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Friday March 1st, 2019

May 19 corn closed up 2 ¼ at $3.73 and December 2019 closed up 2 ¼ at $3.94 ¼. May beans closed up 1 ¼ at $9.11 ½ and November 19 closed up 2 at $9.45 ¾. May wheat closed down 2 ¼ at $4.57 ¼ and July 19 closed down 3 ¼ at $4.63 ¼. Crude oil closed down $1.42 at $56.19.

FOR THE WEEK ENDED 3-1-19

CORN – Corn finally broke out of its trading range this week, only not in the direction growers were hoping.  Despite going home the previous week with raised hopes for Chinese business, nothing came to fruition.  Corn posted a sharp key reversal lower on Monday and extended those losses until Friday posted the only higher close of the week.  Corn traded to lows not seen since last September with May hitting $3.66 per bushel before profit takers stepped in ahead of the weekend.  Funds were sellers throughout the week, building their net short to the second largest ever for this time of year.  Extreme weakness in the wheat market also spilled over into corn.  Both Chicago and Kansas City wheat set new contract lows during the week.

The market has grown tired of the rhetoric from Washington that tries to build up ideas that China will be a buyer of US corn, ethanol, DDGs, and/or soybeans. The US has requested China lower the current 70% tariff on US ethanol to 15%.  No response has been received.  They want to see something concrete on the books.  Despite very good weekly export sales and actual new daily sales, the selling continued.  First notice day for the March contract didn’t help with growers having to price or roll their basis contracts.  Heavy deliveries as the month ended were also a negative factor on prices.  South American and US weather have not been factors for a few weeks.  It’s too early to talk about US planting weather and how it may affect acres.  Some quick shipment basis pushes were seen in localized areas due to weather related logistical problems.

Weekly export sales were much higher than anticipated at 48.8 million bushels.  Total commitments for the year jumped to 1.56 billion bushels and were able to hold a small 1% advantage over last year.  We need to average 31.2 million bushels per week of sales to hit the USDA’s 2.45-billion-bushel export target.   Mexico continues to be the leading buyer of US corn. New sales to Mexico, South Korea, and unknown were also announced in the USDA’s daily reports. Weekly export inspections were only 29.6 million bushels, when we need 46.5 million bushels per week.  Weekly ethanol production was up 32,000 bpd at 1.028 billion bpd.  Stocks fell 200,000 barrels to 23.7 million barrels.  Margins dropped to breakeven, down 2 cents per gallon for the week

One of the next headlines to watch is planting intentions.  The USDA runs the farmer survey the first two weeks of March.  The February crop insurance level for corn came in at $4.00 per bushel and $9.54 per bushel for soybeans.  This is a ratio of 2.39.  This ratio isn’t encouraging any change in acreage allocation between corn and soybeans.  What will the grower do?  Will the banker have a say?  The USDA will release the Prospective Planting report on Friday, March 29th.  The USDA Outlook Forum on February 22 put 2019 US corn acres at 92 million versus 89.1 million last year and soybean acres at 85 million acres versus 89.2 million last year.

OUTLOOK:  A very disappointing week as prices slid lower four days in a row without any promise of buying from China.  Weather in the US and South America is a non-issue at this point on the calendar.  Corn was able to rally for a higher close before the weekend, but for the week May corn was down 11 ½ cents at $3.73, July 11 cents lower at $3.81 ½, and December fell 7 ½ cents to $3.94 ¼ per bushel.  The downside may have been overdone, but politics will continue to overshadow the markets.  In the short-run, a bounce back into the recent trading range wouldn’t be unexpected. The USDA will release the monthly March WASDE report on Friday, March 8 at noon.

SOYBEANS – Soybeans spiked higher on Monday in anticipation of the previous Friday’s announcement that China would buy an additional 10 mmt of US soybeans.  No details were provided in the announcement, but traders were optimistic that this time something would come of it.  Unfortunately, the trade was once again disappointed when no new sales were announced, and it was unclear whether China just promised to buy or if the US was just being overly optimistic.  It was announced the US won a World Trade Organization case against China which accused them of exceeding domestic support limits for wheat and rice from 2012 to 2015.  This isn’t likely to help in trade negotiations.  Prices edged lower throughout the week without any fresh fodder for the bulls.  The market is tired of waiting for new purchases.  South America has the cheapest soybeans and Brazil’s weather is allowing for their soybean harvest to plug away at a record pace.  Production estimates from South America have stabilized with expectations that we have seen the smallest production forecasts for the season.  Attitudes have turned from a neutral to lower bias for production to neutral to higher.  AgRural pegged Brazil’s bean harvest at 45% complete versus 27% on average with growers having sold only 40% of their crop.  BAGE put Argentina’s soybeans at 88% blooming compared to 89.5% on average with 68% setting pods versus 70% on average.  Conditions were rated at 47% good/excellent, up from last week’s 45% rating.  They left the production forecast at 53 mmt, down slightly from USDA’s 55 mmt outlook.

Weekly export sales exceeded expectations at 80.7 million bushels.  This brings total export commitments to 1.4 billion bushels versus the USDA outlook for 1.875 billion bushels of exports.  We need to average 17.7 million bushels of sales per week to achieve the forecast.  China was the leading buyer for the week with 1.8 mmt, but this could still be playing catch up for when the USDA was closed since nothing was announced through the daily reporting system.  China has bought 9.2 mmt of US soybeans in this marketing year versus 26.2 mmt last year.  Weekly inspections were good at 48 million bushels.  We will need to average just over 32 million bushels per week to meet expectations.

China continues to try and contain the African swine fever outbreak.  They are seeking local government comments on dividing the country into five zones to combat the spread of the disease. China estimates their meal demand has fallen 5% due to ASF. China’s Purchasing Managers Index for February fell for the third consecutive month.  It dropped to 49.2 versus estimates for 49.5.  Anything under 50 is considered contraction.

OUTLOOK:  Soybean prices headed south this past week despite good weekly export sales, but the trade has been focused on additional sales to China which didn’t materialize.  For the week, May soybeans fell 12 ¼ cents to $9.11 ½, July lost 11 ¾ cents to $9.25 ½, and November declined 8 ¾ cents to settle at $9.45 ¾ per bushel.  The trade still wants confirmation that new business with China is being completed.  For now, we could go back into a sideways pattern and more talk focusing on acreage for the upcoming year.

WHEAT – The Russian wheat crop is now pegged at 78.5 million tons for 2019.20. The previous estimate was 77.6 million tons.  This is almost a 10% increase from last years crop but not at record levels. Some US crop conditions for wheat are being released on a state by state basis. Those conditions are compared to December 3rd. In Kansas G/E was 51% up from 45%, Colorado was 50% G/E vs 54%, Nebraska was 60% vs 66% and Oklahoma 43% vs 46%.  Wheat export inspection were outstanding posting the biggest total of the marketing year.

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