Blogging by the Bushel
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CORN – Corn direction continues to be driven by soybeans and wheat, but that may be changing slightly.  Demand for corn has been decent, but nothing impressive.  Heading into the weekend, it was reported that China may buy up to 3 mmt of US corn, possibly as soon as January.  This would help meet a previous agreement to purchase of 7.2 mmt on import quota that is subject to a lower tariff.  This helped erase the weekly loss seen in the corn. The December WASDE report was uninspiring as discussed below.  Ethanol production margins are weaker, and production has begun to slow down.  Since the beginning of December, March corn has traded a boring range from $3.80 to $3.87 ¾ per bushel.  Through Thursday’s December 13th close, March corn was down 1 ¼ cents for the week at $3.84 ¼, July was down a penny at $3.98 ¼, and the December 2019 contract was up ¾ cents at $4.03 ¾ per bushel.  As of this writing at mid-morning Friday, corn was up 1 to 3 cents on the day.

The December WASDE report on December 11th didn’t provide any surprises to the trade.  US ending stocks were up 45 million to 1.781 billion bushels on a decline of 50 million bushels in corn for ethanol and a decrease in imports of 5 million bushels.  The average ending stocks trade guess was 1.736 billion bushels. World stocks took a jump of 1.3 mmt to 308.8 mmt and was greater than the trade prediction of 307.2 mmt.    Brazil’s corn production was steady at 94.5 mmt and Argentina was unchanged at 42.5 mmt.

Weekly export sales were disappointing at 35.6 million bushels.  However, the USDA is forecasting a flat year on year export picture and total commitments are currently running 16% ahead of last year.  This week’s sales included an 8.7-million-bushel cancellation to unknown.  Let’s hope this isn’t the start of a trend.  Presently, the Ukraine is competitive on the world export scene.  This month’s WASDE report raised Ukraine’s production 1.5 mmt to a record 35 mmt and their corn exports were raised 1 mmt to 28 mmt.  We need 35.3 million bushels of sales per week to hit the USDA’s 2.45 billion bushels export outlook.  We sold 6.3 million bushels of new crop corn, bringing total commitments for 2019/2020 to 10.7 million bushels.  This is well behind last year’s 40.5-million-bushel total for this time of year.

Weekly ethanol production fell back slightly this week as margins dipped further into the red.  Production was down 23,000 bpd to 1.046 million bpd.  The 4-week average is lagging last year by 3%.  Ethanol stocks dropped 100,000 barrels to 22.9 million barrels.  This is 2.3% higher than last year.  Net margins declined another 2 cents per gallon to a negative 15 cents per gallon.  Margins have been negative for 12 straight weeks.

Informa Economics is pegging 2019 corn acreage at 91.9 million acres, up 2.8 million acres from last year’s 89.1 million planted acres.  This was reportedly a survey-based forecast.

OUTLOOK: The demand picture is supportive for corn, but that at times becomes secondary in light of spillover strength from the soybean market.  If positive effects from the soybeans fade, the demand for corn may help limit any downside moves.  The December 2019 contract is back near $4.05 per bushel.  For now, corn action is a sideways grind with March trapped between $3.80 and $3.90 per bushel.

SOYBEANS – China, China, China – it’s all about China!  This week we finally saw China return to the US soybean market with a purchase of 1.13 mmt or 41.5 million bushels on Thursday.  ON Friday, they bought another 300 tmt.  Before the sales confirmations, the trade was anticipating sales of 1.5 mmt to 2.0 mmt.  The market’s immediate reaction was a classic “buy the rumor, sell the fact” type trade.  The sale did perk up basis levels to the PNW.  Many expect China will still buy up to 5 mmt of US soybeans, with more announcements coming.  Here is the fly in the ointment, China may be buying US origin now, but as we look at 2019 values, Brazil will be the origin of choice for both China and non-Chinese buyers.   Further, it looks as if US acreage switching from soybeans to corn may be much less than earlier estimates of 4-7 million acres.  The US will likely be facing a huge soybean carryout unless China stands in for 8 mmt or more. China’s crush margins this week fell to an 18-month low on poor meal demand and oversupply at plants.

The December WASDE report did not make any changes to the US soybean balance sheet.  US ending stocks remain at an enormous record 955 million bushels.  The trade was expecting a small cut to 936 million bushels.  Brazil’s soybean production forecast was up 1.5 mmt to a record 122 mmt.  Some private estimates have run as high as 130 mmt.  They also increased Brazil’s crop from last year by 0.5 mmt to 120.3 mmt.  Argentina’s production was unchanged at 55.5 mmt.  World ending stocks jumped 3.3 mmt to a record 115.3 mmt, higher than the pre-report guess of 113.1 mmt.  The USDA left China’s soybean imports at 90 mmt.  This month’s report seemed to just kick the can down the street until the January 11th report.

Weekly export sales at 29.1 million bushels were as expected, but meal and soyoil sales were marketing year lows.  Total soybean commitments are 34% behind last year.  The USDA is projecting year on year soybean exports to be down 10.7% this year at 1.9 billion bushels.  We need to average 26.7 million bushels of sales per week to hit the target.  New crop sales were nearly non-existent at 200,000 bushels.  Total new crop commitments are 6.2 million bushels compared to 15.7 million bushels last year.

Brazil’s weather is still generally favorable for crop development but forecasted rain for the latter half of December needs to confirm to avoid raising concerns.  Brazil’s truckers are threatening to strike after the new government essentially wiped out the minimum freight rate regulations.  With soybean harvest expected to start early this year, this situation will be closely watched.

The Office of Management and Budget has stated that the second round of tariff-related payments will be delayed.  No date was given, but they hope to have a determination by the end of the year.  They want to see how recent US/Chinese developments pan out.  USDA Secretary Perdue, President Trump, and OMB Director Mulvaney were scheduled to meet on the matter December 14th.

OUTLOOK:  For the week through the close on Thursday, December 13th, January soybeans were down 9 ¾ cents at $9.07, March down 8 ½ cents at $9.20 ½, and November 2019 down 5 ¼ cents at $9.56 per bushel.  At this writing, soybeans were trading a couple of cents either side of changed.  The market bulls need to be fed a stream of supportive news, without it, prices may drift into the holidays.  Informa Economics is forecasting 2019 soybean acres to fall 4 million acres to 85.1 million planted acres.  This number has likely already been incorporated into traders’ ideas.


A lot of times when you have an early week crop report, by Friday, trade seems to be tired. When you throw in a whole bunch of China talk and rumors, the market gets exhausted, and that is how the wheat complex traded today. The SRW wheat contract finished the day the weakest. However, it was a good week for the wheat complex in that it battled back from early week losses.

The rally leading up to the morning pause, which then carried into the start of the day was led by corn and was mainly due to a story from Bloomberg that talked about China starting to buy corn again starting next month, and the amount they are said to be buying is roughly 3 MMT. Now keep in mind, China bought only a little over 300 TMT of US corn last year, so if they do buy around 3.0 MMT, that would be a big boon for the corn market. As far as wheat, still no word, but China did buy a little more than 900 TMT of US wheat last year and more than double that the year before, so when or if any official announcement comes that they are buying US corn, one would think that wheat will be not too far behind.

Anna Kaverman

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