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Market Report

Monday December 10th, 2018

March 19 corn closed down 1 ½ at $3.84 at December 2019 closed down ¾ at $4.02 ¼. January beans closed down 7 at $9.09 ¾ and March 19 closed down 6 ¼ at $9.22 ¾. March wheat closed down 6 at $5.25 ¼ and July 19 closed down 2 ¾ at $5.37 ¼. Crude oil closed down $1.61 at $51.20.

The corn market started the week in quietly lower fashion, finishing with penny-plus losses. Volume was very light as traders wait impatiently for some word out of China on the mooted ag purchases. There is also a monthly WASDE due out tomorrow, which also squelched activity. CFTC Commitment of Traders data after the close, delayed from Friday, found the expected fund buying in the corn market through 12/4. The agency found large non-commercial (aka “Large Spec” traders were net buyers of 63,584 corn, which included 51k+ new longs and 12k shorts covered.

Elsewhere, Crop Progress reports are over for the year, though U.S. weather is expected to take on a more seasonable track for the balance of December. Above-average temps nationwide may help bring in a few stranded bushels in the field?  South American weather stays mostly favorable, excepting some dryness in SW Brazil. Rains may return to that area Christmas week. Stay tuned. South Africa, a minor net exporter, also struggling with crop losses amid drought. End-user markets were generally weaker today; ethanol and dairy both traded to new lows.

Amid all the China hullaballoo, the December crop report is rapidly sneaking up on us, and will be released mid-morning tomorrow (Tuesday). This is a pure “balance sheet” report, and major changes to U.S. corn production or yield are unlikely.  Demand could be in the crosshairs, but with a few decent weekly export sales reports under its belt lately, they may wait until January to make changes. May see a few small increases in world production, too. Keep an eye on China, as they were the shocker in the November report.

The soybean rally took a breather and gave back Friday’s gains as the market continues to consolidate above $9.00. There was no fresh news on the China trade front and the market anxiety is growing by the day with a lack of confirmation despite lots of rumors and signals that something could be announced soon.   There is chatter of 5.0 to 8.0 mmt of soybeans to be purchased by the Chinese government to replenish reserves but the timing of an official announcement or confirmation is unknown. Both the US and China have taken efforts to distance trade talks from the Huawei arrest last weekend which is calming some nerves in the markets where it was feared the incident would derail recent progress. The USDA flashed 125 tmt of new crop beans sold to unknown along with the big sale of corn to Mexico (1.105 mmt of old crop and 541 tmt of new crop) as world buyers look to front run any potential sales announcement to China.

Assuming no Chinese confirmation tomorrow morning, that leaves the soybean market to contend with the crop report on its own.  A focus on the statistical realities as we know them today spells trouble for soybean prices. The question is, will sellers continue to hold back with the threat of a Chinese trade development whipsawing the market? That has been the case since the Trump-Xi dinner and really has been the case in the weeks leading up to it. With the crop report spotlighting a domestic carryout near 950 million bushels and a world carryout above 112 mmt, it could be a real challenge for beans to defend these recent gains.  It will be interesting to see what kind of stops we find if SF takes out last week’s $8.97 low and fully closes the gap.

The wheat complex struggled to find any footing today, but it was not a complete washout as trade today did not give back all of Friday’s gains. Both Chicago and Mpls each finished the day lower. Much of the markets strength on Friday came on the heels of the USDA announcement of 224 HRW sold to Unknown, along with other fresh business. In fact, last week was a very active export week for wheat, and even though the export lineup at the start of this week is quiet, do not be surprised if we see that pace pick up again as other countries around the World may need or want to facilitate their needs ahead of any US/China trade announcements. However, Friday’s rally did not help.

Tomorrow is crop report day. The December crop report is usually low key, and we see only marginal changes, but it is hard to imagine US ending stocks to do anything but increase thanks to the slow export pace of HRW wheat. We will see some minor adjustments in the World numbers, mainly Australia and the question is will the USDA be able to find anything to offset the Aussie reduction we are going to see. That may be the wild card of the report. Still think that US carryout could be increased more than people think especially if the USDA lowers HRW export expectations. Friday morning’s sales announcement may curtail that thinking some, but we are still behind last year’s pace by around 88 mil bu, and we are almost halfway through the marketing year. If China announces they will buy a significant amount of US wheat, the USDA always could re-adjust back up their expectations.

Anna Kaverman

anna@mercerlandmark.com

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