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Tuesday February 5th, 2019

March 19 corn closed up 1 ½ at $3.80 ¾ and December 2019 closed up 1 at $4.03 ½. March beans closed up 1 ¾ at $9.20 ¼ and November 19 closed up 2 ½ at $9.60 ½. March wheat closed up 1 ½ at $5.27 ¼ and July 19 closed down 2 ½ at $5.30 ¾. Crude oil closed down $.89 at $54.00.

Quietly mixed day in the corn. Early action skewed mostly negative, but the markets turned higher mid-day and maintained that modest bid into the close. Managed Money traders were viewed net buyers of another 5,000 corn today, which would leave them net long an estimated 50,000 combined futures and options.  If you listen real close, you will hear traders shuffling their feet under their desks, as they await the big USDA reports on Friday. Or a resolution on China, perhaps, but that is the “next” issue on the docket at this point. In the mean time, futures continue to struggle with light news flows and interest.  Keep in mind, most traders who want a position have likely already acquired it on the various dips and blips seen over the past few weeks, if not months.

We do get some hard data out of the EIA tomorrow morning. The EIA reports should be interesting sooner or later, given the extreme weather seen in the Midwest over the past week-plus. We suspect it will not appear in this week’s release due to usual reporting delays. In this report, we are looking for production to uptick 1% or perhaps slightly more. Note, in next week’s report, we would be looking for a subsequent 3-4% decline in production off those levels. Blender demand will likely be weaker, while residual flows should be stronger. Weather continues to be a mixed bag for Brazil, along with mostly favorable conditions in Argentina. The long prophesized increase in precip for Brazil appears to be materializing, though southern growing areas could continue to dry down for a time.  Argentina weather will improve with less frequent and less significant rain this week. U.S. gets a little chilly again in parts of the Plains, though not nearly as severe as that seen last week.

The soybean market continues its choppy overall pattern with a higher flat price settlement. The USDA flashed 2.603 mmt of beans sold to China and another 274 tmt of beans to unknown. When combined with yesterday’s 612 tmt it takes the total confirmed this week to 3.49 mmt out of an expected 5 mmt commitment from last week. This follows 5 mmt that was purchased in December (but not yet confirmed) ahead of the G20/Trump-Xi meeting in Argentina.

The crop report on Friday is expected to re-enforce a bear stat scene in soybeans where both domestic and global supplies sit at record highs. The Chinese business is encouraging and if the stars align just right, maybe just maybe we could get a bailout if we reach a deal that removes tariffs and China executes on their purchase commitments (and adds to them) to reduce our domestic oversupply. But that is far from assured as negotiations in Beijing will be critical. If talks fall apart again they could easily wash out those sales and replace with cheaper Brazilian supply. Lurking in the background of all the trade war excitement is the demand black swan of African Swine Fever in China reducing overall demand from the world’s biggest buyer. Chinese markets are closed this week for Lunar New Year holiday.

Friday, we will get US final 2018 Crop Production, Quarterly Grain Stocks data and winter wheat seeding reports. First the bearish side of the report. Analysts are forecasting US 18/19 wheat ending stocks at 989 MB vs the Dec report of 974 MB and it may be even eclipse 1.0 BB as the export program over the first half of the year was abysmal. World ending stocks should see little change, but there too we will probably see a little bigger number than the 268.1 MMT we saw in the December report. Now for some friendly data. USDA quarterly US wheat stocks as of Dec 1, 2018 should come in around 1.957 BB vs 2.379 BB on Sept 1 and 1.873 BB on Dec 1 of 2017. The biggest piece of friendly data should be winter wheat acres. Expectations are for the report to show around 32 MA of winter wheat planted vs 32.535 mil last year. Of this total, HRW acres should come in around 22.5 mil, SRW acres around 6 mil and white wheat acres around 3.5 mil for 2019.

Because of the government shutdown, it does not look like as if we are going to receive crop condition reports for most states, at least in the near future. The only state that has thus far reported was Texas, and they put their state’s winter wheat conditions at 27% G&E and 21% P&VP. Keep in mind, last year during February conditions were only 4% G&E and 73% P&VP, yet they still managed to get a 31 yield and production of 55.8 mil on 4.6 mil planted acres and 1.80 mil harvested acres.

The second installment if the CFTC’s weekly commitment of trader’s report resumed this afternoon as they continue to play catch up.It was from data thru Dec 31, and it was expected to be released on Friday, January 4. Reports going forward will be published in chronological order, with the CFTC expecting to publish one report on Tuesday and another on Friday of each week until the reports are current as per the normal schedule. During the week ending December 31, funds were sellers of a little over 13,100 contracts of Chicago wheat. At that time, it increased their net short position to over 60,200 contracts. As far as managed money, they were sellers of more than 15,000 contracts in Chicago, which at the time, increased their short position to around 32,000 contracts.

Anna Kaverman

anna@mercerlandmark.com

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