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Market Report

Monday March 4th, 2019

May 19 corn closed up 1 ¾ at $3.74 ¾ and December 2019 closed up 1 ½ at $3.95 ¾. May beans closed up 4 ½ at $9.16 and November 19 closed up 4 ¾ at $9.50 ½. May wheat closed down 1 ¾ at $4.55 ½ and July 19 closed down 2 ¼ at $4.61. Crude oil closed up $.78 at $56.97.

The corn market got off to a fast start Sunday and early Monday, leaving Friday’s positive close in the dust. As so often is the case, it is difficult to keep those bull fires burning all day long, and the action ebbed and flowed throughout the day. The higher close will not set hearts racing, but it still leaves behind many shorts who sold “in the hole” late last week.  Managed Money traders were viewed small net buyers today, and we estimate they are net short about 145,000 combined futures and options.

You’re tired of reading it, and analyst are even more sick of writing about it, but the main driver overnight was China once again. We appear to be inching closer to an interim accommodation of sorts, after President Trump called on China over the weekend to drop ag tariffs. The U.S. would respond by beginning to unwind a certain portion of the tariffs imposed last year. At the same time, China would begin the long task of rewriting their laws to accommodate some of the structural economic reforms demanded of it by the U.S. This led to fast gains in most risk assets early, but it appears like the financials are beginning to take a similar attitude as the grains.

Mid-day grain inspections remain mediocre. Not a disaster, but they are now trending below year ago equivalency and have long fallen short of levels needed to meet USDA sales goals. For the week ended 2/28, the U.S. shipped 865,617 MT of corn, which is up slightly wk/wk, but down slightly from the prior year tally of 980k mt. YTD inspections now stand 25.8 mmt, which compares to 19.0 mmt on the books this time last year. Expect this gap to continue to narrow given last year’s back-end-loaded pace.  Lingering export bulls are counting on China to keep this year’s exports ahead of last year. There was a small batch (100k metric tons) of corn sold to Colombia this morning under daily USDA reporting.

The soybean market had a mixed performance where on the positive side, we confirmed Friday’s reversal by leaving a close and settling higher but also found it difficult to sustain strength.  The feature of the product trade was strength in meal where we rejected new lows on Friday and built on the recovery, oil was the odd man out today and the oil share spread settled back to a two-week low although flat price bean oil remains in its near-term range.

Renewed trade optimism following reports that China and the US were closing in on a trade agreement helped to support the recovery, but the market is weary of talk and that was reflected in less than convincing price action in beans. Look for short covering and technical buying against these lows to support prices heading into Friday’s USDA crop report and WASDE. This report will feature a reminder that we are still sitting on record domestic and global soybean supplies. It will also feature Southern Hemisphere production that has benefited from favorable weather for most of Brazil since February and Argentina crops that have bounced back smartly from last year.  The report should not be bullish.

Not too surprising, price action across the wheat complex today was choppy. With still no confirmation on whether the US was able to snag any business. Either what was already known or any of the fresh demand that popped up over the weekend. For now, the complex still needs demand to stimulate a further recovery, and until we see the US win its fair share of business, the funds look to be in control. They have been pressing the market lower over the past two weeks, and on days such as today. They are there to sell any significant bounce and keep a lid on rallies.

Anna Kaverman

anna@mercerlandmark.com

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