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Friday January 18th, 2019

March 19 corn closed up 1 ¾ at $3.81 ¾ and December 2019 closed up ½ at $4.03 ¾. March beans closed up 9 at $9.16 ¾ and November 19 closed up 7 ½ at $9.55 ¾. March wheat closed unchanged at $5.17 ¾ and July 19 closed up ½ at $5.28 ¾. Crude oil closed up $1.68 at $54.04.

FOR THE WEEK ENDED 1-18-19

CORN – Unexpectedly, we had a couple of firework days this past week.  After a quiet start to the week, corn plunged to the bottom of the recent trading range on Tuesday on reports that Trade Representative Lighthizer didn’t see any progress on structural issues in the trade talks with China.  Structural issues include the technology problems that got all this started in the first place.  However, China’s Vice Premier Liu He is scheduled to come to Washington January 30-31 for further high level discussions.  On Thursday, the market roared back to life on rumors that 1) the US had sold wheat to non-state Chinese buyers and  2) the US was considering lifting the tariffs on Chinese goods to calm the markets and entice China to make “real” concessions when they meet in Washington.  Without any reports to confirm export business, the market was left to rely on cash market input, which didn’t reflect any big wheat business being done.  As the bell rang on Friday before the long weekend, there were statements from the US that nothing had been done in relation to lifting tariffs on Chinese goods and from the trade, maybe a cargo of wheat had been sold off the PNW.  As the session progressed, it came to light that China had offered to pick up the pace of US purchases to the tune of $1 trillion over the next 6 years.  US officials were reportedly skeptical of the offer and if true, they would prefer it occur over the next 2 years.

US ethanol production increased this week, but ethanol stocks also rose.  Production was 51,000 bpd higher at 1.051 million bpd, but this was still 1% lower than last year.  Stocks were up 4 million gallons to 981 million gallons.  Weekly export inspections were 39.9 million bushels.  We are 61.4% ahead of last year and need to average 46.1 million bushels/week to hit the USDA’s 2.45-billion-bushel export projection.  China also stated they anticipate one more year of state corn reserve sales.  They expect corn stocks to return to more normal levels after 2019.

March corn rallied this week to its highest level since January 9th and December corn revisited price levels last seen in early November.  For the week, March corn was 3 ½ cents higher at $3.81 ¾, July up 3 cents at $3.97 ¼, and the December contract was 2 ¼ cents higher at $4.03 ¾ per bushel.

OUTLOOK:  Heading into a short trading week with no trading on Monday due to Martin Luther King, Jr. Day, traders remained somewhat cautious on tweets, rumors, and headlines. Without the USDA to verify any export business actually being done, we are left to our own devices and rumor mills.  Corn is still in a sideways pattern despite this week’s gains.

SOYBEANS – Soybeans began the week on a soft note after Brazil received moisture, but not enough to say all their dryness concerns were alleviated.  On Thursday, soybeans benefited from the same rumors/trade chatter that sparked corn higher (stated above).  If we can reach an agreement with China, it could mean additional soybean business.  However, that business could be limited with US soybeans priced higher (even without the tariff) than Brazilian soybeans and Brazil beginning their harvest.  Reportedly, several Brazilian soybean vessels that were looking for homes found them in China this week.  It also makes sense to question China’s demand.  They are still finding new cases of African swine fever in their hogs.  It has now been found in every province in China and has spread to Mongolia.  China reported this past week that 916,000 hogs had been culled.  This may be an understatement as over 100 cases have been verified.   Rabobank believes China’s pig herd could fall as much at 20% this year due to the disease.  According to China, their hog inventory was down 4.8% from a year ago in December and the sow herd was 8.3% lower than a year ago.  China asked for farmers to restock quickly to avoid a shortage of pork and higher prices later in the year.  Due to the ASF, China’s meal prices have fallen to their lowest in three years on weak demand. The last USDA forecast for Chinese soybean imports was 90 mmt.  This number may be called into question on future balance sheets.

Brazil continues to experience dryness in the central and northeastern regions.  How much rain they receive before traders return after the holiday weekend may affect next week’s trading.  Most outlooks for Brazil’s soybean crop fall into the 115 mmt to 118 mmt range. AgRural pegged Brazil’s soybean harvest at 6% complete versus 0.08% last year. Celeres cut their Brazilian soybean production forecast 5 mmt to 117.2 mmt. In Argentina, the BAGE lowered their soybean acreage estimate 200,000 hectares to 17.7 million hectares, or 43.7 million acres, due to heavy rain.

The December NOPA Soybean Crush Report was better than anticipated and set another monthly record for the 14th month in a row.  The December crush was 171.8 million bushels and was the third highest monthly crush ever.  Soyoil stocks were slightly less than expected at 1.498 billion pounds compared to 1.571 billion pounds estimated.  Weekly export inspections were a 7-week high at 39.9 million bushels.  We need to average 35 million bushels per week to achieve the USDA’s 1.90-billion-bushel export outlook.

OUTLOOK:  Next week’s holiday shortened trading week will rely on how much rain Brazil receives, how much is in the forecast, if Argentina can back off excess rain, and what is going on with China.  Looking at the big picture, it is difficult to formulate a scenario where soybeans can surpass this winter’s high.  Even if China returns to the US for soybeans, it will likely only amount to what the government tells their trading house to buy.  Brazilian beans are cheaper than US origin, so only politics would drive purchases from the US.  Without any USDA reports to tell us if China has bought US soybeans in the last three weeks, the popular thought is they have already bought up to 5 mmt since December 1.  For the week, March soybeans rallied 6 ½ cents to $9.16 ¾, July up 6 ¼ cents at $9.42 ½, and November soybeans were 3 ¾ cents higher at $9.55 ¾ per bushel.

The wheat market traded steady to higher Friday with Chicago unchanged. Prices continue to trade in narrow ranges from lack of news and ideas of improving demand. There was chatter that all the chatter about China buying US wheat turned out to be Egyptian business. The jury is still out on Russian exports. Talk is that they plan to curb exports, then the news stories state that they are exporting wheat at a record pace, followed up with officials stating there is no talk of Russian exports backing off. The US Southern Plains braces for snowfall this weekend and seeing frigid temps this week and into the weekend.

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