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January 15, 2019 : Market Summary

Market Report

Tuesday January 15th, 2019

March 19 corn closed down 7 ¼ at $3.71 ½ and December 2019 closed down 5 ¾ at $3.96 ½. March beans closed down 10 ¼ at $8.93 ¼ and November 19 closed down 9 at $9.37 ½. March wheat closed down 3 ¼ at $5.11 and July 19 closed down 4 at $5.20 ½. Crude oil closed up $1.59 at $52.39.

Early, corn appeared ready to stand alone atop the grain room once again, mustering up decent gains overnight while beans and wheat were softer. It was all downhill from there, though, as corn finished right at the bottom end of a $.10 range. Managed Money traders were viewed net sellers of 15,000 corn today, and will head into tonight net long just under 35,000 combined futures and options.

Hate to say it, but without government reports and a coherent weather story, the ag markets are living and dying with each China rumor. Shortly after the grain open, comments attributed to lead U.S. trade negotiator quickly sent markets into a tailspin. For a couple weeks, the market has been inundated with positive vibes on China. Lighthizer expressed his disappointment in this week’s negotiations. As we have warned, it will take time to hammer out a complete, big-picture trade deal with China given the number of complex issues outstanding. The ag markets are merely hoping for a scrap off the table, such as trade confirms on recent export business. It was confirmed overnight that China booked some U.S. Crude Oil(6 mil bbl to be exact).

There was also a little bearish world news around early.  Ukraine just keeps finding more bushels, proving the old adage “big crops get bigger.” APK-Inform was the latest private analyst to raise their crop projections there. The USDA’s latest estimate from Dec pegged Ukraine corn exports this year at 28 mmt, up almost 10 mmt yr/yr, though a lot of that increase will likely go to Europe (and indeed, already has). Brazil crop conditions remain variable, though they will garner more attention the closer we get to safrinha corn planting. The dry pockets are mostly in the center south, interior far southern production areas, and the northeast. Argentina summer crop areas remain in mostly good shape, while South Africa still needs more rain.

The soybean market broke down for a test of the uptrend that has supported the recovery rally over the past four months. A combination of technical selling, macro selling off a sharp rally in the dollar and a growing sense of frustration at the lack of a trade breakthrough with China led to a tough day for the grains.

The US and China will resume face to face talks in Washington on January 30-31. Talks on Chinese purchases of US ag and energy have progressed but the larger issues of intellectual property and forced transfer of technology remain unresolved as US Trade Rep Lighthizer stated that he ‘saw little progress in last week’s talks with China on structural issues, IP protections’.   That may be the case, but it is also important to remember that both sides are actively negotiating and posturing heading into the next round of talks. Expect to see lots of good cop/bad cop headlines coming from both sides. Meanwhile, China asked some state-run enterprises to avoid business trips to the U.S. and its allies and to take extra precautions to protect their devices if they need to travel.

Wheat price action was a little better for most of the night, but in the hour leading up to the morning pause all three classes of wheat started to breakdown and they would all eventually finish the night flat to slightly lower. The selling leading up to the morning pause seemed to resonate from beans and meal, but the weakness trickled down into corn and wheat. Shortly into the start of the day session a statement was released from US Sen Grassley that said that US Trade Rep Lighthizer suggested there was little progress in last week’s trade talks with China. This was all that was needed to ignite additional selling, but wheat was somewhat immune as most of the weakness was seen in corn and soy.

It is hard to say whether all three classes of wheat found much better support, or there is little interest at pressing wheat at these levels. Maybe a little of both, but it is hard to blame traders for wanting to sit on the sidelines as the longer the government is shutdown, the longer we go with no USDA reports, and that makes it more difficult to maintain any enthusiasm. Without USDA reports, there are not many other influences around to spark a rally. Demand is the one constant motivator, but outside of Japan in for their semi-usual weekly tender, the export lineup is basically nil to start this week. A far cry from what we saw this time last week. We already know the next round of trade talks between the US and China is not scheduled until the end of the month, and when a key representative in the negotiations expresses some disappointment at how talks are moving forward, it should be a red flag.

Anna Kaverman

anna@mercerlandmark.com


January 14, 2019 : Market Summary

Market Report

Monday January 14th, 2019

March 19 corn closed up ¼ at $3.78 ½ and December 2019 closed up ¾ at $4.02 ¼. March beans closed down 6 ¾ at $9.03 ½ and November 19 closed down 5 ½ at $9.46 ½. March wheat closed down 5 ¼ at $5.14 ¼ and July 19 closed down 5 at $5.24 ½. Crude oil closed down $1.11 at $50.80.

The corn market featured a mixed start to the week, trading both sides of unchanged at times, ultimately finishing fractionally better on the day. Though it was very quiet overall, it had to be encouraging for aspiring corn bulls to see the market assume the mantle of “upside leader” in the grain complex of the day, largely fending off weakness in beans and wheat. Managed Money traders were viewed small net buyers today, and will head into tonight net long just under 50,000 combined futures and options.

Fresh news remains hard to come by in corn, particularly with most gov’t reports on hiatus. World corn markets were mostly lower heading into the day. Matif Corn is continuing its recent corrective effort after rallying throughout Dec and into early Jan. China is perhaps more interesting. The Dalian market was weak overnight, and remains near contract lows for the most actively traded May contract. It is difficult to say whether this is due to expectations of ramped up imports (from the U.S.), or is a negative externality from the country’s ongoing battle with African Swine Fever. Possibly a combination of the two. Government procurement efforts on corn continue to lag behind what is typically the case (perhaps due to the lower prices).

The USDA did surprise some by offering up their mid-day grain inspections report. It was believed the release may be delayed due to a snowstorm in DC.  Much like many current market factors in corn, the report was a good/bad news prospect. Corn inspections more than doubled coming out of the holiday week, and was also 30% greater than the equivalent year ago week. The bad news is weekly inspections are still falling short of the level needed to achieve USDA sales goals (now roughly 1.3 mmt/wk). Still, the YTD inspection tallies are in good shape, seen at 19.5 mmt vs. 12.1 mmt shipped out this time last year.  There remains no lack of export interest around the corn market; but buyers are being aggressively courted by other suitors, such as Ukraine and South America.

The soybean market was the weak sister of the grains today (with meal a close second) as we revisit the $9.00 support level on March beans. January futures expired at noon. The weekly charts in the soy complex will get an early boost this week from the roll to March front month. That is particularly important for meal because it will close the gap lower to start the week. Trade volumes were minimal, cash was quiet with no farmer selling. Fresh inputs were sparse.

The primarily influences today were weather, poor Chinese economic data and African Swine Fever. Brazil saw some light weekend rains across the center-west of the country which are certainly welcomed even they don’t solve the overall drought.  Dryness in the center-west and the north-east along with flooding in north-east Argentina are issues to pay attention to but the weekend rains helped the market relax some today.  Chinese data published yesterday showed their economy continues to slow and this had world markets under pressure overnight and into today. Chinese soybean imports in 2018 were 8% lower year over year. Partly due to the trade war but also due to reduced feed demand. Yet another case of ASF has been reported in the Jiangsu province of China as this soy demand killer of a disease continues to spread throughout the country. The concern is that even with a trade war resolution, if you get one, China’s buying habits are being altered by this new reality. The next round of US-Chinese trade talks will take place in Washington on January 30-31 where high level trade representatives including Lighthizer and Liu. March 1 is the current deadline to reach a trade deal or else the US will raise existing tariffs from 10% to 25%.

After a lower finish to the overnight, the wheat complex did try to firm a bit once we moved into the day session. Thanks mostly to the early strength in corn, but as the corn rally fizzled there was nothing left to keep wheat prices firm, and wheat futures drifted aimlessly lower the rest of the day. Volume was very light. Reminiscent to Holiday themed trade, but it is hard to blame traders for sitting on the sidelines as the longer the government is shutdown, the longer we go with no USDA reports, and that makes it more difficult to maintain any enthusiasm.

Without USDA reports, there are not many other influences around to spark a rally. Demand is the one constant motivator, but the export lineup is basically nil to start this week. A far cry from what we saw this time last week. Eventually Russian wheat exports will slow, and more business will come to the US, but no one can say for certain when that will be. Over the weekend the Russian Grain Minister confirmed its total grain export forecast of 42 MMT, and said they are not planning on holding another meeting on grain exports until February. Does not sound like they are too concerned about wheat exports and that was behind Friday’s rally. China can change the dynamic to trade if they commit to US wheat, but the next round of trade negotiation between the US and China is not until the end of the month.

Anna Kaverman

anna@mercerlandmark.com


January 11, 2019 : Market Summary

Market Report

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


January 10, 2019 : Market Summary

Market Report

Thursday January 10th, 2019

March 19 corn closed down 5 ¾ at $3.76 ¼ and December 2019 closed down 5 at $3.99. March beans closed down 17 ¼ at $9.06 ¾ and November 19 closed down 14 ½ at $9.48. March wheat closed down 6 ¼ at $5.13 ¾ and July 19 closed down 6 ½ at $5.24 ¼. Crude oil closed up $.22 at $52.91.

The markets were clearly primed for good news; suffice to say, the bull did not get fed today. Futures slowly extended losses through the session, ultimately finishing five-plus cents lower.  The market closed into a one week low. Managed Money traders were viewed net sellers of about 10,000 corn today, which would leave them net long 45,000 combined futures and options.

Today was supposed to be “resolution Thursday”.  CONAB was the first to disappoint. Against the recent drumbeat of “hot and dry” in Brazil, many analysts were looking for a surprise reduction of crops. Brazil’s government did indeed reduce soy crop expectations, but perhaps not as much as many private analysts were hoping. They actually increased full year corn estimates fractionally, taking the first crop up to 27.45 mmt vs. 27.37 mmt prior estimate. They maintained a full 18/19 year corn export forecast of 31 mmt, which compares to 23.5 mmt last year, and the USDA currently at 29 mmt. Private analysts at AgroConsult later affirmed the export projection, despite recently reducing their crop estimates on the weather?  There was also some Argentine crop estimates around today; Rosario pegged the corn crop at 44 mmt, up from the prior range estimate of 42-43 (and well above last year’s drought-shortened crop of 32 mmt).  The corn crop is now said to be 86% planted, advancing 3.5% wk/wk.

The second area of disappointment was China. They did release a joint statement following three days of mid-level trade negotiations with the U.S., but it provided no real specificity with regard to potential Chinese commodity purchases. That’s not to say they won’t buy any corn, but the waiting game continues, and commodity traders tend not to be the patient type!  U.S. corn export biz has no doubt slowed some, particularly relative to more rosy forecasts. Some floating the idea China may remove some import duties next month to get the ball rolling. South Korea was finally back in for corn today, picking up a cargo.  Add to that the lack of information amid the U.S. gov’t shutdown, and it is very difficult to rally a market such as corn in a vacuum. Export sales were not released this morning, nor will CFTC positioning data be released tomorrow afternoon.  End-user markets were mixed; spot hogs, spot cattle, and dairy, a little better, while ethanol and deferred hogs were a little lower.

The soybean market broke sharply where besides the well-known supply side realities you had a few developments that helped set the market back off its latest recovery high.

1)  The Chinese response to this week’s trade meeting lacked the specifics on Ag purchases that the market was anticipating would be revealed.  The comments were optimistic and in sync with the US response, but we didn’t get detail on the quantities of Ag to be purchased or the timing of those purchases.

2)  The CONAB estimate on Brazilian soybean production at 118.8 mmt was bigger than the trade is plugging in.  At only .5 mmt below last year’s record crop, the CONAB estimate told the market there are no disasters here. In the absence of a USDA WASDE update this report took on more significance than usual.  To be fair, their estimate as of Jan 1 and doesn’t account for the past 10 days were additional loss was likely in the center west and north east.

3)  The weather forecast continues to promote rains for the second week of the outlook across that key center west region of Brazil.  If they materialize it would help to stabilize production declines.

As the market began to liquidate its recent length in the first hour we found some stops took us down to our lows where we spent the balance of the session trading sideways for the most part.

The products were not immune to the selloff either and the combined meal and oil losses ended up going deeper than the beans so board crush margins lost 2 cents to settle at $1.00/bushel. Elsewhere in the news, AgroConsult estimated Brazil 18/19 Soybean production at 117.6 mmt, that compares to the group’s previous forecast at 122.8 mmt.  They lowered yields to 54 mt/hectare compared to the 57 mt/ha last season. It was noted that Mato Grosso and Parana drought conditions have damaged some 3.5 mln mt of soy. They see Brazil 18/19 Corn production at 95.6 mmt up from last season’s 80.8 mmt.  Brazilian bean exports were est. around 73.0 mmt, and corn exports around 31.0 mln mt

Wheat price action was slightly lower throughout the night and it did not get any better during the day. The optimism that surrounded trade since the first of the year came to a screeching halt today, and all three classes of wheat finished the day between six and seven cents lower. So, what was behind the weakness we saw today? The results of the GASC tender that closed Wednesday was not very encouraging, the plethora of tenders this week have now concluded, the China talks which wrapped up earlier this week resulted in nothing new, the break in the US Dollar has subsided for the time being and because of the government shutdown, we will not get a USDA acreage report tomorrow to possibly confirm expectations of lower acres year over year. When you throw in this morning’s CONAB’s data, which was probably in line with estimates, but still a couple million above where the market is probably trading thus negatively impacted price action in bean and meal, it created a perfect storm and the entire grain floor found selling all day.

Looking ahead to Friday, it will be important for the wheat complex to find some stabilization. From a technical standpoint, today’s break did very little, but another lower settle tomorrow probably changes that. Chicago March traded above but has not been able to settle above the Christmas week highs, and trade will need a settle above those highs to get the bull back to being enthused about wheat. That may be tougher said than done as the export lineup has dried up, the China talks have concluded and there is still no confirmation that China bought or is willing to buy any wheat, and with the government shut down, there are no USDA reports.

If we had a government report on Friday, the average estimates of traders and analysts for total winter wheat acres comes in at around 32.279 mil acres. The total includes 22.727 mil acres of HRW wheat, 6.019 mil acres of SRW wheat and 3.486 mil acres of White. Keep in mind, late last week Informa pegged total Winter wheat seedings much below this average guess – at 31.513 mil acres.

Anna Kaverman

anna@mercerlandmark.com


January 8, 2019 : Market Summary

Market Report

Tuesday January 8th, 2019

March 19 corn closed down 2 ¼ at $3.80 and December 2019 closed down 1 at $4.02 ¾. March beans closed down 5 ¾ at $9.18 ½ and November 19 closed down 3 ¼ at $9.57 ½. March wheat closed up 1 at $5.17 ¾ and July 19 closed up 2 at $5.29. Crude oil closed up $1.29 at $50.11.

Corn bulls were revved up and ready for action as overnight and early trade erased the prior day’s (and Friday’s) highs.  Unfortunately, positive vibes don’t fill Panamax vessels, and the absence of a major statement out of U.S.-China trade negotiations promoted a late sell-off. Managed Money traders were viewed small net sellers again today, which would leave them net long about 45,000 combined futures and options.

China remains the subject. If you like the topic, get ready for more, as the talks have been extended another day through Wednesday. One would think the extension is a positive. But the continued absence of any tangible trade action in corn by the Chinese no doubt disappointed some of the weaker market bulls.  In an apparent concession, China approved six new GMO varieties, including one for corn. This likely adds some validity to the idea that the Chinese will be around our markets at some point for corn. A final pact is still likely many weeks away, but a “mini-deal” that at least spells out some of China’s intended commodity purchases would be welcomed by all.

One of the few government market reports still standing is the weekly EIA energy blast. Expect the report to have overall bearish feature for ethanol, as it so often does in the first week of January. Production will “revert to the mean” some after the prior 3% drop, likely bouncing 2% off of a three month low.  Producer margins have improved off the early December lows, but still remain in negative territory (20-30 cents/bu loss), when including all costs. Modest concern about Brazil and Argentina weather continues to be a feature. Even though most of Brazil has good moisture in place today, there is a good chance many important crop areas will become too dry in the second half of this month without better returning rainfall. The northeast is already dry and the next ten days will build a ridge of high pressure into the interior south drying out those areas next.  Argentina weather will continue to be very good.

The soybean market was unable to sustain its rally momentum and reversed lower off a test of the downtrend and 200 day moving average where the December rally also was turned away.  Fundamentally, there was very little around the market to talk about although volumes were slightly better with the reversal action and index fund roll. The trade talks in Beijing were extended by one more day through tomorrow, which is a positive sign, although the lack of any detail on progress or trade commitments worked against the futures today. Nothing in the cash or spread activity hinted at any new demand.

Nothing changes and for beans, no news is not good news in a market that is counting on new and desperately needed demand revelations to stimulate a rally in a soundly oversupplied fundamental stat scene. As far as the Southern Hemisphere outlook, the forecast continues to promote heat and dryness across Paraguay and a stretch of Brazil from Center-West to the North-East which is likely going to lead to further production declines. As long as that crop is shrinking, we shouldn’t roll over completely and that uncertainty keeps an underlying bid in the market. This afternoon, the USDA extended the deadline for Market Facilitation Program applications beyond January 15th due to the government shutdown. The deadline will be extended for a period of time equal to the number of business days FSA offices were closed, once the shutdown ends. Besides trade talks and hopefully results, the market will continue to key in on weather and in the absence of a USDA report we will sift through Brazil’s CONAB production report on Thursday.

The wheat complex was able to shrug off the weakness coming out of corn and soy and traded slightly higher throughout the day.  All grain markets rely on demand revelations to stimulate trade, and with government offices shut down, we are not going to get it from the USDA. Price action in wheat today was able to benefit from a plethora of tenders coming to fruition over the next 24 hours. Bangladesh is in for wheat, and although most of this business will probably go Russian, we can still win some of it. Algeria is in, and even though most of this business will most likely be French or Black Sea, we could grab a slice of it. Taiwan is in and it will be all US. Jordan is in, but they will probably pass. That is a TON of potential business, and probably the big reason the wheat complex separated itself from corn and soy today. The wheat complex is also still benefitting from the technical outlook on trade. Taking a look at Chicago March, after testing the $5.00 level last Wednesday the market reversed, made a higher high last week and today it was able to take out the weekly high made during Christmas week.

Anna Kaverman

anna@mercerlandmark.com


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