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Market Report

Tuesday January 7th, 2019

March 19 corn closed down ¾ at $3.82 ¼ and December 2019 closed down ¼ at $4.03 ¾.  March beans closed up 2 ¾ at $9.24 ¼ and November 19 closed up 3 ¾ at $9.60 ¾. March wheat closed down ¼ at $5.16 ¾ and July 19 closed down 2 ½ at $5.27. Crude oil closed up $.54 at $48.82.

The corn market was quietly mixed Monday, spending some time on both sides of unchanged on below-normal volume. Markets were steady/better to start but failed to generate much enthusiasm, eventually finishing fractionally lower. Managed Money traders were viewed small net sellers on the day, which would leave them net long about 50,000 combined futures and options. Once again, no CFTC data to tighten this up until the gov’t shutdown is resolved. Index fund rebalancing “officially” starts tomorrow.

The focus early today (and tomorrow) will no doubt be on the U.S.-China trade negotiations. A resolution on the bigger-picture structural issues is highly unlikely, but some suspect the smaller stage could be the perfect stage for the Chinese to offer more details on unspecified pledges to buy more U.S. ag and energy products. Other than a smattering of U.S. bean purchases, official confirmations of activity in other potential target markets. China was rumored to have purchased more beans today but remained mum on all else. Progress reports from the talks have largely been positive.

Weekly Grain Inspections continue to be one of the few remaining USDA reports to make their regularly-scheduled appearance.  Unfortunately for the bulls, they have not been particularly bountiful, though that may have more to do with the holiday timings. For the week ended 1/3, exporters shipped 501,541 metric tons of grain, which was roughly half the prior week, and was actually below the year ago week too. YTD corn shipments remain comfortably ahead of year ago (18.5 mmt vs. 11.4 mmt), but have not been keeping up with the pace (roughly 1.2-1.3 mmt/wk) needed to meet USDA sales projections for 18/19.   Plenty of time left, but strong harvests in Ukraine and lingering stocks in South America are not helping U.S. exports in the short-run.

The soybean market extended its rally into a new high for the move although the price action was somewhat disappointing considering weather and China are the two key inputs of the moment. Those are the two magic names in our markets that can most often create velocity but today’s anemic push into new highs suggests that the market doesn’t see the weather threat as significant and/or the Chinese demand is not big enough/officially confirmed.

US-Chinese trade talks are underway in Beijing through tomorrow.   It was reported today that China bought anywhere from 3-15 cargoes of US bean out of the Gulf and the PNW for Feb-March. That trade will not be confirmed by the USDA during the partial government shutdown. Some of the selling in beans today could be tied to the Chinese lifting long hedges as they purchased the physical beans which was the case last month when the rally peaked as the anticipated China purchases were confirmed. There is continued talk that China could also agree to buy US corn, sorghum and other ag products which would be an easy way for them to reduce their trade deficit with the US and advance larger trade negotiations.

While most USDA reports are delayed indefinitely, they continue to report the weekly export inspections data. Soybean inspections totaled just 673 mt compared to 756 mt a week ago and 1.214 mmt this week a year ago. In addition to the usual destinations, there was 74 mt headed to China. Soybean inspections to date stand at 17.299 mmt compared to 29.608 mmt this time last year representing a shortfall of 452 million bushels relative to last year’s pace. This data also contributed to flat price beans coming off their highs.

The forecast is concerning with heat and dryness prevailing in an area stretching from Paraguay and West-Central Brazil into Northeastern Brazil over the next couple of weeks. In this scenario, look for additional production cuts to Brazil’s soybeans and if the dry pattern persists into Safrinha corn planting season, it will be a bigger deal for corn as well.

A late rally was not enough to save the wheat complex, and for the first time this year, all three classes of wheat finished slightly lower. Some of the rally last week was being tied to demand surfacing off the lower board. Another supportive influence came from talk that winter wheat plantings are much lower than most expectations, which was re-enforced when Informa pegged Winter wheat seedings at 31.513 mil acres, which would be more than one mil below the USDA estimate of 32.535 mil acres last year. Unfortunately, we do not get a USDA crop report this Friday to confirm their synopsis or anybody else’s. For now, the wheat complex still has both technical and fundamental support behind it. However, talk could, and will, only rally the market so much. Eventually, it will need some confirmation – whether it be fresh business or lower acres.

Anna Kaverman

anna@mercerlandmark.com

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