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Market Report

Wednesday December 19th, 2018

March 19 corn closed down 3 ¾ at $3.81 ¾ and December 2019 closed down 2 ½ at $4.02 ½. January beans closed down 7 ¾ at $9.00 and November 19 closed down 7 ¼ at $9.49. March wheat closed down 10 ¼ at $5.22 ½ and July 19 closed down 8 ¾ at $5.37. Crude oil closed up $1.55 at $48.49.

The corn market featured its typically sleepy start, but some late selling did generate a little excitement. Corn finished the day with losses, which, believe it or not, is the largest intraday settlement (good or bad) in more than two weeks.  Volume remains below average. Managed Money traders were viewed net sellers of about 5,000 corn today, which would leave them net long 30,000 combined corn futures and options.  The highlight of the cash was no doubt some overnight “buy” interest on the PNW.

As has been the case for the past week, traders’ attentions were focused elsewhere. Another China bean sale floated through and like last week, it stimulated futures selling rather than buying. Blame trader impatience over the “drip-drip” of buying, or typical “buy the rumor, sell the fact” activity, but the pressure on beans, along with no confirmation of China corn buying, weighed on corn of the day, too. Funds were likely also focused on the Fed decision near the close. As expected, the Fed hiked interest rates a quarter-point, and pledged two more rate hikes in 2019 (they were promising three in their last meeting).  Equities were not impressed. The Dow was trading 300 points higher pre-Fed, and 300+ lower after. The Dollar held fast near recent highs.

The weekly EIA report had bearish feature for ethanol, mostly by virtue of an unexpectedly large inventory build. Weekly production, however, was little changed, despite almost daily news stories of plant shutdowns and/or slowdowns. Current production levels would imply a yearly corn-for-ethanol grind of just under 5.6 billion bushels per year, which is close to present USDA forecasts. Elsewhere, end-user markets were little changed. USDA will publish Cattle on Feed and Quarterly Hogs and Pigs reports after the close Thursday.

The soybean market set back following the confirmation of Chinese soybean purchases for the second time over this past week in what is shall we say is, not a good signal. Yes, the export business is welcomed and needed but perhaps the market is beginning to see past the government purchases and seeing the big picture stat problem with soybeans that is unlikely to be fixed by the amount of beans China can/will buy this marketing year. Beans will continue to trade around for the near term in this recent $9.00 to $9.20 type of range established following the Trump-Xi dinner. The gap remains open for now extending to $8.96 1/2. Support comes from the expectation that we likely will see more trade confirmations to China over the coming days and weeks.

Crops in parts of Brazil’s Parana, Mato Grosso do Sul and Sao Paulo has received lots of attention the past couple of weeks as a lack of rain and hot temps have damaged production potential which should lead to private analysts taking the top end off their production estimates. There are very important rains in the forecast in the coming week for these dry areas of Brazil that can stabilize these declines, assuming the rains materialize.

When positive influences start to wane, price action in wheat usually tends to regress rather quickly. The weakness over the past two days could be simply tied to the fact that the optimism that was built into the market over the past two weeks has not yet come to fruition, with the exception that Russian wheat prices, and World wheat prices in general have firmed quite significantly. China has made NO announcement they intend to buy US wheat (hopefully one day they will), and the recent $.30 rally has taken US wheat from being very competitive, to being just on the outside looking in. Once that demand goes away, or the hope of demand (China) does not materialize, it becomes very difficult to keep that momentum alive. The market is now searching for that next spark to reinvigorate trade. There are several more chances this week, with Egypt back in for wheat, export sales on Thursday morning and the outcome of Friday morning’s meeting between the Russian Ag Minister and its country’s suppliers.

Anna Kaverman

anna@mercerlandmark.com

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