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Market Report

Monday February 4th, 2019

March 19 corn closed up 1 at $3.79 ¼ and December 2019 closed up ¼ at $4.02 ½. March beans closed up ¾ at $9.18 ½ and November 19 closed up ¾ at $9.58. March wheat closed up 1 ½ at $5.25 ¾ and July 19 closed up 1 ¼ at $5.33 ¼. Crude oil closed down $.66 at $54.89.

The corn market managed a “slightly better” start to the week, though volumes were light and the ranges tight. There was more talk today about Super Bowl ads than trading, especially with that high-fructose corn syrup ad in the mix. Managed Money traders were viewed net buyers of another 5,000 corn today, which would leave them net long an estimated 45,000 combined futures and options.

Futures continue to bide their time, likely awaiting something concrete on the export front, or the big USDA “data dump” slated for Friday. The rumor was the apparent “delay” in China reporting their official grain import quotas for the year. Some took this to mean that they are holding off in anticipation of larger future business booked with the U.S. Either way, this business has yet to show up in the “hard” data reported by the USDA. Mid-Day Inspections remain very benign for corn, with just 901,214 metric tons shipped for the week ended 1/31.  This was down slightly from the prior week, and almost 20% less than the prior year week.  This takes YTD corn shipments to 22.47 million metric tons, which is well ahead of the prior year’s 14.89 mmt.  In recent weeks, corn exports have mostly been falling short of the ~1.4 mmt/wk pace needed to meet USDA sales forecast. On the weather front, Brazil precipitation remained erratic over the weekend. Temperatures were quite warm. Rain will increase during the middle and latter parts of this week. Mato Grosso second crop corn said to be 30% planted. Argentina’s bottom line is mostly quite good.

The soybean market firmed slightly on renewed export demand from China although the board once again struggled to hold strength into the close. The USDA flashed 612 tmt of old crop beans sold to China which is the first official sales confirmation of the latest round of business. Reportedly, Cofco and Sinograin have each bought 1 mmt purchased as part of the 5 mmt commitment from last week. Trade volumes were sharply reduced from Friday’s high volume session with March beans trading only 70k today vs. 168k Friday.

The feature trade once again was soybean oil where flat price and negate Friday’s outside day lower performance. The USDA released the delayed census crush for November where total crush was 178.1 mb which was about .5 bigger than estimates. Oil stocks were 1.903 bln lbs vs. 2.030 bln expected.  Friday’s crop report is a major report and will feature the final US corn and soybean production numbers, quarterly stocks and winter wheat acres. The trade estimates for the January report are posted below, updated estimates should hit the wires today. The big difference from the January estimates to current trade estimates will be Brazil’s soybean crop where instead of a 120 mmt production estimate, the trade likely pricing in a 115 mmt type of crop compared to the USDA last at 122 mmt back in December. While Brazil’s bean crop may be 5 mmt below last year’s record crop, Argentina’s crop likely at 53-55 mmt is 15-17 mmt BIGGER than last year’s (38 mmt) keeping overall SAM soybean production well ahead of last year. Global and domestic soybean supplies are extremely burdensome. Soybeans have been well supported by optimism over Chinese trade progress and Brazilian production declines, Friday’s report will offer a start reminder of those statistical realities.

After a quiet overnight session that produced slightly weaker trade throughout, the wheat complex caught a bid shortly after the day session began and for a short time it looked as if we were going to see similar price action to Friday. The problem today at possibly keeping that early momentum going may have been simple. Lack of market participants. The Asian markets were closed due to their Lunar Chinese New Year holiday break and we had a relatively quiet news cycle from the weekend. Following the enthusiasm on Friday from the US/China trade negotiations, this morning’s comments from White House advisor Hassett saying we still must be patient to see how much progress can be made on China trade talks, adding that much work still remains to be done with negotiations had to come across as a little disheartening.

A quiet day today for wheat may have not been the worst of things. Tuesday we get Stats Can data and Friday we will finally get winter wheat acreage data, and both reports could be influential and could have an impact on trade. Friday’s report will be substantially more important and probably lead to much greater market volatility. If you take a look at the export lineup to start the week, it is pretty bare, so we are hopeful announcements may be on the horizon. Because of the huge crop report Friday, until we actually see that demand surface, it might prove to be too difficult to extend gains much until later in the week. One thing that will probably continue to happen is that the back months will probably continue to trade weaker than the fronts.

Anna Kaverman

anna@mercerlandmark.com

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