Market Report

Monday February 6, 2012

March 2012 corn closed down ¼ at $6.44 ¼ and December 2012 corn closed down ¼ at $5.81 ¼. March soybeans closed up ½ at $12.33 and November 2012 beans closed up 1 ¾ at $12.39. March wheat closed up 7 ¾ at $6.68 ½ and July 2012 closed up 3 at $6.92

Corn prices spent most of today in a very narrow trading range with modest losses, but they firmed in the final minutes to settle near their day-session high. Prices continue to consolidate below $6.50 after failing to take out the overhead chart resistance last week. We will likely see this pattern continue ahead of Thursday morning's USDA crop report. Exporters shipped 39.4 million bushels of corn in the week ending February 2, up from 22.8 million the previous week and above the five-year average for the week of 34.2 million. Last week's total included 4.7 million bushels destined for China. Marketing year shipments to all destinations total 711 million bushels, according to USDA, down 1 million from the previous year. Shipments to date exceed the seasonal pace needed to reach USDA's export target by August 31 by 55 million bushels and the gap is growing. A Dow Jones Newswires trade poll reflected expectations that USDA will peg the size of the corn crop in Argentina and Brazil to 22.5 and 59.8 million metric tons (mmt) respectively on Thursday morning, down from 26 and 61 mmt.

Soybean prices surged to new one-month highs overnight as South American production estimates begin to ratchet lower amid trade chatter of China buying of U.S. soybeans. In fact, the lead March contract surged as high as $12.44 early in today's trading, but profit taking emerged when it failed to test this winter's high of $12.44-3/4. Exporters shipped 37.3 million bushels of soybeans in the week ending February 2, down from 41.8 million the previous week and below the five-year average of 40.5 million. Last week's shipments included 28.4 million bushels destined for China. The aforementioned trade survey revealed expectations for USDA to peg Argentina's soybean crop at 48.5 mmt, while Brazil's crop comes in at 71.7 mmt. USDA pegged the Argentine and Brazilian crops at 50.5 and 74 mmt respectively in January. The trade expects USDA to peg this year's domestic soybean stocks at 269 million bushels, down from 275 million in January.

Wheat prices posted modest gains in both Chicago and Kansas City today, as well as in the nearby months for Minneapolis. More winter kill damage may have occurred overnight in Germany and Poland, but the current threat is largely behind us. Further stories of a possible Russian export tax are also likely not coming anytime soon. As such, today's gains were impressive for a market that's been driven by headlines at a time when corn prices were struggling. Exporters shipped 14.5 million bushels of wheat in the week ending February 2, down from 18.8 million the previous week and below the five-year average for the week of 21.7 million. Marketing year shipments total 671 million bushels, down 115 million from the previous year. The trade expects USDA to peg this year's wheat ending stocks at 868 million bushels on Thursday morning, down from 870 million in January.

Anna Kaverman

Mercer Landmark

anna@mercerlandmark.com

(419) 769-5403

Corn posted small gains today after trading lower most of the session. Wheat closed slightly lower today while soybeans posted strong gains. March corn closed up 1 1/2 cents at $6.44 1/2, December corn closed up 2 1/2 at $5.81 1/2, March wheat closed down 2 at $6.60 3/4, July wheat closed down 2 3/4 at $6.89, March beans closed up 15 1/2 at $12.32 1/2, and November beans closed up 13 1/2 cents at $12.37 1/4.

At midday the outside markets were mixed. The dollar index was up 14 points, crude oil was down 45 cents, and gold was down $19, all of which were bearish for grains. The stock market was up 130 points, which was bullish.

The outside markets got their direction from the U.S. jobs report. The Labor Department reported this morning that 243,000 jobs were added in January, much better than anticipated by analysts. Unemployment fell to 8.3%, the lowest level in three years.

Mexico was the biggest buyer of U.S. corn in yesterdays USDA sales report. They have bought nearly 7 million metric tons of U.S. corn year-to-date, which is more than they have ever bought before. Their last corn crop was devastated by the same drought that impacted Texas. Mexicos corn purchases will likely be raised in future USDA S & D Reports. Analysts estimate Argentine corn production at 21.8 mmt, well below the USDAs current estimate of 26.0 mmt.

Overnight South Korea bought 175,000 mt of corn, mostly of U.S. origin. Taiwan bought 60,000 tons of Argentine corn.

Reuters reported today that China is expected to sign soybean import deals during a trip to the U.S. by their vice president later this month, but volumes are likely to fall short of their biggest ever deal signed by their president in a visit last year. Soybean futures spiked last year after China signed deals to import 11.5 mmt of soybeans, worth about $6.7 billion.

Soybean barges are being agressively bid up as crush margins improve around the world, and end users are actively seeking to secure supplies with much uncertainty about the South American crop.

Russia is expected to make their export picture clearer today, with most in the trade expecting the country to have some type of tax on future exports.

From reading and listening to different news reports, it sounds like an attack by Israel on Irans nuclear facilities is likely in the not too distant future. One thing that is certain is that it would send oil futures sky-high. What is less clear is what it would do to the grain markets. Higher oil prices are normally bullish for grains. But it could also drive the dollar higher, which would be bearish for grains. My best guess is you would see sharply lower grains to start out with.

Joe Brossman - Mercer Landmark

419-965-2121 - joeb@mercerlandmark.com

Corn and beans posted modest gains today while wheat closed lower. March corn closed up 1 cent at $6.43, December corn closed up 2 1/4 at $5.79, March wheat closed down 11 1/2 at $6.62 3/4, July wheat closed down 5 1/2 at $6.91 3/4, March beans closed up 1 3/4 at $12.17, and November beans closed up 5 1/2 cents at $12.23 3/4.

At midday the outside markets were mixed, and mostly bearish for grains. The dollar index and the stock market were nearly unchanged. Crude oil was down $2 and gold was up $11.

This was a relatively quiet newsday for grains. There was a lack of news on the European debt crisis front. The cold weather is expected to moderate in eastern Europe, which put some pressure on wheat.

The USDA announced the sale of 107,340 tons of corn to Japan for the 2011/12 marketing year. The USDA released its weekly Export Sales report today. It was bullish for all three commodities. Old crop wheat sales of 19.1 million bushels were double the 9.1 million needed this week to reach the USDAs sales projection for the year. Combined old crop/new crop sales of 20.4 million bushels were near the high end of trade estimates of 14.7 to 22.0 million bushels. Wheat shipments for the week of 16.7 million bushels fell just short of the 18.1 million needed.

Old crop corn sales of 35.9 million bushels were nearly double the 18.7 million needed this week. Combined old crop/new crop corn sales of 38.4 million bushels were above the high end of trade estimates of 27.6 to 37.4 million bushels. Corn shipments of 26.4 million bushels were below the 31.6 million needed this week. Old crop soybean sales of 11.3 million bushels were above the 10.0 million needed this week. Combined old crop/new crop soybean sales of 13.5 million bushels were just above the low end of trade estimates of 12.9 to 20.2 million bushels. Soybean shipments for the week of 43.0 million bushels were more than double the 19.0 million needed.

There is mounting concern in the trade that the generally moisture free, and mild Midwest winter may be a precursor to a hot, dry summer. Nowhere is this being played out more than it is in Iowa, the largest corn producing state, and one that has endured steadily drying conditions since last July. Their cummulative precipitation there for the last half of 2011 was the second lowest in 35 years.

This pattern, along with heavy snows in Alaska, is reminding climatologists of 1988, the last major drought year to hit the Corn Belt, when U.S. corn yields averaged 27% below trend.

Joe Brossman - Mercer Landmark

419-965-2121 - joeb@mercerlandmark.com

The grain markets closed higher today. March corn closed up 3 cents at $6.42, December corn closed up 7 1/4 at $5.76 3/4, March wheat closed up 8 1/4 at $6.74 1/4, July wheat closed up 6 1/4 at $6.97 1/4, March soybeans closed up 16 1/4 at $12.15 1/4, and November soybeans closed up 16 3/4 cents at $12.18 1/4.

The outside markets were bullish for grains today. At midday the dollar index was down 60 points, crude oil was up 15 cents, gold was up $9, and the stock market was up 150 points.

The USDA today reported the sale of 120,000 tons of wheat to unknown destinations for the current marketing year, and also reported the sale of 120,000 tons of soybeans to unknown destinations for the 2011/12 marketing year.

The cold weather in eastern and western Europe continues to get a lot of press. Record cold temperatures of 27 degrees below zero have hit Ukraine, and they have very little snow cover. It is estimated they could lose 42% to 58% of their wheat acres due to the cold. There was also speculation that next spring some of these wheat acres could be planted to corn.

An Argentine analytical group, Agroconsult, has projected the Argentine corn crop at 18.8 million metric tons, which is lower than trade ideas of around 22.0 mmt.

Japanese corn imports from Europe have hit a record high of 1.5 million tons for January, Feb., March shipment. Japan has historically bought most of its corn the U.S..

The Chinese hog herd continues to grow, with a higher proportion in confinement, which should help to support feed demand.

Increased biodiesel production is helping to support soybeans. Chinese crush margins have improved to a three month high, which should help to maintain their recently expanded soybean import pace. The Brazilian harvest continues at a very slow pace, so China should continue to import U.S. beans.

Joe Brossman - Mercer Landmark

419-965-2121 - joeb@mercerlandmark.com - 567-204-1303

The grain markets closed higher today. March corn closed up 7 1/4 cents at $6.39, December corn closed up 4 3/4 at $5.69 1/2, March wheat closed up 21 1/4 at $6.66, July wheat closed up 19 3/4 at $6.91, March beans closed up 13 3/4 at $11.99, and November beans closed up 7 cents at $12.01 1/2.

At midday the outside markets were negative for grains. The dollar index was up 30 points, crude oil was down 30 cents, gold was down $1, and the stock market was down 75 points.

News was scarce in the grain pits today.

The head of the Russian National Grain Union said today that Russia is discussing the possibility of introducing an export duty on grain, as shipments in the current year are likely to exceed the upper limits of 25 million metric tons by April. The main focus of the export duties seems to be wheat. Russias grain production was much improved this year at 93.0 million metric tons compared to 60.9 mmt for their drought ravaged 2010 crop.

Wheat was supported today by concerns over bitter cold temperatures and the lack of snow cover that could damage wheat crops in Russia, Ukraine, Germany, and Poland.

Oilseed analyst Oil World has cut its forecast of 2012 soybean crops in Argentina and Brazil by a combined 4 million metric tons due to the drought in South America.

The average snow depth in North Dakota on January 29 was 1.8 inches compared to 24.3 inches at this time last year. The mild temperatures are good for the cattle herds, but farmers there are concerned about the lack of snow cover for the wheat and alfalfa crops.

Joe Brossman - Mercer Landmark

419-965-2121 - joeb@mercerlandmark.com - 567-204-1303