Blogging by the Bushel
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Market Report

Thursday January 24th, 2019

March 19 corn closed down 1 ¾ at $3.77 and December 2019 closed down 1 ½ at $4.00 ¾. March beans closed up 1 at $9.16 and November 19 closed up ¼ at $9.56 ½. March wheat closed down 4 ½ at $5.21 ½ and July 19 closed down 3 ½ at $5.34. Crude oil closed up $.50 at $53.42.

The corn market continued its struggles amid the shortened week, finishing the day with losses. Corn tried to be a little firmer overnight, but once again struggled to keep the fires burning during the day.  Managed Money traders were viewed net sellers of another 5,000 corn today, which would leave them net long just under 55,000 combined futures and options.

The daily “wax on, wax off,” of China trade negotiation chatter continues, and today was definitely in the “wax off” column.  Major U.S. negotiator Ross stated this morning that the two sides were “miles and miles” away from a complete resolution, which is not surprising given the scope of the talks. Ag traders are merely hoping for a few “scraps” off the table, ie: the promised short-run boost in exports amid the trade truce.  Though the list of shipped commodities has grown, corn business still has not been confirmed. The uncertainty continues to keep traders from fully committing to a bull or bear stance, maintaining a frustrating range chop.

The weekly EIA report was not as bearish-as-feared for ethanol, finding a modest pullback in production and a small build in stocks. Weekly ethanol production of 1.031 million bbl/day was almost 2% lower than the prior report’s six week high. A weather tinge remains around the markets. There is limited concern over big rains in Argentina’s center and south, which could produce some localized flooding on newly-planted crops. Concurrent drying in the NE of Argentina will improve conditions? In Brazil, Mato Grosso do Sul will continue struggling for moisture along with parts of Mato Grosso, Paraguay and Bolivia, until this weekend when showers and thunderstorms evolve.  Farm Futures surprised some with a 90.3 million estimate for 2019. Informa out yesterday was 91.5. By way of comparison, many private analysts were eyeing 93 million type acreage numbers just a few months ago, but higher input costs and firmer-than-expected soy-to-corn ratio have disabused such theories.

The soybean market continued its choppy two-sided trade where the overnight gains failed to hold and a weaker opening after the break also failed to extend. There is a sense that the markets have hit pause as we await the outcome of next week’s trade meeting between the US and China. Will there be an agreement where China commits to significant ag and energy purchase or not? Time will tell but there are significant barriers to reaching an all-encompassing trade deal because of the fundamental disagreement over intellectual property and forced technology transfer.

Both sides are under pressure to get a deal done which would remove the trade tariffs with China’s economy at this point showing much deeper and troubling cracks. Keep in mind, March 1 is the deadline for an agreement to be made or else additional tariffs on Chinese goods will be enacted so there is a strong chance that next week’s highly anticipated face to face is a bust. For now, these remain technically traded markets that are lacking new fundamental insights particularly in the absence of fresh USDA inputs. Acreage is a hot topic of conversation again with Feb days now only a week away. Farm futures released their acreage survey results, this follows Informa’s estimates published yesterday.  The project bean acres -5.5% to 84.6 mln (Inf 86.2).

Brazil’s weather remains very uneven with soybean production estimates on the decline. Cordonierre lowered his Brazilian soybean crop estimate by 1 mmt to 115 mmt vs. 120 mmt last year with a lower bias going forward, he left his Argentine soybean production unchanged at 56 mmt vs. 38 mmt last year with a steady bias going forward. Brazil’s state of Parana which is the second largest soybean producing state after Mato Grosso, lowered their production estimate to 16.8 mmt from 19.1 mmt projected in December. AgRurual reports Brazil soybean harvest overall at 6.1% compared to .8% this time last year and 1.2% for the 5-year avg. Early yield reports have generally been disappointing.

The wheat complex took a bit of a breather today in another low-volume, unenthusiastic trade. Shortly after the European markets opened the complex found some selling. After a couple of positive technical closes for wheat recently, Chicago had a poor technical close today, posting an outside day lower settle. From a technical perspective, another lower close on Friday could be enough to eliminate what the markets have built up earlier in the week, so tomorrow’s settle can be very important. From the fundamental side of things, it has been a good week for US wheat. A plethora of sales have already popped up, and with this being late Jan days and already well into the second half of its export season, demand for US wheat should only pick up over the next few months and that will be the key to sustaining any upward momentum. Firming World wheat values will only accelerate how quickly the US becomes that global supplier for wheat, and with Russian domestic wheat values firming sharply again, it only makes US wheat that much more enticing. A China deal would be the icing on the cake but at this point in time there is no reason to believe that is going to happen anytime soon.

Farm Futures put together a table of projected plantings for this coming year. The survey was from 626 farmers. After putting the data together, it estimates all winter wheat acreage at 31.6 mil, which is very similar to Informa’s estimate of 31.51 mil. The breakdown had HRW wheat acres at 22.8 mil vs 22.2 mil from Informa, SRW wheat acres at 5.6 mil vs 5.9 mil from Informa and White at 3.2 mil vs 3.5 mil from Informa. Spring wheat acres were estimated not nearly as high as Informa, 12.5 mil vs 13.78 mil. Durum acres were estimated at 2.5 mil vs Informa’s 1.87 mil. Overall acreage from Farm Futures survey was set at 46.6 mil vs Informa’s estimate of 47.163 mil acres.

Anna Kaverman

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