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Market Report

Wednesday January 2nd, 2019

March 19 corn closed up ¾ at $3.75 ¾ and December 2019 closed up ¾ at $3.98 ¼. March beans closed up 12 at $9.07 and November 19 closed up 8 ½ at $9.43 ¾. March wheat closed up 3 ½ at $5.06 ¾ and July 19 closed up 1 ¾ at $5.20 ¼. Crude oil closed up $1.14 at $46.86.

The corn market struggled to define itself on the first trading day of 2019, generally leaning steady/firm, but spending some time on both sides of the ledger intraday. Corn would close fractionally better. Managed Money traders did not alter their position much, as they hang with a small net long in the corn market. Index funds may be another matter, though, as corn was one of the few commodities ending the year in the “plus” column.  They may need to sell out a few longs in coming days to rebalance their position.

The mixed sentiment in trade likely represented some moderate commercial buy interest and gains in wheat/soy, offset by headwinds from a sharply higher Dollar and weak Chinese economic data. Weather is similarly wishy-washy. Recent rains in Brazil were a godsend to some but missed a number of dry pockets.  Overall, record bean crops are still projected, but this has brought back to earth some of the more wild projections bantered around a month ago. Argentina is mostly in good shape. Farmers there are on the home stretch of planting their first (and only) corn crop. South Africa could continue to use more precip.

To small surprise, the USDA released weekly grain inspections Monday. They were fairly non-descript, perhaps even leaning a little disappointing. Exporters shipped out 914k metric tons of corn for the week ended 12/27, which was slightly below the prior week, but still a fair amount above the previous year’s 726k. This takes YTD corn inspections to 17.9 mmt, which compares to 10.6 mmt shipped in the year ago period. Decent start, but keep in mind, the U.S. needs to ship over 1.2 mmt per week to meet current USDA sales projections. The U.S. government remains shut down, shelving many important market reports.

President Trump reassured today that positive on-going discussion between U.S. and Chinese officials continue as we approach closer to the March 1st deadline. Soybean prices reacted and climbed double digits today on optimism over U.S.-China trade negotiations, coupled with dry weather for the past two or more weeks in some key production areas in Brazil. Governmental estimates still predict a massive 2018/19 crop production of around 4.409 billion bushels for now, however.  Brazil’s soybean exports in December topped 155 million bushels, which moved 16.5% below November exports but still trend more than 79% higher year-over-year. China has purchased massive amounts of Brazilian soybeans in recent months amid its ongoing trade feud with the U.S.

After a sluggish start the wheat complex caught a bid and traded higher throughout the day. Prices did set back a bit during the final hour of the day. There has not been much in the way of influential news around this week for wheat, so much of today’s firmness may have been just tied to a strong rally coming out of soy. Technically, the markets can build some upward momentum with a strong close on Thursday but that would mean a settle above $5.14 in Chicago March, and we saw how rallies fizzled today. What influence is around that would change that and help the markets extend gains?   The export lineup has improved a little, but it is still not very impressive. Jordan is in, but that should mean very little since they always seem to struggle to get offers, and when they do they are not US anyways. Taiwan is in, and that will be all US, which is a positive. Bangladesh is in this week, and recent inspections reports have shown some US wheat heading out to Bangladesh, so as long as prices do not firm too much we have a legitimate chance of winning more of that business. There continues to be plenty of China rhetoric around, but until there is talk that they will start buying US wheat, these headlines mean very little for the wheat complex.

Anna Kaverman

anna@mercerlandmark.com

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