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Thursday January 10th, 2019

March 19 corn closed down 5 ¾ at $3.76 ¼ and December 2019 closed down 5 at $3.99. March beans closed down 17 ¼ at $9.06 ¾ and November 19 closed down 14 ½ at $9.48. March wheat closed down 6 ¼ at $5.13 ¾ and July 19 closed down 6 ½ at $5.24 ¼. Crude oil closed up $.22 at $52.91.

The markets were clearly primed for good news; suffice to say, the bull did not get fed today. Futures slowly extended losses through the session, ultimately finishing five-plus cents lower.  The market closed into a one week low. Managed Money traders were viewed net sellers of about 10,000 corn today, which would leave them net long 45,000 combined futures and options.

Today was supposed to be “resolution Thursday”.  CONAB was the first to disappoint. Against the recent drumbeat of “hot and dry” in Brazil, many analysts were looking for a surprise reduction of crops. Brazil’s government did indeed reduce soy crop expectations, but perhaps not as much as many private analysts were hoping. They actually increased full year corn estimates fractionally, taking the first crop up to 27.45 mmt vs. 27.37 mmt prior estimate. They maintained a full 18/19 year corn export forecast of 31 mmt, which compares to 23.5 mmt last year, and the USDA currently at 29 mmt. Private analysts at AgroConsult later affirmed the export projection, despite recently reducing their crop estimates on the weather?  There was also some Argentine crop estimates around today; Rosario pegged the corn crop at 44 mmt, up from the prior range estimate of 42-43 (and well above last year’s drought-shortened crop of 32 mmt).  The corn crop is now said to be 86% planted, advancing 3.5% wk/wk.

The second area of disappointment was China. They did release a joint statement following three days of mid-level trade negotiations with the U.S., but it provided no real specificity with regard to potential Chinese commodity purchases. That’s not to say they won’t buy any corn, but the waiting game continues, and commodity traders tend not to be the patient type!  U.S. corn export biz has no doubt slowed some, particularly relative to more rosy forecasts. Some floating the idea China may remove some import duties next month to get the ball rolling. South Korea was finally back in for corn today, picking up a cargo.  Add to that the lack of information amid the U.S. gov’t shutdown, and it is very difficult to rally a market such as corn in a vacuum. Export sales were not released this morning, nor will CFTC positioning data be released tomorrow afternoon.  End-user markets were mixed; spot hogs, spot cattle, and dairy, a little better, while ethanol and deferred hogs were a little lower.

The soybean market broke sharply where besides the well-known supply side realities you had a few developments that helped set the market back off its latest recovery high.

1)  The Chinese response to this week’s trade meeting lacked the specifics on Ag purchases that the market was anticipating would be revealed.  The comments were optimistic and in sync with the US response, but we didn’t get detail on the quantities of Ag to be purchased or the timing of those purchases.

2)  The CONAB estimate on Brazilian soybean production at 118.8 mmt was bigger than the trade is plugging in.  At only .5 mmt below last year’s record crop, the CONAB estimate told the market there are no disasters here. In the absence of a USDA WASDE update this report took on more significance than usual.  To be fair, their estimate as of Jan 1 and doesn’t account for the past 10 days were additional loss was likely in the center west and north east.

3)  The weather forecast continues to promote rains for the second week of the outlook across that key center west region of Brazil.  If they materialize it would help to stabilize production declines.

As the market began to liquidate its recent length in the first hour we found some stops took us down to our lows where we spent the balance of the session trading sideways for the most part.

The products were not immune to the selloff either and the combined meal and oil losses ended up going deeper than the beans so board crush margins lost 2 cents to settle at $1.00/bushel. Elsewhere in the news, AgroConsult estimated Brazil 18/19 Soybean production at 117.6 mmt, that compares to the group’s previous forecast at 122.8 mmt.  They lowered yields to 54 mt/hectare compared to the 57 mt/ha last season. It was noted that Mato Grosso and Parana drought conditions have damaged some 3.5 mln mt of soy. They see Brazil 18/19 Corn production at 95.6 mmt up from last season’s 80.8 mmt.  Brazilian bean exports were est. around 73.0 mmt, and corn exports around 31.0 mln mt

Wheat price action was slightly lower throughout the night and it did not get any better during the day. The optimism that surrounded trade since the first of the year came to a screeching halt today, and all three classes of wheat finished the day between six and seven cents lower. So, what was behind the weakness we saw today? The results of the GASC tender that closed Wednesday was not very encouraging, the plethora of tenders this week have now concluded, the China talks which wrapped up earlier this week resulted in nothing new, the break in the US Dollar has subsided for the time being and because of the government shutdown, we will not get a USDA acreage report tomorrow to possibly confirm expectations of lower acres year over year. When you throw in this morning’s CONAB’s data, which was probably in line with estimates, but still a couple million above where the market is probably trading thus negatively impacted price action in bean and meal, it created a perfect storm and the entire grain floor found selling all day.

Looking ahead to Friday, it will be important for the wheat complex to find some stabilization. From a technical standpoint, today’s break did very little, but another lower settle tomorrow probably changes that. Chicago March traded above but has not been able to settle above the Christmas week highs, and trade will need a settle above those highs to get the bull back to being enthused about wheat. That may be tougher said than done as the export lineup has dried up, the China talks have concluded and there is still no confirmation that China bought or is willing to buy any wheat, and with the government shut down, there are no USDA reports.

If we had a government report on Friday, the average estimates of traders and analysts for total winter wheat acres comes in at around 32.279 mil acres. The total includes 22.727 mil acres of HRW wheat, 6.019 mil acres of SRW wheat and 3.486 mil acres of White. Keep in mind, late last week Informa pegged total Winter wheat seedings much below this average guess – at 31.513 mil acres.

Anna Kaverman

anna@mercerlandmark.com

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