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December 8, 2017 : Market Summary

Market Report

Friday December 8th, 2017

March 17 corn closed up 1 ¼ at $3.52 ¾ and July 18 closed up ¾ at $3.69 ¼. January 18 soybeans closed down 2 ¼ at $9.89 ¾ and March 18 closed down 2 ¾ at $10.01 ½.  March wheat closed down 2 ½ at $4.19 and July 18 closed down 3 ¼ at $4.45 ¾. Crude oil closed up $.69 at $57.44.

FOR THE WEEK ENDED 12-8-17

CORN – Corn posted a key reversal lower to begin the week, and then continued to leak lower throughout the week.  For the week, March corn gave back all the previous week’s gains, plus more, closing $.06 lower at $3.52 ¾ per bushel.  The July contract fell $.05 ¼ cents for the week to $3.69 ¼, and December 2018 was 4 ¾ cents lower at $3.85 per bushel.  Corn continues to stagnate between $3.48 and $3.65 per bushel on adequate demand, ample supplies, and a higher US dollar.  There just wasn’t much to talk about in corn this week.

Weekly export sales were at the low end of expectations at 34.5 million bushels, Export sales are running 27% behind last year. Total export sales 901 million bushels are 47% of the USDA’s 1.925-billion-bushel target.  We usually have 53% sold by now.  Weekly export inspections were below estimates at 23.1 million bushels.  Year to date inspections are running 43% behind last year.  The USDA is projecting year on year exports to be down 16%.  We have a lot of catching up to do.  It wouldn’t be surprising to see exports cut and ethanol increased on future USDA reports. Weekly ethanol production set a record at 1.108 million barrels per day, up 42,000 bpd.  Stocks increased 500,000 barrels to 22.5 million barrels.  The crush margin was unchanged from the previous week at 8 cents per gallon. Argentina’s corn crop is 38% planted.  Early planted corn will enter pollination soon.  This year will likely see late planting and harvest overlap.

OUTLOOK:  The next WASDE report will be released on December 12th.  The average ending stocks estimate is 2.478 BB versus 2.487 BB last month (lower exports, higher ethanol use).  World ending stocks are projected at 202.72 mmt versus 203.9 mmt previously.  Brazil’s corn is predicted at 93.26 mmt versus 95.0 mmt last month and Argentina is estimated at 41.77 mmt compared to 42.0 mmt last month.  Look for corn to respect upside resistance from $3.60 to $3.65, but if the USDA report is bearish, we could see new contract lows.  The contract low in the March contract is $3.48 ¾ per bushel.  Influence from South American weather forecast will also drive prices.

SOYBEANS –  Soybeans responded to less than expected weekend rains in Argentina with “gap and go” upside type action to begin the week. Gains were extended on Tuesday when January soybeans jumped to their highest price since late July, hitting $10.15 per bushel.   However, uncertain weather forecasts for South America and profit-taking resulted in a pullback in prices, filling the gap left on Monday.  The USDA also revised a November 30th soybean sale to China from 525 mt down to 393 mt. China’s Dalian soybeans fell to their lowest level since May. A weaker Brazilian real also promoted sales from the Brazilian farmer, which lent pressure to soybeans. For the week, January soybeans tumbled 4 ½ cents lower to $9.89 ¾, July declined 4 ¾ to $10.21, and November 2018 was 4 ¼ cents lower at $10.04 ¾ per bushel.

Early week concern over dryness in Argentina prompted the sharp rally in beans, but favorable weather in Brazil should make up for at least a portion of Argentina’s losses.  It is very early in the year to declare big losses (crop is 53% planted, 4.4% ahead of last year), and the market seemed to absorb the idea as the last half of the week saw prices decline.  The average trade guesses for Argentina and Brazil’s soybean production for the December 12th WASDE report don’t reflect excessive losses.  Keep in mind, there is not a significant correlation between La Nina events and below trendline yields in South America.  The Australian Bureau of Meteorology confirmed La Nina, but believes it will be a weak and short-lived event.  The bright spot for beans continues to be China.  China imported 10.7% more soybeans in November compared to last year.  In the last two months, China’s soybean imports are up 11.4% from last year.  The USDA is projecting a 3.7% year/year increase.

Weekly export sales were very good at 74.1 million bushels, but we’re still 16% behind last year’s pace.  Total soybean sales of 1.335 billion bushels are 59% of the USDA’s 2.25-billion-bushel target.  We usually have 74% of the forecast sold by now. Weekly export inspections were 66.2 million bushels, better than estimates, but cumulative year to date inspections are down 12.5% from last year.  The USDA is forecasting a 3.5% increase in year/year exports.  I would look for exports to be cut on subsequent balance sheets.

OUTLOOK:  Soybean prices will need sustained concern over South American weather (it’s just too early to write off the crop) and fresh Chinese demand to make a run higher.  Without either, ample world supplies will be a hurdle to higher prices.  Average trade estimates for the December 12th report are:  US ending stocks 438 million bushels versus 425 million last month, world ending stocks 97.82 mmt versus 97.9 mmt previously, Brazil’s production at 108.21 mmt versus 108.0 mmt previously, and Argentina 56.52 mmt compared to 57.0 mmt last month. South American weather forecasts will continue to be headline news to dictate price direction.  Without any new surprises, this week’s $10.15 high will act as resistance; very short-term support lies at $9.85 ¼, then $9.77 to $9.67 per bushel (the low in November).

Additional comments: Contract changes for the week ended December 8th:  Minneapolis March wheat collapsed 20 ¼ cents lower to $6.11 ¼ per bushel.  Both Chicago and Kansas City wheat set new contract lows, posted key reversals lower on the weekly chart, and each closed 19 ½ cents lower at $4.19 and $4.18 per bushel respectively.  Crude oil declined $1 per barrel to $57.36 per barrel, ULSD was 1 ¼ cent lower, RBOB dropped 2 ½ cents, and natural gas crumbled 29 cents lower.  The US dollar index was up a full point for the week, as of mid-afternoon Friday.


December 5, 2017 : Market Summary

Market Report

Tuesday December 5th, 2017

March 17 corn closed up ¼ at $3.53 ¾ and July 18 closed up ½ at $3.70 ½. January 18 soybeans closed up 10 at $10.08 ½ and March 18 closed up 10 ¼ at $10.20 ½.  March wheat closed down 2 ½ at $4.32 ¾ and July 18 closed down 2 ½ at $4.58 ¼. Crude oil closed up $.18 at $57.67.

The corn market turned more mixed today. Futures tried to recover a bit early, trading as much as $.03 higher. Much like Monday, though “someone” hit the sell button around the noon hour, quickly erasing most of the day’s gains. Corn would ultimately finish the day fractionally better, achieving a “Turnaround Tuesday bounce” in name only.  Managed Money traders were viewed relatively flat in their positioning of the day, which would leave their net short in the market near 210,000 futures and options. The most active topic of discussion remains the potential for a mid-month ridge forming in Argentina. Given that country’s importance in beans and meal relative to other commodities, it is no secret those are the main markets to benefit. That being said, private estimates of both Argy and Brazil corn crops have been trending lower of late; weather in the former, and the potential for lost second crop acreage in the latter. As per usual, Wednesday is “EIA Day”, and we would lean toward more of the same. Production will likely increase a little, probably hanging out near recent record high levels.  Stocks could also build slightly, given the likely presence of a few imports. Ethanol markets have been quite flat this week, implying crush margins are a little better relative to last week.

The soybean market (and meal) by and large continues to be the only market with a pulse. Futures gradually rallied into the dawn hours, and continued to do so throughout most of the session. Once again, soy itself managed double digit gains, though some late profit-taking dragged the market five plus cents off the day’s highs. Meal and Oil continued their recent divergence, with the latter finishing $6 higher, and the former finishing a few points higher. Managed Money traders were viewed net buyers of 9,000 beans, 8,000 meal, and 4,000 oil of the day.  They remain net long the entire complex, with particular focus on meal (60k net long) rather than oil (15k net long) or soy itself (20k net long). Weather chatter remains at the forefront of discussion in soybeans. A mid-month ridge is still very much in the outlook for many Argentina growing regions, which is maintaining a “hot and dry” outlook for the region for at least the next two weeks. Far-Southern Brazil will also dry down over this timing, should the forecast hold, which is sparking plenty of “La Nina” chatter. Depending upon whether you are glass half full or empty, the dry stretch will either help speed up planting progress (which is lagging behind) or introduce crop stress. Point being, it is very early, so trying to project a disaster is somewhat premature at this stage. There is some hope for rain roughly two weeks out that may calm jitters, though confidence is still quite low.

The wheat complex struggled to find its footing today, with prices trading slightly lower through most of the session. What little news that was around was surely not very friendly for wheat. The Russian wheat export program continues to be in full swing following a mammoth crop, Egypt feels they have enough reserved wheat for months. On paper it would make you think that the GASC might be done for a while, but in reality, this statement is usually a precursor for an upcoming tender and export activity on the agenda this week has so far not been as active as the past few weeks. Any extended rally seems to fizzle before it gets started, and in hindsight, most times there has been positive influential news, funds have been there to sell a ten to fifteen cent rally and add to their already short position. So, what do we have then? There is a market pattern, at least in Chicago that keeps methodically stair-stepping down. Over the last half of September, the March trading range was between $4.80 and $4.65. Through most of October it was $4.65 to $4.50. From late Oct through late Nov it was $4.50 to $4.35, and currently from late Nov through now it has been $4.40 to $4.25. The market is having a tough time trying to stabilize.

Anna Kaverman

anna@mercerlandmark.com


December 4, 2017 : Market Summary

Market Report

Monday December 4th, 2017

March 17 corn closed down 5 ¼ at $3.53 ½ and July 18 closed down 4 ½ at $3.70. January 18 soybeans closed up 4 ¼ at $9.98 ½ and March 18 closed up 4 ¼ at $10.10 ¼.  March wheat closed down 3 ¼ at $4.35 ¼ and July 18 closed down 3 ½ at $4.60 ¾. Crude oil closed down $.89 at $57.49.

The corn market posted small gains overnight, led by soy, as traders debated the prospect for a high-pressure ridge forming in Argentine growing regions. Unfortunately for aspiring bulls, the day’s highs were made on the open, and corn spent the balance of the day slowly selling off. Corn would ultimately finish lower, which would be $.07 below the overnight highs.  Managed Money traders were viewed net sellers of 18,000 corn, which would take their net short in the market back up to 210,000 futures and options. Some of today’s pop may have been funds looking to re-own corn shorts after losing a healthy chunk in the recent Dec futures (and options) expiration. There was a definite weather tinge to trade today. A dry week/weekend in the US Midwest likely helped farmers make headway on the final ~600-700 million bushels left in the field.  The Crop Progress report was discontinued until next season last week.

The soybean market was on fire Sunday night, posting double digit gains on the highs. The market managed to hold together some gains, unlike the corn and wheat markets. The broader bean complex remains an “oil vs. meal” story, with the former losing significant ground to the latter. This was best demonstrated by last week’s CFTC report, which found spec fund traders sold roughly 20k oil and bought roughly 20k meal. Today the funds were viewed as net buyers of 5,000 beans and 6,000 meal, while selling 4,000 oil.  Heading into tonight, they are believed over 10,000 net long beans. It was all about the “ridge”, at least early. Meterologists were busy overnight writing wires suggesting Argentina will return to a dryer trend after a smattering of welcome rains fell late last week into this weekend.  A ridge of high pressure is expected to develop later this week which will promote hot and dry weather for what is believed to be the next two weeks. Keep in mind, it is still very early. Both corn and soy there are less than 50% planted, according to the Buenos Aires Grain Exchange. While this may allow planting to advance in areas that recently received good rains, it will also raise crop stress issues later this month if the hot/dry lasts. Keep in mind, Argentina accounts for nearly 50% of all global meal exports, which has kept a bid under that portion of the complex. Far southern Brazil is also expected to dry down significantly during the next two weeks, though subsoil moisture should be good enough to see them through it.  Most of the rest of Brazil appears to be in good shape over the next two weeks. Brazil farmers are very close to being done planting soy.

The wheat complex was looking to start the week where it left off on Friday. Initially the trend seemed to be opting for that direction as the complex posted modest overnight gains led by Chicago. However, by midday the weakness in corn started to take its toll on the wheat markets. Price action in Mpls would be more two-sided, but late selling across the entire complex helped trade settle slightly lower across the board. Early on it was Chicago that tried to lead the rally, after all it is here where the big short resides. The problem is that their percentage to open interest stands at around 23%, and we have seen that percentage above 30% before. Granted the large spec is at a significant level and we can start seeing liquidation at any time, but they usually like waiting until that percentage gets closer towards that 30% threshold. The inundating rains across Australia over this past weekend which put around 4 MMT of an already reduced crop in harms way did not get much attention this morning. Export activity on the agenda this week so far is not as active as the past few weeks, but it is early.

Anna Kaverman

anna@mercerlandmark.com


December 1, 2017 : Market Summary

Market Report

Friday December 1st, 2017

March 18 corn closed up 3 at $3.58 ¾ and July 18 closed up 3 at $3.74 ½. January 18 soybeans closed up 8 ½ at $9.94 ¼ and March 18 closed up 8 ¼ at $10.06.  March wheat closed up 5 ½ at $4.38 ½ and July 18 closed up 6 at $4.64 ¼. Crude oil closed up $.84 at $58.29.

FOR THE WEEK ENDED 12-1-17

CORN – December corn pushed to a new contract low this week on a lack of fresh bullish news with December positions rolling forward.  The new low in the December contract dropped to $3.35 ½, while the March contract held above its $3.48 ¾ contract low.  A late week recovery was inspired by month end fund short covering.  There were huge deliveries against the December contract.  This is not normally friendly to prices.  For the week, March corn jumped 3 ¾ cents higher at $3.58 ¾, July 3 ¼ cents higher at $3.74 ½, and December 2018 2 ¼ cents higher at $3.89 ¾ per bushel.

Weekly export sales were dismal at just 23.6 million bushels, well below expectations and an 8-week low.  This was below what is needed on a weekly basis to achieve the USDA export target.  Total export commitments at 867 million bushels are 27% behind last year.  The USDA’s 1.925 billion bushels export forecast is a 16% year-on-year decline.  Weekly corn sales need to average 26.3 million bushels per week to ring the bell.  Cumulative export inspections are down 42% from a year ago.  It may not be recognized on the December report, but the USDA’s export outlook may be too high.  It has been reported that China has bought 700 tmt of corn in the last month, mainly from the US.  It is currently 16% cheaper for Chinese end users to import corn versus paying domestic prices.

The USDA released their 10-day baseline projections this week.  These numbers are used mainly for budgetary reasons.  They do give us a peak into what the USDA may use at the February Outlook Forum.  For 2018 corn, they plugged in 91 million acres, up 600,000 acres from 2017; trend-line yield at 173.5 BPA versus 175.4 BPA this year; production at 14.52 billion bushels versus 14.58 billion this year; ending stocks at 2.607 billion bushels versus 2.487 billion bushels this year.  At the 2017 Outlook Forum, the corn yield used for 2017 was 170.7 BPA.

The EPA’s final 2018 biofuels blending mandate was left unchanged from those proposed in July.  Conventional ethanol blending was left at 15 billion gallons, unchanged from the 2017 level.  Biomass-based biodiesel mandate at 2.1 billion gallons is up slightly from this year’s 2.0 billion gallons, but was unchanged from the July proposal.  The 2.1-billion-gallon level for biodiesel will remain in effect for 2019.

OUTLOOK:  The next WASDE report will be released on December 12th.  The corn balance sheet is expected to show an increase in the ethanol usage category and possibly a cut to exports.  We won’t see trade estimates until closer to the report date.  The seasonal tendency for corn is to trade higher through the first half of December, but this year may be a year to be cautious.  Funds are very short and unless they have a reason to cover their position, like a significant, well defined South American weather problem, they could drift sideways/lower until the December 12th report.  As far as fresh market impacting news – take what you know, put it in a bag, shake it up, pour it out – same stuff, just rearranged.  March corn is bracketed by $3.48 on the downside and $3.65 on the upside until something gives.

SOYBEANS –  Soybeans slipped lower for most of the week on disappointing sales and month end fund positioning, as well as chatter that the USDA’s export number will need to be reduced on the December report.  A bump higher on the first of the new month, erased earlier losses to allow for a slightly higher weekly close.  Bulls point to areas of dryness in Argentina, while bears tout improved prospects for possibly a record soybean crop in Brazil.  The USDA’s last estimate for Brazil’s soybean crop was 108 mmt.  A news survey put the average trade estimate at 109.4 mmt.  The BAGE estimated Argentina’s bean crop 42.5% planted versus 46% complete last year.  China continues to slowly cover their needs, which were thought to exceed 30 cargoes for December, as of November 27th.  For the week, January soybeans were up a penny at $9.94 ¼, July was 3 ¼ cents higher at $10.25 ¾, and November 2018 was up 4 ¼ cents at $10.09 per bushel.

Weekly export sales were within expectations, but continue to fall behind last year’s pace.  Sales were 34.6 million bushels.  Total export commitments at 1.26 billion bushels are now 18% behind last year.  The USDA’s 2.25 billion bushels export forecast is a 3.5% increase year-on-year.  We must average a record 25.3 million bushels of sales per week to complete the USDA’s number.  Last year, we averaged just 17.3 million bushels/week from this point through the end of the marketing year.  China has, so far this marketing year, bought 19.36 mmt of US beans compared to 25.68 mmt last year.  Export inspections continue to fall behind last year with cumulative inspections 120 million bushels behind last year, while the USDA is pegging a 76-million-bushel export increase.  We have lots of ground to make up.  US soybeans are currently competitive into China through January, then Brazil is the market.  Many expect the USDA to lower the export category on the December report.

The USDA’s 10-year baseline forecast puts US soybean acres at 91 million acres or above for the next 10 years!  For 2018, they have soybean acres up 800,000 acres at 91 million acres; trend-line yield at 48.4 BPA versus 49.5 BPA this year; production at 4.36 billion bushels versus 4.425 billion this year; ending stocks at 376 million bushels versus 425 million this year.  Last year, the February Outlook Forum used a bean yield of 48.0 BPA for 2017.

OUTLOOK:  In anticipation that we could see soybean exports cut on the December report, funds holding length, and the inability to close over $10 on the board, we could see a mixed trade for the time being.  Support to the market comes from the positive seasonal trend and the uncertainty over dryness in Argentina.  January soybeans have been in a $9.66 ½ to $10.08 ½ range since November 9th.  Unless the December 12th report is a surprise, or South American weather becomes a bigger problem, we are likely to spend more time in this range.

Additional comments: Contract changes for the week ended December 1st:  Minneapolis March wheat fell 7 cents to $6.31 ½, Chicago up 3 ¾ at $4.38 ½, and Kansas City up 5 ½ cents at $4.37 ½ per bushel.  Crude oil was down 59 cents at $58.36, ULSD down 1 ½ cents, RBOB fell 4 cents, and natural gas rose 14 ½ cents.  The US dollar index was .159 higher as of mid-afternoon on Friday.  The CME announced they would launch a bitcoin futures contract on December 18th.

Anna Kaverman

anna@mercerlandmark.com


November 27,2017 : Market Summary

Market Report

Monday November 27th, 2017

December 17 corn closed down 3 ½ at $3.38 ¾ and March 18 closed down 3 ¼ at $3.51 ¾. January 18 closed up 2 ¾ at $9.96 and March 18 closed up 3 at $10.07 ¾. December wheat closed down 6 ¼ at $4.09 ½ and July 18 closed down 5 ¾ at $4.55 ½. Crude oil closed down $.75 at $58.16.

No rest for the weary in corn as futures steadily down-ticked throughout the day, ultimately finishing lower. It felt like the market was trapped between the lower tug of wheat and the better tug of beans (more specifically, meal). CFTC data after the close offered no real surprises. For the week ended Tuesday 11/21, large non-commercial (aka “Fund” or “Large Spec”) traders were net buyers of nearly 15,000 corn contracts, which trimmed their net short back to just under 250k. When including selling over the past several days, we estimate they are heading into Tuesday short just over 260,000. The weekly crop progress update from the USDA found farmers have now harvested 95% of their corn, advancing 5% wk/wk, which was in-line with expected. That compares to 98% average. This would imply there are just under 4 million US corn acres left to harvest. Iowa and Wisconsin are the two largest at 524k and 580k, respectively, with Ohio & Indiana next up (420k and 376k).

The soybean market spent the overnight session trading lower but ended the day in the black in a two-sided trading session.  Beans continue to maintain South American risk premium due to dry conditions in parts of Argentina where the crop is estimated to be around 41% planted as of last Thursday. Over the weekend Argentina saw some rainfall but coverage and totals were not great. Another system is forecast to provide better relief and coverage later this week but there will continue to be areas of concern so the market is likely to maintain some of that risk premium. Conditions in Brazil are mostly favorable with that soy crop estimated to be 84% planted as of Friday. Weekly export inspections in beans totaled 1.578 mmt down from 2.275 mmt last week and compares to 2.243 mmt this week a year ago.

Disappointing overnight price action, with Chicago finishing the night the poorest. Markets were under pressure again for most of the day but the script flipped with Mpls finishing the day the weakest. Trade today seemed to be largely following the weakness that took place Friday. This has really shut off all farmer movement and there was not much to start. Egypt’s GASC announced after today’s close they were in for wheat for Jan 11 thru Jan 20 shipment. Their last purchase was 12 days ago when they bought four cargoes of Russian wheat. This was very similar to their prior tender, but what was shocking was how there was no risk premium built in on any of Russia’s offers after Egypt’s court ruling re-instating its zero level ban of the common grain fungus ergot. Traders selling to Egypt have seemed to grown accustomed to the country’s fickle import rules and irregular inspection procedures, but no risk premium from Russia could turn into a dangerous proposition, especially since there are already around 15 vessels from Russia that still need to go to Egypt while this ergot ban once again goes through the court system. Crop progress this afternoon showed winter wheat emergence at 92% vs 88% last week, 92% this time last year and 92% normal. The two states with the largest acres still awaiting to emerge are Kansas with 487,000 acres and Texas with 376,000 acres. Winter wheat conditions were down another 2% overall (4% in the past two weeks) to 50% G&E. For the third week in a row, the HRW wheat states led the declines as they were off more than 4% from a week ago to 38% G&E.

Anna Kaverman

anna@mercerlandmark.com


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