of good harvest progress before a period of wet weather begins Thursday into Friday and lasts into Oct. 13. Some heavy rain and flooding are expected in the Central Midwest. The remainder of the Corn Belt will see less rain and shorter interruptions to fieldwork. An important period of mostly dry weather is advertised for Oct. 13-17. Meanwhile, South American first crop corn planting continues to run ahead of normal.

The soybean market was unable to hold new highs and reversed lower after the break. This price action could give us a deeper test of support as charts were due for a correction and we are heading into the October crop report a week from tomorrow with expectations for a bearish supply side re-enforcement in the stats. Fresh news was very limited and trade volumes were holiday-like. Prices this week have been supported from a soybean oil break out that continued today, a wet weather forecast, and strong technical action (daily and weekly) that encouraged short covering.  US farmer is more interested in storing as many beans as possible and prying those bushels loose will come with a cost.  There is talk that some IL growers are even turning to ag bags for storage as space is at a premium. The Brazilian real rallied to a two-month high before settling back, strength in the currency futures takes away from farmer margins in that country and in the macro sense is supportive to our prices but Brazil’s exportable old crop is about exhausted and the currency move more applies to new crop profitability which is still robust thanks to the big fob premiums. Brazil’s presidential election is Sunday. Soybean oil printed a bottom a couple weeks ago and has not looked back since. Oil has been the forgotten product for the better part of a calendar year as meal took center stage on Argentina’s crop issues, record crush built up domestic supply, and funds were heavy sellers of the oil share. Now, oil is sitting up and the market is caught short with managed money holding 87k shorts as of last Tuesday.

Early overnight wheat gains were unable to carry through the night, and after a two-sided start to the day it was pretty evident that the enthusiasm from Tuesday was not going to be there today and prices retreated into the close. The big story on Tuesday was the Reuters headline that came out around noon which stated several Russian export loading points were faced with a potential suspension. All and all, there were 30 facilities involved in which they could be closed for 90 days if they were shown to have shipped wheat with phytosanitary issues. This one headline was thought to be not enough to get trade over the 5.30 level basis the Chicago, and it was not. When the Russian Ag safety watchdog came out this morning and said it had no immediate plans to suspend work of grain loading points in the Krasnodar ports it surely led to some of the weakness leading up to the morning pause and it gave trade more confidence that price action would probably lack the energy or power to even make a run at its overnight highs. That is the problem with chasing Russian headlines, usually within 24 hours they get rebuked.

Anna Kaverman

anna@mercerlandmark.com

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