Blogging by the Bushel
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Market Report

Tuesday March 12th, 2019

May 19 corn closed up 3 ¾ at $3.65 ¾ and December 2019 closed up 5 at $3.91 ½. May beans closed up 7 at $8.97 and November 19 closed up 6 ¾ at $9.32 ¼. May wheat closed up 24 ½ at $4.53 and July 19 closed up 23 ¾ at $4.60 ¾. Crude oil closed up $.08 at $57.20.

Finally, a “Turnaround Tuesday” worthy of the name. The corn market overcame a slightly uncertain start, riding on the back of a short-covering bounce in wheat. While futures couldn’t quite stick the “good trade” (a close above Monday’s high), the resulting four cent higher close is a welcome break from recent bearish trends. Managed Money traders basically bought back what they sold yesterday, trimming their net short to 235,000 combined futures. Make no mistake it was all wheat today. After a near-relentless $1 dive, wheat recovered 25% of it in a single day of short bashing. Corn and soy merely rode its coat-tails. Trade was unable to identify a single catalyst for the rally (other than a record large fund short), but it was broad-based, encompassing the equally beaten-up European markets.

There was a little news around today, but it was not ultra-bullish. Brazil’s gov’t (CONAB) raised projections of the corn crop by 1 mmt from prior to 92.8 mmt. This is sharply higher than the drought-shortened 80.7 mmt crop last year, but still 2 mmt below current USDA projections. If weather continues in a favorable direction, the USDA may look smart. Still a lot of growing season there, though, with safrinha planting still ongoing. Argentina is also in decent shape, with crops there broadly in pollination mode; condition ratings have been slipping, but the forecasts still appear mostly good. U.S. Midwest gearing up for another winter storm. Elsewhere, exports remain a sore point for the bull. South Korea continues to actively source corn for summer, but little/none is going to U.S. sellers. U.S. is roughly $15/mt uncompetitive. Turkey/Iran are both in for feed grains, but that business will almost certainly go to the Black Sea, on freight and politics.

The soybean market reversed higher as part of a broad-based short covering/technical recovery across the grain complex. Beans and meal nearly had key reversal trades (outside day up out of new lows for their respective moves) but were unable to hold the momentum into the close and had to settle for standard reversals. Follow through to confirm these trades will be important tomorrow and would help to stabilize our downside for a moment.

South American weather remains favorable overall with production estimates on the upswing although the privates generally are coming in below the latest USDA projections. There were plenty of private estimates around the headlines today. Cordonnier sees Brazilian beans at 113.5 mmt with harvest now 57% complete with his corn production estimate at 93.5 mmt. He estimates Argentina’s soybean crop at 54 mmt and corn at 44 mmt. Agrural puts Brazil soybeans at 112.9 mmt. CONAB estimates the Brazilian soybean crop wat 113.459 mmt vs. 115.543 mmt last month, they are using a yield of 3.168 mt/hecatare and lowered exports by 1.5 to 70.0 mmt. CONAB put the Brazilian corn crop at 92.807 (26.21 and 66.59) vs. 91.652 mmt last month, they are using a yield of 5.436 mt/hectare and left exports unchanged at 31.0 mmt. USDA is at 116.5 mmt and 94.5 mmt respectively for Brazil  beans and corn and 55.0 mmt and 46.0 mmt for Argy beans and corn. Big crops in Brazil and Argentina are going to compete hard with US corn and soybean exports moving forward with combined soybean production around 11-13 mmt above last year and combined corn production around 23-26 mmt bigger.

Informa updated US acreage estimates with corn 91.8 million (up 180,000 from Feb), beans 85.5 million (down 550,000 from Feb), all wheat 46.7 million (down 60,000 from Feb), spring wheat 13.580 million (down 60,000 from Feb)and cotton 14.7 million (up 50,000 from Feb).

The enticing carrot of a China trade deal remains in the background, but time has eroded market optimism and until we see a conclusion and final details confirmed, the bull has retreated to a full defensive posture.  Chinese media reports that trade rep Liu He spoke with US reps Lighthizer and Mnuchin by phone today to further discuss the trade deal text and make plans for the next stage of work. There were no follow through export sales confirmation after the USDA flashed 1.5 mmt Friday-Monday.  The talk was 2-3 mmt+ of purchases so we will be on the lookout for additional sales confirmation over the coming days.

Price action across the wheat complex was a little better throughout the night, and when trade moved into the day session the markets took it to a whole new level. After moving above yesterday’s highs some buy stops looked to be triggered, and the rally continued through the midday time frame.

Trade was looking to rebound after yesterday’s disastrous start to the week, and even though one day’s gains are not an indication that the break is over. One would think that traders will take a step back at look at things a little differently now. Today’s trade does the same thing as what happened on March 1. If you recall, that was when we saw that big reversal, thus putting in a base low. At that time, prices eventually went back down to those lows, took them out, and proceeded to fall another $.20. If that were to happen again, we would probably expect to find the same type of price action, with the $4.00 level probably providing huge support. The funds do not feel threatened, and even after Tuesday’s $.20 pop, they probably have no intentions of throwing in the towel. But remember at these levels, wheat could be used for just about anything. After yesterday’s break, traders started hearing of famers thinking of plowing under their wheat with intentions of planting corn. In the areas where it has been extremely wet, or maybe they have had some sort of winterkill, maybe they have enough of an insurance guarantee to plow their wheat under and plant a different crop. Keep in mind, Informa lowered their winter wheat acreage estimates today.

Anna Kaverman

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