Blogging by the Bushel
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Market Report

Monday March 11th, 2019

May 19 corn closed down 2 ¼ at $3.62 and December 2019 closed down 2 at $3.86 ½. May beans closed down 5 ¾ at $8.90 and November 19 closed down 5 at $9.25 ½. May wheat closed down 11 at $4.28 ½ and July 19 closed down 10 ½ at $4.37. Crude oil closed up $.69 at $57.12.

The corn market finished a couple cents lower, producing new contract lows for old crop futures. Futures once again made a brave stab at a bounce overnight, but turned decisive sellers shortly after the day open. Did not help that wheat finished double-digits lower. Managed Money traders continue to pad their large net short in the market. They are estimated to have sold another 10,000 contracts today, which would leave them net short close to 245,000 combined futures and options heading home tonight.

Mid-Day Grain Inspections report did nothing to staunch the bleeding, finding another rather subpar week of corn shipments.  For the week ended 3/7, exporters shipped 765,618 metric tons of corn, which was down slightly from the prior week, and compares to 1.377 million metric tons in the year ago week. YTD inspections total 26.6 mmt versus 20.4 mmt in the year ago period. Still a large lead, no doubt, but it is certainly in jeopardy given strong foreign competition this spring and summer, combined with last year’s back-end loaded pace.

The soybean market extended its slide despite some trade confirmations with China. The USDA flashed 926 tmt of US old crop beans sold to China. This takes the total confirmed to 1.590 mmt on the latest round of purchases with more possible in the coming days if the 2-3 mmt+ rumored total from last week is realized.

There was a more upbeat tone to US-China trade talk rhetoric over the weekend with both sides commenting on an agreement being finalized. There may be two different interpretations of an agreement at this point, but they continue to work toward a deal. Once terms are agreed upon by both sides, then a Trump-Xi signing ceremony will be scheduled with sometime in April now the best guess for that to take place. The White House this afternoon confirmed that no date has been set for a summit and that negotiations are ongoing. Weekly grain inspections data was delayed by a technical issue but eventually did get published and showed bean inspections of 874 tmt compared to estimates for 800 tmt and last week’s shipments of 848 tmt. Total soybean shipments to date stand at 26.832 mmt compared to 39.730 mmt this time last year. This represents a deficit of 474 million bushels to last year’s pace, the USDA sees total soybean exports for the year falling short of last year by only 254 million bushels.

Existing soybean fundamentals tell a clear story, but even more disconcerting is the outlook moving forward which suggests ending stocks will continue to grow. Larger than anticipated US soybean acreage this spring is likely due to a combination of favorable price relationships, a slow start to spring fieldwork/planting due to weather and a tight farm economy that doesn’t favor the higher input cost of planting corn. Even if China and the US reach a trade agreement, overall Chinese soybean demand is wounded by the spread of African Swine Fever that some reports say will limit feed demand by 30% this quarter from the prior year and may still be getting worse. It is not a rosy outlook for soybean fundamentals. China may come to the rescue, but any deal would appear to be longer term supportive rather than solving our oversupply problem this marketing year.  We have plenty of competition out of the Southern Hemisphere this year where net production is estimated 13-14 mmt higher than last year and it is competitively priced.

For much of the night, price action in wheat was two-sided, but in the few hours leading up to the morning pause all trade turned a little lower. Funds seem to care less about the size of their position they are building. There was nothing in the report on Friday that was friendly, and the funds do not feel threatened at all. Looking back over the past 17 years, the biggest percentage move from Chicago wheat has had from the end of January to the end of March was a move of a little under 12% back in 2013. After Monday’s settle, since the end of January, Chicago wheat has experienced a move of more than 18%. Granted, today is only March 11, and there are three more weeks to the month, but Chicago wheat futures will have to rally more than $.30 just to get back to that 12% threshold.

Impossible to tell when the fund selling will stop. Today may have been the last day, or it may not come till next week. For now, there are no threats around, and look for them to be there to sell any extended rally. On Friday trade talked about the USDA trimming all the fat after Friday’s report, and that may be true, but there is still going to have to be that one phenomenon to occur to spook the fund into a significant short covering rally. There has been plenty of demand around, and the US seems to be getting its fair share, but so far that has not slowed the break. At these levels, wheat could be used for just about anything right now, but the funds don’t seem to care.

Anna Kaverman

anna@mercerlandmark.com

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