Blogging by the Bushel
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FOR THE WEEK ENDED 10-12-18

CORN – Let’s dive right into the biggest market influence this week which was the October WASDE report.  There were several adjustments to both the old crop and new crop balance sheets.  The biggest market surprise was the adjustment of the yield. The market was looking for an increase to 181.8 bpa and there was a bearish bias heading into the report.  The USDA surprised the market by dropping the yield from 181.3 to 180.7 bpa. Old crop saw a reduction to the feed category by 148 million bushels which contributed to an increase of ending stocks of 138 million.  The increased old crop stocks were largely offset by the reduction in the yield for new crop.  The USDA also bumped up new crop exports by 75 million bushels. The net result of the new crop adjustments was a slight increase in the end stocks number by 39 million bushels to 1.813 billion.  The bullishness of the yield drop helped push December futures prices up to 373.75 at weeks end which made for a gain of 5.5 cents on the week.

Export inspections numbers were very good for corn at just over 63 million bushels. This was the best inspection number of the year so far and the best going back to mid-July. The inspection pace is now just slightly above the USDA pace. Export sales for corn this week was 39.6 million bushels.  This was on the low end of expectations and was also the lowest sales total of the new marketing year.

President Trump is telling the EPA that they should allow for E15 gasoline to be sold all year long. He will need an act of Congress to change the current mandate.  Newly appointed Supreme Court Judge Kavanaugh wrote in 2012 that the EPA cannot change the rule unless Congress changes the law.  The ethanol industry is hoping that Trump’s political allies in ag related states will push Congress to make changes.  The refining industry has already promised to sue if the EPA tries to amend the current system.

OUTLOOK – The extremely wet and cool weather has slowed the pace of harvest down significantly.  The risk of loss, damage, or unharvested bushels will only rise.  A friendly WASDE report and strong demand makes it feel like the corn market may have found a bottom for now.  Not sure we have enough ammo to jump corn right to $4, but there is enough to support a gentle push higher.

SOYBEANS – The changes to the soybean balance sheet on the October WASDE report were not quite as dramatic or extensive as the changes to the corn balance sheet.  A very slight increase to LAST year’s yields and a reduction to the residual bumped up ending stocks for old crop by 43 million to 438 million bushels.  For new crop the yield was raised from 52.8 to 53.1 bpa but the increase wasn’t quite as big as pre-report expectations of 53.3 bpa.  The surprise on the bean side was the reduction to acreage of 500,000 planted and 600,000 harvested.  Between the lower acreage, and the increased yield, the change to production was a decrease of 3 million bushels.  New crop ending stocks increased by 40 million bushels which was just a pass through of the increase to old crop stocks.  Most analysts commented that the report was neutral to bearish, but the price action of the futures indicated otherwise.  November beans traded higher on report day and the day after to salvage just a 1.5 cent loss for the week.

Export inspections for soybeans were very weak at just 32.5 million bushels.  The pace is well behind last year obviously as China is not a buyer any longer. Because the USDA is not dropping the current export level of 2.060 billion bushels, the current inspection pace is lagging.  Export sales were dreadful at just over 16 million bushels.  This is the lowest total of the marketing year and the lowest total since early July.  We did see cancellation to China that totaled almost 7 million bushels.

Soybean harvest is extremely slow due to wet weather across most of the country.  Currently harvest progress stands at 32%, which was only a 9% advance from the previous week.  It doesn’t look like harvest pace will be any quicker this week as well.  The five year average is at 36% so we are now behind pace.  If things stay slow, we could be looking at the 2nd slowest harvest in the past 30 years.

The planting progress in Brazil continues to move along nicely with over 10% already planted.  Adequate early season rains are encouraging a fast start. Brazil’s SAFRAS reports 18/19 bean sales are well ahead of last year, with farmer taking advantage of the resulting strong prices from the US/China trade war. Farmers have sold 27.3% of their new crop soybean production vs 14.1% last year. Strong 17/18 sales are also confirmed with 92.9% sold vs 83.7% last year.

OUTLOOK – The fundamentals of the market are still bearish with no Chinese business and without an end in sight to the trade war. Brazil is off to a quick start, so they should have big production numbers unless a weather event occurs. If it is the funds covering up some shorts it might be good to look at some marketing opportunities on the pop higher.

Wheat

Russia’s 2018 wheat crop is expected to total 68 to 69 million tons. Previous projections were at 64.4 million tons. The Rosario Stock Exchange cut the Argentina wheat forecast from 21 million tons to 19 million tons due to drought in the central-western parts of Pampas, especially the Cordoba and Santa Fe provinces. Australian wheat production decreased 1.5 million tons to 18.5 million tons for 18/19, due to dry weather conditions.

Private exporters reported to the U.S. Department of Agriculture export sales of 120,000 tons of hard red spring wheat for delivery to Bangladesh during the 18/19 marketing year. Just one day later, the U.S. Department of Agriculture reported cancellations of export sales of 140,000 tons of corn for delivery to unknown destinations.  The October WASDE held very few changes for the wheat balance sheet.  The changes included only slight adjustments to several categories with a net change of a 21 million bushel increase to ending stocks.

Anna Kaverman

anna@mercerlandmark.com

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