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Market Report

Tuesday January 8th, 2019

March 19 corn closed down 2 ¼ at $3.80 and December 2019 closed down 1 at $4.02 ¾. March beans closed down 5 ¾ at $9.18 ½ and November 19 closed down 3 ¼ at $9.57 ½. March wheat closed up 1 at $5.17 ¾ and July 19 closed up 2 at $5.29. Crude oil closed up $1.29 at $50.11.

Corn bulls were revved up and ready for action as overnight and early trade erased the prior day’s (and Friday’s) highs.  Unfortunately, positive vibes don’t fill Panamax vessels, and the absence of a major statement out of U.S.-China trade negotiations promoted a late sell-off. Managed Money traders were viewed small net sellers again today, which would leave them net long about 45,000 combined futures and options.

China remains the subject. If you like the topic, get ready for more, as the talks have been extended another day through Wednesday. One would think the extension is a positive. But the continued absence of any tangible trade action in corn by the Chinese no doubt disappointed some of the weaker market bulls.  In an apparent concession, China approved six new GMO varieties, including one for corn. This likely adds some validity to the idea that the Chinese will be around our markets at some point for corn. A final pact is still likely many weeks away, but a “mini-deal” that at least spells out some of China’s intended commodity purchases would be welcomed by all.

One of the few government market reports still standing is the weekly EIA energy blast. Expect the report to have overall bearish feature for ethanol, as it so often does in the first week of January. Production will “revert to the mean” some after the prior 3% drop, likely bouncing 2% off of a three month low.  Producer margins have improved off the early December lows, but still remain in negative territory (20-30 cents/bu loss), when including all costs. Modest concern about Brazil and Argentina weather continues to be a feature. Even though most of Brazil has good moisture in place today, there is a good chance many important crop areas will become too dry in the second half of this month without better returning rainfall. The northeast is already dry and the next ten days will build a ridge of high pressure into the interior south drying out those areas next.  Argentina weather will continue to be very good.

The soybean market was unable to sustain its rally momentum and reversed lower off a test of the downtrend and 200 day moving average where the December rally also was turned away.  Fundamentally, there was very little around the market to talk about although volumes were slightly better with the reversal action and index fund roll. The trade talks in Beijing were extended by one more day through tomorrow, which is a positive sign, although the lack of any detail on progress or trade commitments worked against the futures today. Nothing in the cash or spread activity hinted at any new demand.

Nothing changes and for beans, no news is not good news in a market that is counting on new and desperately needed demand revelations to stimulate a rally in a soundly oversupplied fundamental stat scene. As far as the Southern Hemisphere outlook, the forecast continues to promote heat and dryness across Paraguay and a stretch of Brazil from Center-West to the North-East which is likely going to lead to further production declines. As long as that crop is shrinking, we shouldn’t roll over completely and that uncertainty keeps an underlying bid in the market. This afternoon, the USDA extended the deadline for Market Facilitation Program applications beyond January 15th due to the government shutdown. The deadline will be extended for a period of time equal to the number of business days FSA offices were closed, once the shutdown ends. Besides trade talks and hopefully results, the market will continue to key in on weather and in the absence of a USDA report we will sift through Brazil’s CONAB production report on Thursday.

The wheat complex was able to shrug off the weakness coming out of corn and soy and traded slightly higher throughout the day.  All grain markets rely on demand revelations to stimulate trade, and with government offices shut down, we are not going to get it from the USDA. Price action in wheat today was able to benefit from a plethora of tenders coming to fruition over the next 24 hours. Bangladesh is in for wheat, and although most of this business will probably go Russian, we can still win some of it. Algeria is in, and even though most of this business will most likely be French or Black Sea, we could grab a slice of it. Taiwan is in and it will be all US. Jordan is in, but they will probably pass. That is a TON of potential business, and probably the big reason the wheat complex separated itself from corn and soy today. The wheat complex is also still benefitting from the technical outlook on trade. Taking a look at Chicago March, after testing the $5.00 level last Wednesday the market reversed, made a higher high last week and today it was able to take out the weekly high made during Christmas week.

Anna Kaverman

anna@mercerlandmark.com

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