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Thursday December 20th, 2018

March 19 corn closed down 6 ½ at $3.75 ¼ and December 2019 closed down 5 ¾ at $3.96 ¾. January beans closed down 6 ½ at $8.93 ½ and November 19 closed down 6 ¼ at $9.42 ¾. March wheat closed up 1 at $5.23 ½ and July 19 closed up 1 ¼ at $5.38 ¼. Crude oil closed down $2.30 at $46.19.

The corn market raised some eyebrows, apparently awakening from its early December slumber. Futures finished lower Thursday and has surrendered $.10 in two days. The previous seven sessions, the corn market was not able to muster more than a $.02 higher or lower close. Volumes picked up today, as the break no doubt interested commercials previously resigned to buying $3.80+ corn. Managed Money traders were viewed net sellers of at least 10,000 corn today, which would leave them net long just over 15,000 combined futures and options.

To absolutely no surprise, weekly export sales were quite strong across the board. New 18/19 corn sales of 1.974 MMT were a marketing year high and nearly double the four week average.  The vast majority of this was bought by Mexico (1.339 mmt), who had a large announced sale early last week. Other buyers of note included Japan and Colombia. There was also 0.543 mmt booked for new crop as part of the Mexico sale. Perhaps corn caught some fund long liquidation after mostly playing bystander amid sharp recent declines in other related risk assets? In fact, European corn market (Matif) closed into a new two month high today, despite a big rally in their underlying currency.

Elsewhere, weather watchers will watch to see if prophesized rains fall in dry areas of Brazil early next week. They are important after a month of drying in a couple key spots.  Regardless, still plenty of areas that are in very good shape.  Argentina corn planting moved up to 60% complete; mostly good weather seen there. Ethanol futures were lower today, mostly in-line with corn, keeping 30-40 cent/bu negative profitability for most plants. US Dollar broke to a two week low. Partially on less rate hikes for next year, partially on an Italian-EU budget deal, and partly on the risk of a gov’t shutdown. Trump signed the Farm Bill, but also said he would not compromise, demanding border wall funding for a gov’t funding bill.

For the 3rd time in the past 6 sessions, soybeans have sold off following an export confirmation to China. This is a terrible signal. It says the market had rallied in anticipation of the business and with the help of fund and other short covering,  but now that the trade has arrived, the market is beginning to see past these government purchases recognizes the big picture stat problem with soybeans. China cannot and will not import enough soybeans this marketing year to turn this into a lasting bull market. That is the uncomfortable statistical reality of soybeans.

Export activity has picked up to China and other buyers too.  Weekly soybean sales in the old crop totaled 2.836 mmt. A marketing year high. Buyers of note included China, Mexico, Netherlands, Germany, and Egypt. On top of that, the USDA flashed daily sales of 204 tmt of old crop beans sold to China, 257 tmt sold to unknown, 100 tmt of old crop meal sold to Colombia and 427 tmt of corn sold to Mex (373 old crop and 53 new crop).

Brazil’s production prospects have been reduced thanks to weeks of dry and stressful conditions across parts of Parana, Mato Grosso do Sul and Sao Paulo. Rains are forecast to bring relief and stabilize those crops. Crops elsewhere in the country are strong enough to maintain near record potential overall and will offer significant export competition once harvested which is earlier than normal this year. Another less discussed problem is African swine fever which continues to spread across China and infect it hog herd with the deadly disease. This has the potential to reduce demand for soybeans to crush for meal with signs that is already happening.

After a couple of disappointing sessions, there were several positive influences around the market as we went home yesterday. The GASC announced they were in for wheat, there was hope of another strong export sales report and there was some excitement around as to what may come of the Russian meeting Friday morning. And make no mistake, the market is now searching for that next spark to reinvigorate trade. In anticipation of what may have been on the horizon, the wheat complex traded higher throughout the night, but after a disappointing export sales announcement, futures gave back some of its gains. An early flush in both corn and soy briefly took wheat futures lower, but trade battled back and spent most of the session trading slightly higher. The GASC back in for wheat for a third time in less than three weeks had to be the biggest motivator, as we knew overnight offers would be significantly higher than last week – and they were. If nothing else, the fact that the GASC was back in again so quickly should keep Russian wheat prices and World wheat prices in general firm. Russia not winning any business is a huge indication that we are seeing just that.

Anna Kaverman

anna@mercerlandmark.com

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