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Tuesday January 29th, 2019

March 19 corn closed down 2 ½ at $3.77 ¼ and December 2019 closed down 2 at $4.01. March beans closed down 4 ¼ at $9.19 and November 19 closed down 4 ¼ at $9.58. March wheat closed down 5 ½ at $5.13 ¼ and July 19 closed down 6 ¼ at $5.25. Crude oil closed up $1.31 at $53.60.

Much like the broader Midwest, the corn market “hunkered down” today, easing a couple cents lower as traders await developments to play out later this week and next. Volumes picked up a little, and the daily range widened out to 4-5 cents. Managed Money traders were viewed net sellers of 10,000 corn today, which would leave them net long 45,000 combined futures and options. The CFTC confirmed it would release data piecemeal on Friday’s and Tuesday’s into early March, similar to the prior gov’t shutdown.

The markets continue to mostly discount the present in favor of future developments, namely the China dialogue this week, and the USDA updates next week. On the latter point, there was are still a few question marks, particularly pertaining to the weekly export sales release Thursday. There was a “twitter rumor” around mid-day that the USDA would take the “piecemeal” approach we discussed above with the CFTC releases. If true, this would significantly reduce the usefulness of the export sales report for the foreseeable future. The USDA did issue their first daily sales announcement today in well over one month, reporting 138,000 metric tons in optional origin sales to South Korea. This is actually neutral to corn at best, as it implies it could theoretically be satisfied from non-U.S. origins.

Forecasters continue to promote “some relief” in dry areas of Brazil starting next week.  Soy production estimates continue to creep lower off very high levels, though getting corn planted behind those acres are the more important point for corn.  Argentina may be too wet in spots, but it remains to be seen whether it will have much impact.  South Africa is improving, but some damage has been done. U.S. Midwest is hunkering down for near-record cold Wed-Thurs.

The soybean market settled lower as our choppy trade continues and the chart formation continues to coil. Both products also settled lower with bean oil overdue for a technical correction after its recent gains. Bean prices are currently supported by the potential for Chinese purchase commitments as part of a trade agreement as well as falling production ideas out of Brazil. Unfortunately, China is unlikely to buy enough soybeans from the US to materially change our oversupply situation this year. Unfortunately, for us, Argentina is likely to more than make up for any Brazilian production short falls this growing season.

The looming issues of African Swine Fever reducing demand from the world’s biggest soybean buyer in China, net-net larger South American production year over year, too many US soybean acres likely to be planted this spring due to inflated prices, and existing supply side statistics will be reflected on the board some point.

The CFTC and the USDA will release staggered, back dated commitment of trader’s reports and weekly export sales reports instead of one big report to catch everything up at once. The COT reports will re-start this Friday and will be published on Tuesday as well, starting with data from the week ending Dec 24 this Friday so it will be a couple of weeks before we get caught up.  The weekly export sales report this Thursday supposedly will be for sales from the week ending December 20th and will not encompass all the activity during the shutdown.  The data will be updated once per week until they get caught up?  Importantly, it appears that the markets will be in the dark on the current fund position and export data for the Feb 8 WASDE.

All eyes turn to the US-China trade talks in Washington scheduled for tomorrow-Thursday.  There is plenty of optimism surrounding the negotiations along with the potential to see substantial ag and energy purchase commitments by China.  However, the reality is that it is unlikely that the two side will get past the fundamental disagreements on intellectual property theft and forced technology transfers that continue to hold up a larger trade agreement. The US has requested the extradition of the Huawei executive who was arrested in Canada last month and is being used as a negotiating tactic and symbol of the trade dispute. March 1 is the deadline for a trade agreement to be reached before tariffs rates are increased, so there is a strong possibility that no breakthrough is reached this week. Expect both sides to posture in the media creating continued headline choppiness on the board.  The old saying is that those who chase headlines end up selling papers in the street.

The wheat complex saw mixed price action overnight with futures starting a little weaker, before rallying a bit late evening and staying firm through the European opening. However, as we neared the morning pause the GASC offers were revealed and that is when wheat prices collapsed. There was nothing positive to take out of those offers this morning, and trade during the day reflected that. The bottom line is the US offers in the GASC tender are not as competitive as a few weeks ago. Keep in mind, the US was only around $3.00-$4.00 away from being competitive in the GASC’s last tender on Jan 8. Hard to rally a market on that news. The good news is there is enough demand around that could stop the bleeding, we just have to get a little more competitive in price to win that business. If not, it may be a long ten days as the next bout of positive news may not be until Feb 8 when the USDA will release the January reports for quarterly stocks, wheat acres, and final 2018 production.

Anna Kaverman

anna@mercerlandmark.com

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