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Wednesday December 12th, 2018

March 19 corn closed up ½ at $3.85 ¼ at December 2019 closed down ¼ at $4.03 ¾. January beans closed up 5 at $9.20 and November 19 closed up 4 ¼ at $9.66. March wheat closed up 5 ½ at $5.26 ½ and July 19 closed up 2 ¾ at $5.38 ¾. Crude oil closed down $.48 at $51.36.

Markets were quite firm early, as China threw traders a few extra bones. Futures would close fractionally better. Managed Money traders were viewed net buyers of 5,000 corn today, which would leave them net short less than 15,000 combined corn futures and options heading home tonight. Yep, it was another “China day”. Apparently, the Chinese will allow improved access to their markets for foreign firms and tweak the “Made in China 2025″ policy. Still nothing tangible to lean on for ag trade. This changed a little mid-morning, when wire services reported some purchases of U.S. soy. No official word on other markets, though, including corn.

The weekly EIA report held mostly friendly feature for ethanol this week. Although one could call it a little bearish corn given the drop in production. Weekly production of 1.046 million bbl/day was -2.2% lower wk/wk, which would consume just under 5.60 billion bushels of corn over a marketing year. Weekly export sales report tomorrow should continue on their recent near ~1 mmt/wk trajectory. Note, the large Mexican sale reported earlier this week will likely not make it in this report.  200,000 metric tons of “other sales” will make it in, however.  The U.S. remains competitive on world export markets, though we are not alone, as Ukraine is also in the running, followed not too distantly by South American sellers.

The soybean market extended its rally into a new recovery high.  The recovery in beans off the September contract low has been driven by a combination of short covering, a slowly improving chart posture and a growing sense of optimism that we could resolve the trade dispute with China. The recent meeting between President’s Trump and Xi did represent a breakthrough that was further validated with today’s news that China bought US soybeans for the first time since July. Reuters reported a 500 mt package of beans was bought off the PNW for Jan-Feb-March while our sources report that total was closer to 2.4 mmt and bought by China. Beans bought for Chinese government reserves are subject to the 25% tariff up front but my understanding is that the tariff will be rebated back.

The recent rumors had China buying 5-8 mmt of US beans to replenish government reserves so today’s relatively modest total likely was a disappointment to some but don’t be surprised to see a string of sales announced in the coming days and weeks.  As far as a larger trade deal there is still lots of work to do before the March deadline and the purchase of US agriculture is the easy part of the negotiation. This is a good will gesture that not only will help to narrow the trade deficit. When all is said and done but will hopefully lead to the removal of tariffs and importantly, help grease the wheels on stickier issues like intellectual property and technology theft.

Another headline invigorated trade overnight after President Trump indicated that China was ‘back in the market’ for US soybeans. For wheat, it is hard to explain what kept prices firm throughout the day. Heavy rains across Argentina, Uruguay and southern Brazil over the next two weeks received a lot of attention today. Some regions in those country’s still have half of its harvest still to go, and with expectations for some of those said areas to possibly get as much as 20 inches of rain over the next 16 days means quality loss will be an issue. Another story that was bantered around centered on Russian export concerns. Maybe that came about because of the limited offers the GASC received in its tender overnight or because the Russian wheat offers were some $6.00 above where they were just last week. Either way, there are some that are trying to bring back up the possibility that eventually the Russian Ag Minister will put a halt to wheat exports. At this point, that is hard to believe considering the USDA just raised Russian wheat export expectations to 36.5 MMT, and that so far this marketing year Russia has exported around 21 MMT. This means they still have around 15 MMT to export. Granted quality has been and will continue to be a bit of a problem, but there will need to be a lot more to happen for any halts in exports to come to fruition.

Anna Kaverman

anna@mercerlandmark.com

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