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Market Report

Thursday February 28th, 2019

May 19 corn closed down 3 at $3.70 ¾ and December 2019 closed down 2 ½ at $3.92. May beans closed down 6 ½ at $9.10 ¼ and November 19 closed down 5 ½ at $9.43 ¾. May wheat closed down 7 ¼ at $4.59 ½ and July 19 closed down 6 ¾ at $4.66 ½. Crude oil closed up $.24 at $57.61.

Corn has been nothing if not consistent this week, finishing lower and extending its losing streak to four. Managed Money funds continue to lean in, selling another 10,000 corn today, which by our estimate would leave them net short 120,000 futures and options.

Though not obvious given the end result, the markets actually had a little good news around to start today, in the form of solid weekly export sales. Net new corn business of 1.24 MMT for the week were reported by the USDA, which was better than the sub 1 mmt tally expected. Mexico and Japan were the big buyers of record, taking over half, with South Korea, Colombia, and Morocco bringing up the rear. This takes corn sold + shipped for the 18/19 campaign to 39.56 mmt, which compares to 39.27 mmt on the books this time last year.

Most other market inputs are still very much in a holding pattern. China remains a four-letter word for most, and the market is quickly becoming deaf to rumors. Need to see something on paper. Not much weather risk premium in with rains expected to bail out SW Argentina growers in a matter of days. Most of the rest of South America is suspected to be in good shape.  Some talk increased usage and a shorter crop in India could permit them to import small quantities of corn, likely locally-sourced?  South Africa in a similar posture. U.S. weather is cold for the next week. Extreme snowpack and moisture implies slim odds of an early Midwest planting start.

The soybean market closed weaker with the charts pressing nearby support levels despite a better than expected weekly export sales report confirming new trade with China. It has been an extremely active geopolitical news cycle. The Trump-Kim summit was cut short, with no deal after North Korea demanded an end to sanctions first in exchange for partial de-nuclearization. This was not sufficient to make a deal so Trump walked.

In terms of negotiations with China, this underscores the reality that unless China gives into US demands on structural trade issues and enforcement, no deal will be made there either and was a negative influence in today’s market. The tariff deadline tomorrow has been delayed indefinitely which will keep the 10% tariffs in place instead of moving to 25% to allow more time to complete ongoing negotiation and the two sides do appear to be making progress. Lighthizer shed some light on a ‘triple-tiered enforcement mechanism’ backed by the threat of unilateral U.S. punishment that the US is pushing for.

The WTO dispute settlement panel sided with the US in finding that China has provided trade distorting domestic support to its grain producers well in excess of its commitments under WTO rules. China’s market price support policy artificially raises Chinese prices for grains above market levels, creating incentives for increased Chinese production of agricultural products and reduced imports. Moving forward, this will help American farmers compete on a more level playing field. This dispute is the first to challenge China’s agricultural policies that disregard WTO rules.

Another poor performance for Chicago wheat, with another move into new contract lows and settling the weakest between all three classes of wheat. It was a month Chicago wheat is going to want to forget, as it closed $.64 lower during the month of February. The worst preforming month since Aug of 2017. USDA export sales this morning was in line with this weeks’ expectations, coming in at 476 TMT, with an additional 61 TMT of new crop for a combined sales number of 537 TMT. Takes total sales for the marketing year to 806 mil bu vs 795 mil bu this time last year.

Anna Kaverman

anna@mercerlandmark.com

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