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Thursday February 14th, 2019

March 19 corn closed down 4 at $3.74 ¾ and December 2019 closed down 3 ¼ at $3.99 ¼. March beans closed down 13 at $9.03 ½ and November 19 closed down 10 ¾ at $9.48. March wheat closed down 15 ¼ at $5.07 and July 19 closed down 13 ¼ at $5.13 ¼. Crude oil closed up $.48 at $54.79.

It was a heart-breaker of day for the grain markets where just about all the inputs around the news weighed in on one side and tipped prices lower, just not a back breaker. After running the bean stops to the topside just two days ago, today we ran them back to the downside putting the chart right back into its key trend support against $9. Trade war optimism was deflated once again following a pair of media reports. The first report was that the President is considering a 60-day extension on the pause in tariff hikes to allow negotiations to progress without further penalty. The second was a headline from Bloomberg that said; “In closed-door sessions, the sides have failed to narrow the gap around structural reforms to China’s economy that the U.S. has requested”.

Weekly export sales for the week ending Jan 3 fell short of trade expectations although those expectations were overly optimistic considering the holiday timings.  Nevertheless, the feature was soybean cancellations by China -807 tmt and unknown -444 tmt which more than offset other non-Chinese purchases.  That was not a good week for bean export commitments.

Informa published their updated acreage projections with corn acres at 91.6 million up from 89.1 last year, beans 86.0 million vs. 89.2 last year, spring wheat 13.6 million vs. 13.2 last year and cotton 14.6 million vs. 14.1 last year.

Typically, export sales data is a fade, and those percentages probably go up on month old data, but the China cancellations put a wrinkle in that thought process today. It was though wheat would see some early pressure across the entire grain complex once the market re-opened for the day session. But, as has been the case over the past several months, a headline news flash would change the dynamic of trade for the rest of the day. Around mid morning a Bloomberg headline read “China and US said to be far apart on framework for monitoring Chinese action of structural reform”. Most took this as the recent China perspective of how things on the negotiating table are going, and the markets’ reaction was not very friendly.

Granted, export sales this morning was abysmal, coming in at only a combined 161 TMT. And we talked yesterday that if China was not in the report, sales were going to be disappointing. But the prospect of US/China negotiations dragging on for another 90 days is a dagger to the heart of old crop wheat. The wheat complex yearns for demand. The outlook for huge US and World stocks come summertime. Which will only get larger if World weather is better than last year and that should not be too difficult, is a real threat if China does not turn to the US for any wheat.

Informa updated their acreage estimates for the coming year. Looks like they left winter wheat acres alone at 31.290 mil. That puts All Wheat acres at 46.782 mil vs 47.80 mil last year. Keep in mind, throughout the early stages of the Fall months, many traders (including myself) had estimated that wheat acres would top 50 mil this year. But that thought process started to change as we moved through the Fall period and heavy rains saturated fields, with many farmers unable to get their crop in the ground. With the export pace not picking up nearly as much as we had hoped as we have moved into the second half of the export season, and because of that the burdensome stocks that it has created, it was a blessing in disguise that Mother Nature dumped all that rain on the farmer last Fall, or we would be looking at an even larger stocks problem come summertime.

Anna Kaverman

anna@mercerlandmark.com

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