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Market Report

Thursday March 7th, 2019

May 19 corn closed down 7 ¼ at $3.65 ¼ and December 2019 closed down 6 at $3.89. May beans closed up ½ at $9.02 ½ and November 19 closed down ¼ at $9.36 ½. May wheat closed down 11 ¾ at $4.38 ¼ and July 19 closed down 10 ½ at $4.45. Crude oil closed up $.41 at $57.03.

Ouch. There’s not much else to say after the drubbing the grain markets took today. Corn futures erased their entire Fri-Tues recovery and then some, settling lower in the end. Today marked the lowest May Corn settlement seen since the September lows.  Managed Money traders smell blood in the water, adding 20,000 more corn shorts today. It is estimated that they are heading into tonight net short 165,000 combined futures and options.  CFTC will finally be current tomorrow, reporting data through this Tuesday.

Unfortunately, there was no magical reason the markets were down as much as they were today. To sum it up, the bull side of the picture is still more talk than action, while at the same time, bears can tout poor U.S. export competitiveness for summer slots, and the negative tug of cheap feed wheat on world corn demand. The former was best demonstrated by South Korea, who has been actively picking up corn supplies for summer days on the break. Prices hint at South American origin, mostly Brazil at this point. A surging US dollar trading at the highest levels in one year today was also not doing U.S. markets any favors.

In fact, the day started in relatively decent fashion after weekly export sales arrived toward the high-end of market expectations. Net old crop sales were 969,700 MT. When factoring in a 281k dollop of new crop sales, both combined topped 1 mmt versus expectations for something just under that. Mexico was the big net buyer of record, accounting for nearly half the business, with Colombia, South Korea, and Canada, bringing up the rear. Exports sold and shipped are running in a dead heat with 17/18, which is not optimal given the fast start to 18/19 (and strong finish to 17/18). The wild card remains China. If they do indeed come through with some old crop corn purchases, the current USDA forecast looks close to the mark. If not, they have considerable room to fall in coming crop reports. Indeed, we would not be surprised if a cut in corn export demand is the primary feature of the March WASDE update. Likely too early for the USDA to make major wholesale adjustments to South American corn production.

The soybean market had a mixed performance which was somewhat impressive in shaking off the substantial negative influence of the wheat and corn action along with a very lackluster weekly sales report and a negative currency input to settle slightly higher in the old crop.  While export confirmations to China have been lacking there was some new business being shopped today and that helped keep beans on the board afloat today in a sea of bearishness.

In the weekly export sales report, old crop bean sales of 311 tmt fell well below market expectations. The meager total featured China. Outstanding soybean sales on the books is 12.7 mmt vs. 9.2 mmt this time last year while accumulated exports total 26.5 mmt compared to 38.7 mmt this time last year. This represents a shortfall of 449 million bushels to last year’s export pace. The USDA is currently projecting year over year exports to fall by 254 million bushels. We must really need bean acres because we are price incentivizing a whole lot of them, certainly much more than was assumed following harvest. Besides price, a tight farm economy and a cold wet spring could also support larger than expected bean acres at the expense of corn and spring wheat acres. The new crop bean/corn ratio is near its recent highs at 2.41%.

The only positive you can take out of today’s wheat price action was that the day ended. It was a day in which every tick lower you thought to yourself this is it. Every time the board rallied a couple cents, you thought finally the board is catching a bid. As it turned out, the markets kept finding more and more selling, and by the end of the day. Back-to-back sessions of double-digit losses has left many wondering how much lower can we go? Going home Wednesday there was not a lot of positive things around for wheat, but this morning’s export sales report changed that thinking a little. It gives hope that the US, even though it may not look it, is capturing business on the lower board, and with futures only continuing to unravel, that demand will remain.

If this morning’s export sales report would have been as dismal as most thought it was going to be, traders would have completely understood today’s price action. But, if we could get a good export number with most of the demand flying under the radar, the lower board only makes US wheat that much more enticing to vendors. For several days it was mentioned that the funds are nowhere near their record short position in Chicago, and if they wanted to pound wheat lower they had more than enough ammo (power) behind them to accomplish this feat. They have done that, and at least in Chicago, even after the selling of the last two days they probably still have a manageable position. The crop report Friday morning is the smaller of the two crop reports in March, but it does not mean it is insignificant. For wheat, we were not expecting the USDA to change much in the report.

Anna Kaverman

anna@mercerlandmark.com

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