Blogging by the Bushel
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FOR THE WEKK ENDED 10-26-18

CORN – The corn market just keeps plugging along in a sideways trading range between 360 and 375.25. Since October 1st, the open or the close of December corn futures has been in that range every day. The weekly change for the December futures was a slim gain of just ¾ of a cent. Corn harvest advanced by just 10% to 49%.  It remains above the 5 year average of 47%. Weather has opened up a bit and we should see good progress on next week’s report.  The average for next week is 63% complete so harvest should remain on pace.  The good/excellent rating for corn held steady at 68%.

Corn inspections came in on the low end of expectations  and was the first time since February that inspections were under 1 million tons. The inspection pace is just a wee bit behind the USDA level by only 3 million bushels. Corn export sales were just terrible. Sales of just 13.7 million bushels is the lowest total of the marketing year and the lowest total since December 2017!  There were cancellations of 12.4 million bushels which really cut into this week’s sales. Weekly ethanol production rose 13,000 barrels/day to 1.02 million bpd, below the 1.068 million pace needed to meet USDA estimates. Ethanol stocks fell 233,000 barrels to 23.9 million barrels.

Brazil reports that the main corn production state of Parana has corn planting at 90% complete vs 89% a year ago. The state of Mato Grosso is 50% planted. AgRural says Brazil’s overall first season corn planting is 48% complete vs 45% average. Argentine corn planting is 34% complete vs 33% last year. Conditions there are 30% good-to-excellent, and 24% poor-to-very poor, with dryness in the state of Cordoba.

OUTLOOK – The next WASDE report is still two weeks away so harvest results should be the biggest driver for prices in the short run.  Results we have seen are overall pretty good but there is much more variability then we are seeing in soybeans.  This variability has some believing that the national yield could decline in the November report.

SOYBEANS – With the exception of a few days last week, soybeans have been stuck in an $8.40 to $8.70 trading range since late September.  Soybean inspections were pretty good this week at nearly 41 million bushels.  Argentina and Egypt were the two largest destinations this week.  Normally China dominates the top spot this time of the year. Inspection continue to lag the USDA pace by 44 million bushels. Export sales, however, were a disaster.  Sales were only 7.8 million bushels which is the lowest total of the marketing year.  This is also the lowest total since May 31st. China also cancelled another cargo of 2.2 million bushels this week. There was also a flash sale announcement of 200,000 tons to unknown.  This is the first positive flash sale we’ve seen since the huge bean sale to Mexico on September 26.

US soybean condition ratings were unchanged at 66% good/excellent. Soybean harvest made good progress this week and is 53% complete vs the 5 year average of 69%. This year remains the 2nd slowest bean harvest in 30 years. The weather remains favorable for harvest and we should see a big jump again next Monday bringing the harvest progress closer to average. The next big USDA report is still two weeks away. Until then, the market will get price direction from harvest results.  So far, we have been seeing really strong soybean yields which is in line with the USDA’s estimate of a record yield. The USDA is predicting that 12 US states will set a new soybean yield record this year.

Soybean planting in Brazil is moving along at record pace with roughly 45% of the crop in the ground. Weather remains good, maybe a touch to wet, and will keep the fast pace going.  The fast pace will mean Brazil will be harvesting in January and will be able to keep the pipeline to China relatively well supplied. Traders believe China has soybean coverage for 85% of November needs, 40% of Dec, and 10% of January needs.

The African Swine Fever continues to spread across China with several new cases reported this week.  There are some that believe that problem is way bigger that China is publicly acknowledging. The US is stepping up surveillance to keep the disease out of the US.  Scientists have said that a vaccine is at least 10 years away due to the complexity of this virus. Changes to genetics might be a quicker way to combat the disease. If this virus continues to spread and the killing of pigs expands this will factor into Chinese feed demand.

OUTLOOK – Larry Kudlow accused China of doing “nothing to defuse trade tensions,” saying a detailed list of U.S. demands has gone unaddressed. It doesn’t look like China will be returning to our markets anytime soon. That leaves the market to deal with the supply side of the market and bean yields look to be as good as advertised and worthy of the USDA record outlook.

WHEAT – We need to touch on wheat this week as that was the market that seemed to have the most activity and talking points. Egypt’s GASC is tendering for wheat, for Dec 11-20 shipment. The lowest offer was two cargoes of U.S. SRW at $219/MT FOB, offered by Cargill. When you add in freight costs US wheat was the first and third most expensive. However, Egypt pretty much bought all that was offered except the 2 most expensive offers which meant one cargo of US wheat was purchased. The futures market was quick to rally prices which immediately cut into the competitive we had in the world market.

Anna Kaverman

anna@mercerlandmark.com

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