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Tuesday February 19th, 2019

March 19 corn closed down 5 at $3.69 ¾ and December 2019 closed down 2 ½ at $3.96 ¾. March beans closed down 6 ¾ at $9.00 ¾ and November 19 closed down 6 ¼ at $9.45 ¾. March wheat closed down 14 ½ at $4.89 ¾ and July 19 closed down 12 ¾ at $4.96 ½. Crude oil closed up $.47 at $56.45.

After flashing some resilience last week, corn buckled under the pressure of a collapsing wheat market, finishing lower. Today was the lowest close seen for March Corn since Thanksgiving.  Managed Money traders were aggressive today, selling an estimated 20,000 corn. When taking into account the latest CFTC “true-up” (now through end of Jan), we would estimate they are now net short 70,000 combined corn futures and options.

A renewed focus on African Swine Fever also did not help corn market prospects today. The disease has reportedly jumped to two other countries, Vietnam and Romania, with unqualified rumors of a case showing up in Canada, too. The disease has forced widespread culls in China over the past year, crimping feed demand. An outbreak in North America would obviously have similar negative impact on corn feed demand, though domestic biosecurity is believed to be much better than in China. Hog futures finished limit down today, perhaps as traders fear a potential consumer backlash against pork.

South American weather also remains a relative nonevent at present. Improving rainfall in Brazil last week was great for boosting soil moisture and reducing crop stress for many areas. Dryness is still a problem in the northeast where some relief is expected this week. Argentina and South African weather are also expected to be favorably mixed in the coming week, too. The mid-day grain inspections report was “just okay”, finding 941,811 MT in new shipments for the week ended 2/14. This was up almost 200k from the prior week, but on par with the year ago week. It is also nearly 50% below the weekly pace needed to meet current USDA projections. On the bright side, YTD inspections continue to run well ahead of the prior year. 24.2 mmt has been shipped to date, compared to 16.7 mmt sent out this time last year. The recent break has uncovered some export interest, with South Korea picking up some corn.

The soybean market violated its uptrend support but managed to bounce back from session lows to close back above the key $9.00 front month support level. Beans are bending but have not yet broken. Soybean meal established a new contract low but bounced off its low with the spreads leading the way. $300 front month meal once again offered the commercial buyer an opportunity to extend coverage at what has been a value area and because of the price action. The selloff in the soy complex was triggered by fresh African Swine Fever news (and rumors), lack of fresh trade optimism in the headlines, a sobering reminder of our current exports to date, and stabilizing Brazilian production ideas. A restructuring in world wheat values to the downside added a negative influence as well. It may be just a matter of time before beans roll over to better reflect current fundamental realities but today was not the day.

Trade talks with China are underway in Washington this week.  The deadline for tariffs to move from 10% to 25% is one week from Friday. President Trump has indicated he may delay the rise in tariffs if negotiations are showing progress but most reports. It is the potential of reaching an agreement that continues to provide underlying support for soybeans despite the underlying fundamentals. Weekly grain inspections were in line with expectations for beans at 1.031 mmt.

A disappointing day from start to finish, with all three classes of wheat sustaining heavy losses. After a three-day weekend, the wheat complex started the shortened week of trade with mixed price action overnight before eventually finishing with modest losses.

When the markets re-opened for the day session, the focus turned to the fall in World wheat prices. We started to see it last week with the extremely low French offers in the Algerian tender, and by the end of the week the ripple down effect that had with the rest of the World. With the freight disadvantage the US has, we are going to have to be much more aggressive than that with our offers if we are going to want to win any future business and the ramifications of that is what we saw in price action today. The US continues to miss out on business. There were ample opportunities to pick up some business last week, and the US did not win its fair share. We must get more aggressive, or come March 8, the USDA will lower wheat export expectations, and our ending stocks will only grow.

Anna Kaverman

anna@mercerlandmark.com

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