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Friday March 15th, 2019

May 19 corn closed up 3 at $3.73 ¼ and December 2019 closed up 2 at $3.96. May beans closed up 10 ¾ at $9.09 ¼ and November 19 closed up 9 ¾ at $9.42 ½. May wheat closed up 9 ½ at $4.62 ¼ and July 19 closed up 8 ½ at $4.68 ¼. Crude oil closed down $.09 at $58.82.

FOR THE WEEK ENDED 3-15-19

CORN – Corn tumbled to new contract lows early in the week, but fund short covering engaged to push corn to four straight higher closes.  For the week, May corn rallied 9 cents to settle at $3.73 ¼ after setting a new contract low of $3.61 per bushel.  July corn settled 8 ¾ cents higher at $3.82 ¼ and the December contract gained 7 ½ cents to close at $3.96 per bushel.

There didn’t seem to be one major headline that precipitated the steady upswing in corn this week.  The news from China was perceived as friendly, although the two world leaders won’t likely meet until April.  China passed new laws to protect the IT and IP rights by making it illegal to force companies to give up their rights, and they also passed laws to open their markets to more foreign investment.  The US had been asking for these measures.

Mother Nature has provided significant moisture across the Midwest this winter.  As a result, we are seeing widespread flooding.  This makes traders nervous about the possibility of a late planting season.  A lot can happen in the next 45 days.  While it is too early to say planting will be late, many would agree we won’t have an early planting season.  This leads to ideas that we may not see as many acres switch from soybeans to corn.  The USDA’s early forecast is for 92 million corn acres this year, up from 89.1 million acres last year.  They are projecting 85 million soybean acres versus 89.2 million acres last year.  IEG Vantage (formerly Informa Economics) pegged US corn acreage this year at 91.8 million acres and US soybean acreage at 85.5 million acres.  Conab’s latest corn production forecast for Brazil is 92.8 mmt, up 1.1 mmt from their February outlook.  The USDA is carrying their corn crop at 94.5 mmt.  Brazil’s safrinha crop is 70% planted in favorable conditions.  Argentina’s corn crop is estimated at 47.3 mmt by the Rosario Grains Exchange compared to the USDA’s outlook for 46 mmt.

Weekly export sales were below expectations at 14.6 million bushels.  Total commitments fell from just 1% behind last year in last week’s report to 6% behind this week.  Total sales stand at 1.61 billion bushels.  The USDA is calling for a 2.6% decline in exports year on year.  We need to average 26.9 million bushels of sales per week to hit the USDA’s current 2.375-billion-bushel export forecast.  New crop sales were 18.7 million bushels, bringing new crop sales to 69.8 million bushels versus 62.5 million last year at this time.  Weekly export inspections have fallen below the weekly average needed for seven straight weeks.  Weekly ethanol production was down 19,000 bpd to 1.005 million bpd.  Stocks fell by 600,000 barrels to 23.7 million barrels.  Weekly ethanol production has been below last year in 15 out of the last 17 weeks.  Further cuts to the ethanol usage line could be coming on future balance sheets.

The USDA announced this week they plan to discontinue the objective yield survey used in their August report.  They will continue with farmer surveys and satellite imagery for the August report, and will continue to use objective yield surveys for the September through November reports.  However, the objective survey will use about half the number of what they historically used.

OUTLOOK:  Funds had built a sizeable short position coming into this week, leaving the market susceptible to a short covering rally.  Rumors that China is on the verge of buying US corn/ethanol/DDGs and the major snow storm provided a spark to lighten up on short positions.  However, as we’ve seen over the past several months, rumors about Chinese buying can turn on a dime. Have your upside targets in mind as we are fighting just to get back to mid-February price levels.  If China actually makes purchases of US grains, the rally could be extended.  For now, we may have found an interim bottom.  The March 29 Prospective Plantings is right around the corner and could provide price direction for the next month.

SOYBEANS – Soybeans dropped to a new low for the move early in the week, but a resulting reversal higher on the chart helped kick start a rally that extended through the balance of the week.  Of course, Chinese rumors and how the trade talks are progressing were positive inputs. China did buy 926 tmt of US soybeans to begin the week.  This brought their total purchases to 11 mmt so far this marketing year compared to 28.2 mmt by this time last year. Fund short covering was apparent in soybeans, as it was in corn.

Weekly export sales were above trade estimates at 70.2 million bushels.  This brings total commitments to 1.5 billion bushels and 16% behind last year.  To hit the USDA outlook for 1.875 billion bushels of exports, we need to average 15.9 million bushels of sales per week for the balance of the marketing year. The February NOPA Crush report showed 154.5 million bushels were crushed, much less than the trade estimate of 158.7 million bushels.  Soyoil stocks were up to 1.75 billion pounds versus 1.61 billion pounds expected.

China’s problems with African swine fever in their pig herds was reinforced this week when they purchased 52.5 million pounds of US pork.  This is the third biggest weekly purchase ever made by China.  China reported their hog inventory had fallen nearly 17% in February from last year and their sow numbers had plunged 19% versus a year ago.  There were reports this week that some schools, businesses, and military units in China will no longer serve pork in their cafeterias.  China’s poultry production is expected to be up 8% this year due to ASF.

Conab updated their Brazilian crop estimates this week.  They cut their soybean forecast 1.9 mmt from last month to 113.5 mmt.  The USDA is using 116.5 mmt.  The Rosario Grains Exchange in Argentina upped their soybean crop estimate from 52 mmt to 54 mmt.  The BAGE left their estimate at 53 mmt versus the USDA’s 55 mmt projection.

OUTLOOK: May soybeans were 13 ½ cents higher for the week at $9.09 ¼, July rallied 13 ¼ cents to $9.23, and November was 12 cents higher at $9.42 ½ per bushel.  Soybeans may have found a short term low ahead of the March 29 plantings report.  China’s situation is still up in the air and US weather is becoming a headline.  Short term we may see some short covering rallies, but longer term it’s difficult to get overly bullish without a threat to the next crop.

WHEAT- On a week/week basis funds did not impact their short position in SRW to much extent. On 3-12-19 funds were approximately short 108,200 contracts in Chicago.  Ahead of the visit to Washington D. C. by Brazil’s President Jair Bolsonaro’s , Brazil is considering granting an import quota of 750,000 tons of U. S. wheat per year without tariffs in exchange for other trade concessions. Brazil is looking for the U. S. to reopen the import of fresh beef from Brazil as well as access to the U. S. market for its exports of limes.  Ethiopia has issued an international tender to purchase 400,000 tons of milling wheat. The tender deadline is April 19, 2019. China sold 2,000 tons of imported 2013 wheat at an auction of state reserves overnight. The sale represented less than one-half of one-percent of the total grain wheat available at the auction.

Updated wheat crop condition for the states of Kansas, Oklahoma and Texas will become available this afternoon. Texas conditions should improve given the mid-week rain event last week. More extensive state generated condition reports should be forthcoming next week. Government generated crop conditions begin on April 1, 2019.          

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