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Friday January 11th, 2019

March 19 corn closed up 2 at $3.78 ¼ and December 2019 closed up 2 ½ at $4.01 ½. March beans closed up 3 ½ at $9.10 ¼ and November 19 closed up 4 at $9.52. March wheat closed up 5 ¾ at $5.19 ½ and July 19 closed up 5 ¼ at $5.29 ½. Crude oil closed down $1.00 at $51.91.

FOR THE WEEK ENDED 1-11-19

CORN – Well, it’s official.  The January WASDE, quarterly grain stocks, and winter wheat seeding reports will all be delayed until after the government reopens.  The longest shutdown has been 21 days, which we matched on January 11th.  Add to that the absence of any export sales reports and here we sit in the $3.72 ½ to $3.84 ½ per bushel trading range we’ve been in since December 19th.  The sign up for the Market Facilitation Program will be extended for the same number of days the government was closed.

Demand news was scarce, but there was chatter China would be in the market for US ethanol or DDG’s.  Nothing materialized from the trade talks and there was nothing to suggest business was done in the export numbers.  Weekly ethanol production pulled back 1% to its lowest level in nine months, down 11,000 bpd to 1.0 million bpd.  Ethanol stocks increased 100,000 barrels to 23.3 million barrels.  Margins were down a penny to a negative 5 cents per gallon.

Conab refreshed their Brazilian corn production forecast this week with a small increase to 91.2 mmt.  Safras was higher at 93.4 mmt, and Agroconsult came in at 95.6 mmt.  The USDA in December was using 94.5 mmt. The Rosario Grain Exchanged put Argentina’s corn crop at 44 mmt versus 42-43 mmt last month and the USDA’s 42.5 mmt outlook. China’s corn estimate for this year’s crop caught up to their previous revisions, putting it at 257.3 mmt versus 215 mmt previously.  The last USDA estimate was 256 mmt. China cut their 2018/2019 corn import forecast from 2.5 mmt to 1.5 mmt.  Neither update was unexpected by the trade.

Weekly export inspections continue to be reported, despite the government shutdown.  Corn inspections were 19.7 million bushels, a big disappointment to trade expectations for 25.6-39.4 million bushels.  This was the lowest of the marketing year.  Cumulative exports are up 61% from last year, but for the last five weeks they have been below the 46 million bushels we need to average to hit the USDA’s 2.45 billion bushels export forecast.

If and when we get a WASDE report, the trade is anticipating the US corn carryout at 1.694 billion bushels, down from December’s 1.781 billion-bushel forecast.  World carryout is expected to average 307.32 mmt versus 308.8 mmt in December.  The average trade guess for Argentina’s corn crop is 42.39 mmt and for Brazil 94.31 mmt.

OUTLOOK: For the week, March corn gave back over half of last week’s gains.  This week, March corn was 4 ¾ cents lower at $3.78 ¼, July fell 4 cents to $3.94 ¼, and December dropped 2 ½ cents to $4.01 ½ per bushel.  South American weather and China will continue to be driving force in nearby price direction.

SOYBEANS – It’s sort of surprising how dependent we get on government reports, even though at times we question their accuracy.  Without any progress on getting the US government up and running, the market’s attention focused on South American crop estimates.  Conab published their newest Brazilian soybean production number at 118.8 mmt but left their export forecast at 75 mmt.  This was down 1.3 mmt from their previous estimate, but not low enough versus trade expectations.  Brazil last year produced a record 119.3 mmt of soybeans.  The market slumped lower on the figure and posted double digit losses on the day of the announcement.  For comparison, other Brazilian soybean production estimates also updated this week:  Safras at 115.7 mmt, Agroconsult at 117.6 mmt, and AgRural at 116.9 mmt.  The last USDA number was 122 mmt.  Southern Brazil’s rain profile is improving, but the northeast and central areas need more rain.  However, in Argentina the weather has been favorable for the corn and soybean crops, despite areas that received heavy rain and may need to be replanted.

Nothing concrete was announced at the conclusion of the three days of trade meetings (they were extended one day before the original time frame) in Beijing, but the word was good progress was being made.  Reportedly, a Chinese official will be traveling to the US in the coming week for additional talks, and again more talks are rumored to take place at the end of the month.  Some in the trade have already assumed China has bought up to 5 mmt of US.  But who knows without confirmation from the USDA.  If true, and we see the announcement at a later date, it may have limited impact on prices.  Others believe they not only have bought US beans, but they have bought all they will buy.  Even without the tariff in place, US soybeans are priced at a premium to Brazilian soybeans.  There is also the unanswered question of how much China’s demand has fallen due to the African swine fever across their country and their push to reduce protein feed levels.

Is China’s economy suffering more than ours from the trade war?  China’s PPI rose just 0.9% in December versus an increase of 2.7% in November.  This was the largest month to month decline since late 2015. Weekly export inspections were 24.7 million bushels and neutral to the trade.  Inspections need to average about 35 million bushels per week to achieve the USDA’s 1.9-billion-bushel export target.

The average trade guess for the next WASDE report, whenever that is, for US soybean carryout is 904 million bushels versus 955 million bushels in December.  World soybean carryout is estimated to average 114.36 mmt versus 115.33 mmt in December.  The average trade outlook for Brazil’s soybean crop is 120.13 mmt and 55.29 mmt for Argentina’s bean crop.

OUTLOOK:  The daily closes in March soybeans were like a seesaw this week, up one day, down the next, throughout the week.  For the week, March soybeans lost 11 ¼ cents to settle at $9.10 ¼, July dropped 9 ¾ cents to $9.36 ¼, and November declined a nickel to $9.52 per bushel.  There are many unanswered questions in the soybean market and it doesn’t look like we’ll get any firm answers anytime soon.  Until then, the bulls want to be fed daily.  March soybeans have set up a trading range of $8.80 to $9.30 per bushel awaiting something new to happen with South American weather or China.

Wheat- Egypt’s GASC bought 295,000 tons of Russian wheat for Feb 20-28 shipment, and 120,000 tons of Russian wheat for March 1-10 shipment. Lowest price was price was $263.45/ton C&F. US SRW was the cheapest FOB at $239/ton, which puts it at about a $7-10 premium to Black Sea with freight. The Russian Ag Ministry says their grain exports are up 5.1% from a year ago, at 28.2 million tons. Grain inventories are down 19.4% YoY at 42.4 million tons. US wheat inspections were very poor, coming in well under the low expectation this week. Inspections are be-hind the USDA total by 144 million bushels. Spring wheat made up just over half of the inspections.

Anna Kaverman

anna@mercerlandmark.com

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