Blogging by the Bushel
With numerous challenges over the past several years for producers, we at Mercer Landmark understand the need for a comprehensive risk management solution. We seek to provide our customers with unparalleled service to ensure maximum results.
Archives

Market Report

Tuesday January 15th, 2019

March 19 corn closed down 7 ¼ at $3.71 ½ and December 2019 closed down 5 ¾ at $3.96 ½. March beans closed down 10 ¼ at $8.93 ¼ and November 19 closed down 9 at $9.37 ½. March wheat closed down 3 ¼ at $5.11 and July 19 closed down 4 at $5.20 ½. Crude oil closed up $1.59 at $52.39.

Early, corn appeared ready to stand alone atop the grain room once again, mustering up decent gains overnight while beans and wheat were softer. It was all downhill from there, though, as corn finished right at the bottom end of a $.10 range. Managed Money traders were viewed net sellers of 15,000 corn today, and will head into tonight net long just under 35,000 combined futures and options.

Hate to say it, but without government reports and a coherent weather story, the ag markets are living and dying with each China rumor. Shortly after the grain open, comments attributed to lead U.S. trade negotiator quickly sent markets into a tailspin. For a couple weeks, the market has been inundated with positive vibes on China. Lighthizer expressed his disappointment in this week’s negotiations. As we have warned, it will take time to hammer out a complete, big-picture trade deal with China given the number of complex issues outstanding. The ag markets are merely hoping for a scrap off the table, such as trade confirms on recent export business. It was confirmed overnight that China booked some U.S. Crude Oil(6 mil bbl to be exact).

There was also a little bearish world news around early.  Ukraine just keeps finding more bushels, proving the old adage “big crops get bigger.” APK-Inform was the latest private analyst to raise their crop projections there. The USDA’s latest estimate from Dec pegged Ukraine corn exports this year at 28 mmt, up almost 10 mmt yr/yr, though a lot of that increase will likely go to Europe (and indeed, already has). Brazil crop conditions remain variable, though they will garner more attention the closer we get to safrinha corn planting. The dry pockets are mostly in the center south, interior far southern production areas, and the northeast. Argentina summer crop areas remain in mostly good shape, while South Africa still needs more rain.

The soybean market broke down for a test of the uptrend that has supported the recovery rally over the past four months. A combination of technical selling, macro selling off a sharp rally in the dollar and a growing sense of frustration at the lack of a trade breakthrough with China led to a tough day for the grains.

The US and China will resume face to face talks in Washington on January 30-31. Talks on Chinese purchases of US ag and energy have progressed but the larger issues of intellectual property and forced transfer of technology remain unresolved as US Trade Rep Lighthizer stated that he ‘saw little progress in last week’s talks with China on structural issues, IP protections’.   That may be the case, but it is also important to remember that both sides are actively negotiating and posturing heading into the next round of talks. Expect to see lots of good cop/bad cop headlines coming from both sides. Meanwhile, China asked some state-run enterprises to avoid business trips to the U.S. and its allies and to take extra precautions to protect their devices if they need to travel.

Wheat price action was a little better for most of the night, but in the hour leading up to the morning pause all three classes of wheat started to breakdown and they would all eventually finish the night flat to slightly lower. The selling leading up to the morning pause seemed to resonate from beans and meal, but the weakness trickled down into corn and wheat. Shortly into the start of the day session a statement was released from US Sen Grassley that said that US Trade Rep Lighthizer suggested there was little progress in last week’s trade talks with China. This was all that was needed to ignite additional selling, but wheat was somewhat immune as most of the weakness was seen in corn and soy.

It is hard to say whether all three classes of wheat found much better support, or there is little interest at pressing wheat at these levels. Maybe a little of both, but it is hard to blame traders for wanting to sit on the sidelines as the longer the government is shutdown, the longer we go with no USDA reports, and that makes it more difficult to maintain any enthusiasm. Without USDA reports, there are not many other influences around to spark a rally. Demand is the one constant motivator, but outside of Japan in for their semi-usual weekly tender, the export lineup is basically nil to start this week. A far cry from what we saw this time last week. We already know the next round of trade talks between the US and China is not scheduled until the end of the month, and when a key representative in the negotiations expresses some disappointment at how talks are moving forward, it should be a red flag.

Anna Kaverman

anna@mercerlandmark.com

Leave a Reply

Your email address will not be published. Required fields are marked *

*

* Copy this password:

* Type or paste password here:

39,269 Spam Comments Blocked so far by Spam Free Wordpress

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>