Blogging by the Bushel
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CORN – Holiday trading was in session this week with very little news for the commodity markets with the government in partial shutdown.  Export announcements are on hold until the government reopens. Even so, US corn is uncompetitive on the world scene with Ukrainian corn the cheapest.   If the shutdown is extended, we may not get the January 11th WASDE report on time.

The holiday shortened trading week began on a dull, slightly softer note, but traders returned from Christmas with their selling shoes on.  Corn posted a key reversal lower on the charts the same day the stock market set a single day rally of over 1,000 points.  News was scarce for the corn market all week.  Corn took its direction for its 6 ¾ cent weekly trading range from the wheat and soybean markets.  The European Union raised their 2018/2019 corn production figure from 62.9 mmt to 67.5 mmt.  The USDA is carrying them at 60.4 mmt.

Weekly ethanol production was released this week since the EIA was not affected by the shutdown.  Production fell 4,000 barrels to 1.042 million barrels per day.  This is down 4.4% from a year ago.  Ethanol stocks dropped from 23.9 million barrels to 23.1 million barrels.  This is an increase of 5% over last year.  Margins did improve 3 cents per gallon to a negative 5 cents per gallon.  There are suggestions that the USDA may be overestimating corn for ethanol usage at 5.6 billion bushels.  We will see if there is an adjustment on the January WASDE report.

Weekly export inspections were released this week.  Corn inspections were as expected at 39.2 million bushels and a three-week high.  However, we need to average 44.9 million bushels per week to hit the USDA’s export target of 2.45 billion bushels.

OUTLOOK: For the week, March and July corn each dropped 3 cents per bushel to $3.75 ½ and $3.90 ½ respectively.  December 2019 corn declined 1 ¾ cents to $3.97 ½ per bushel.  As we head into 2019, corn will likely be range bound unless South American weather pushes soybeans hard in one direction.  Talk about a global economic slowdown may also gain in importance as a focal point.  Funds are holding a net long position and without a positive catalyst, we could see further liquidation.

SOYBEANS – This is the type of week you wonder why we bothered to come in.  There was a decent amount of action in the soybeans this week, but with very little news to back it up.  A key reversal lower at mid-week sent prices to their lowest level since November 27th.  This was followed by a rally into the weekend when China announced they would allow US rice imports for the first time in history.  Traders interpreted this as a sign that better things are in store for soybeans. However, US rice is currently uncompetitive into China, and it is still under a 25% import tariff.  A US delegation will meet with Chinese officials in Beijing the week of January 7th.  In the meantime, phone calls have been taking place between the two countries.  Without the US government functioning, we do not receive any USDA export announcements.  However, there has been no indication in the export or freight markets that any further soybean business has been done with China in the past week.  Adding to concern the US and China will reach a deal by March 1 is chatter that President Trump is considering declaring a national emergency that would bar US companies from using telecommunication equipment from two of China’s largest companies, Huawei and ZTE.  China also opened their markets to alternative sources of protein.  They removed import tariffs on rapeseed meal, cottonseed meal, sunflower meal and palm meal, effective January 1.  More cases of the African swine fever were found in China again this week.

Weather in South America is taking on added focus since we don’t have any export business to discuss.  Brazil did receive rain prior to Christmas, but there are concerns over what the dryness had already done to the soybean crop.  Estimates for Brazil’s soybean production have come down from the 125 mmt plus area to the 120-122 mmt range.  This would still be a record crop.  There is more rain in the forecast for the dry areas into the first of the year.  Argentina has been too wet, raising concerns about wheat quality and soybean production.  The BAGE estimated Argentina’s soybean planting at 83% complete versus 84% on average.

Weekly export inspections were below estimates at 23.9 million bushels.  This was the lowest inspection number in 11 weeks.  We need to average 34.7 million bushels per week to confirm the USDA’s 1.9-billion-bushel export forecast. In other news, the CFTC approved the CME’s proposal to increase daily storage rates for corn and soybeans, beginning with the December 2019 contract for corn and the November 2019 contract for soybeans.  The daily rate will increase from .1650 cents/bushel/day to .2650 cents/bushel/day.  This roughly equates to an increase from 5 cents/bushel/month to 8 cents/bushel/month.  Why do you care?  It will likely increase board carries and may affect what storage charges will be in the country in the future.

OUTLOOK:  For the week, March soybeans were 2 ¼ cents lower at $8.95 ½, July fell 2 cents to $9.21, and November was down just ¾ cents at $9.35 ¾ per bushel.  South American weather will be a major headline into 2019.  Will rain in Brazil help?  Or will below normal rainfall and above normal heat call for cuts in production estimates?  Any news surrounding Chinese trade will sway price direction as well.  Let’s get the holiday trade mentality out of the way and hopefully we’ll have concrete news after the first of the year.

WHEAT – Russian State Statistics Service reports that the final figures from the 2018 Russian grain harvest show wheat production at 72.1 million tons and total grain harvest at 112.9 million tons. These figures compare with the record 2017 harvest of 86 million tons of wheat and total grain harvest of 135.5 million tons. Ukraine has exported 10.3 million tons of wheat this marketing year compared to 11 million tons at the same time last year.

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