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February 14, 2019 : Market Summary

Market Report

Thursday February 14th, 2019

March 19 corn closed down 4 at $3.74 ¾ and December 2019 closed down 3 ¼ at $3.99 ¼. March beans closed down 13 at $9.03 ½ and November 19 closed down 10 ¾ at $9.48. March wheat closed down 15 ¼ at $5.07 and July 19 closed down 13 ¼ at $5.13 ¼. Crude oil closed up $.48 at $54.79.

It was a heart-breaker of day for the grain markets where just about all the inputs around the news weighed in on one side and tipped prices lower, just not a back breaker. After running the bean stops to the topside just two days ago, today we ran them back to the downside putting the chart right back into its key trend support against $9. Trade war optimism was deflated once again following a pair of media reports. The first report was that the President is considering a 60-day extension on the pause in tariff hikes to allow negotiations to progress without further penalty. The second was a headline from Bloomberg that said; “In closed-door sessions, the sides have failed to narrow the gap around structural reforms to China’s economy that the U.S. has requested”.

Weekly export sales for the week ending Jan 3 fell short of trade expectations although those expectations were overly optimistic considering the holiday timings.  Nevertheless, the feature was soybean cancellations by China -807 tmt and unknown -444 tmt which more than offset other non-Chinese purchases.  That was not a good week for bean export commitments.

Informa published their updated acreage projections with corn acres at 91.6 million up from 89.1 last year, beans 86.0 million vs. 89.2 last year, spring wheat 13.6 million vs. 13.2 last year and cotton 14.6 million vs. 14.1 last year.

Typically, export sales data is a fade, and those percentages probably go up on month old data, but the China cancellations put a wrinkle in that thought process today. It was though wheat would see some early pressure across the entire grain complex once the market re-opened for the day session. But, as has been the case over the past several months, a headline news flash would change the dynamic of trade for the rest of the day. Around mid morning a Bloomberg headline read “China and US said to be far apart on framework for monitoring Chinese action of structural reform”. Most took this as the recent China perspective of how things on the negotiating table are going, and the markets’ reaction was not very friendly.

Granted, export sales this morning was abysmal, coming in at only a combined 161 TMT. And we talked yesterday that if China was not in the report, sales were going to be disappointing. But the prospect of US/China negotiations dragging on for another 90 days is a dagger to the heart of old crop wheat. The wheat complex yearns for demand. The outlook for huge US and World stocks come summertime. Which will only get larger if World weather is better than last year and that should not be too difficult, is a real threat if China does not turn to the US for any wheat.

Informa updated their acreage estimates for the coming year. Looks like they left winter wheat acres alone at 31.290 mil. That puts All Wheat acres at 46.782 mil vs 47.80 mil last year. Keep in mind, throughout the early stages of the Fall months, many traders (including myself) had estimated that wheat acres would top 50 mil this year. But that thought process started to change as we moved through the Fall period and heavy rains saturated fields, with many farmers unable to get their crop in the ground. With the export pace not picking up nearly as much as we had hoped as we have moved into the second half of the export season, and because of that the burdensome stocks that it has created, it was a blessing in disguise that Mother Nature dumped all that rain on the farmer last Fall, or we would be looking at an even larger stocks problem come summertime.

Anna Kaverman

anna@mercerlandmark.com


February 11, 2019 : Market Summary

Market Report

Monday February 11th, 2019

March 19 corn closed down 1 ½ at $3.72 ¾ and December 2019 closed down 1 ½ at $3.97 ¾. March beans closed down 9 ½ at $9.05 and November 19 closed down 8 at $9.49. March wheat closed up 1 at $5.18 ¼ and July 19 closed up ½ at $5.22 ¾. Crude oil closed down $.31 at $52.78.

The corn and soybean markets started the week off on a down note. Beans led the break on follow through from Friday’s crop report. That report for beans while less bearish than feared, still highlighted record domestic and global stocks and today’s price action better reflected that reality than Friday’s. $9.00 front month beans represent key support with the uptrend still intact for now. In the case of corn, the selling today was influenced by the weakness in beans but really had more to do with follow through from the negative technical developments on Friday including an outside day lower and violation of the uptrend. The corn market is long and liquidation that began on Friday continues today.

The lower soybean board tugged meal flat price into negative territory as well although the oil share spreading helped to provided needed underlying support to meal which is already down against contract lows. The meal exports confirmed by the USDA were not much of a factor today. It was a quiet day from the trade war headline front. We would expect that to be the exception and not the rule from now on up to the March 1 deadline. Negotiators are in Beijing this week with the high-level reps stepping in for Thursday Friday as the lower level teams lay the ground work through Wednesday.  Negotiations may return to Washington next week if progress is being made. Time is running short with big hurdles to overcome if an agreement will be made by March 1st.

Weekly grain inspections data for export showed corn inspections of 744 tmt falling short of expectations for closer to 1 mmt, wheat inspections of 562 tmt were a little stronger than expected and soybeans at 1.063 mmt were also a little stronger.  Corn inspections to date are 23.209 mmt compared to 15.736 mmt this time last year, wheat inspections to date are 15.389 mmt vs. 17.143 and beans 22.628 mmt vs. 36.051.

The wheat complex was able to battle back after a tough opening half of the day and finished the session mixed. The stocks data from Friday’s crop report is going to make it difficult to sustain rallies especially in new crop. It is bad enough to see a 1.0 bil carryout, but to get to that number without adjusting exports lower is a huge concern. To make current USDA export projections of 1.0 bil bu, wheat exports will need to average almost 700 TMT per week for the rest of the marketing year, and thus far this year, that has occurred a whopping one time. The market is already projecting an increase year over year in World production. It is almost a necessity for the US to lower their acreage year over year just so some of those stocks could get depleted. If China comes swooping in and buys 5 MMT of wheat everyone will win.

Anna Kaverman

anna@mercerlandmark.com


February 6, 2019 : Market Summary

Market Report

Wednesday February 6th, 2019

March 19 corn closed down ¾ at $3.80 and December 2019 closed down ½ at $4.03. March beans closed up 1 ½ at $9.21 ¾ and November 19 closed up 2 ½ at $9.63. March wheat closed down 1 ¼ at $5.26 and July 19 closed up 1 ½ at $5.32 ¼. Crude oil closed up $.34 at $54.34.

Corn market trade remains extremely choppy and indecisive ahead of Friday’s important USDA reports. In fact, even when compared to the rather subdued sessions of late, this was a particularly dull affair. Managed Money traders were viewed marginal net sellers today, which would leave them net long just under 50,000 combined futures and options.

The only real data of substance to come out today was the weekly EIA report, which actually was quite interesting for all involved, as it was heavily influenced by the historic cold that recently gripped the Midwest. Weekly production of 0.967 million bbl/day of ethanol was a -4.4% drop from the prior report and would be the lowest single week production total seen in well over one year (since October 2017). With the gov’t fully back in business (at least for now), the USDA will release export sales tomorrow. Unfortunately, it will be rather stale data, harkening back to the last week of December. Not worth spending much time discussing, much like the CFTC reports, until they are caught up. The USDA still has not reported a new corn sale since resuming 8 AM daily reporting.

The soybean market continues its choppy overall pattern with a higher flat price settlement for a fourth consecutive session although the bull spreads once again did not participate for a second day which is a red flag. The feature trade once again was soybean oil which took out its key reversal from Friday and resumed its rally into new highs. The USDA flashed 2.603 mmt of beans sold to China and another 274 tmt of beans to unknown when combined with yesterday’s 612 tmt it takes the total confirmed this week to 3.49 mmt out of an expected 5 mmt commitment from last week. This follows 5 mmt that was purchased in December following the G20/Trump-Xi meeting in Argentina.  The crop report on Friday is expected to re-enforce a bear stat scene in soybeans where both domestic and global supplies sit at record highs even when factoring in the smaller Brazilian crop than originally forecast.  Elsewhere in the news, Japan now reports a case of ASF, although a different strain, that has led to a cull of 15,000 pigs.

The wheat rally stalled today for multiple reasons, but probably the most logical, is with the huge data dump the USDA is going to give us Friday, who wants to take on a huge position ahead of those reports? Especially after how quiet trade has been over the past several months. But with futures holding steady in the upper end of its recent range, trade is positioned very nicely in case we do get friendly data that is influential enough to give the markets that breakthrough it has been yearning. Friday, we get the next wave of export sales data, but the only relevance of this report would be if we see something out of the norm as the data is from the week ending December 27.

Friday, we will get US final 2018 Crop Production, Quarterly Grain Stocks data and winter wheat seeding reports. First the bearish side of the report. Analysts are forecasting US 18/19 wheat ending stocks at 989 MB vs the Dec report of 974 MB and it may be even eclipse 1.0 BB as the export program over the first half of the year was abysmal. World ending stocks should see little change, but there too we will probably see a little bigger number than the 268.1 MMT we saw in the December report. Now for some friendly data. USDA quarterly US wheat stocks as of Dec 1, 2018 should come in around 1.957 bil bu vs 2.379 bil bu on Sept 1 and 1.873 bil bu on Dec 1 of 2017. The biggest piece of friendly data should be winter wheat acres. Expectations are for the report to show around 32 mil acres of winter wheat planted vs 32.535 mil last year. Of this total, HRW acres should come in around 22.5 mil, SRW acres around 6 mil and white wheat acres around 3.5 mil for 2019.

Anna Kaverman

anna@mercerlandmark.com


February 5, 2019 : Market Summary

Market Report

Tuesday February 5th, 2019

March 19 corn closed up 1 ½ at $3.80 ¾ and December 2019 closed up 1 at $4.03 ½. March beans closed up 1 ¾ at $9.20 ¼ and November 19 closed up 2 ½ at $9.60 ½. March wheat closed up 1 ½ at $5.27 ¼ and July 19 closed down 2 ½ at $5.30 ¾. Crude oil closed down $.89 at $54.00.

Quietly mixed day in the corn. Early action skewed mostly negative, but the markets turned higher mid-day and maintained that modest bid into the close. Managed Money traders were viewed net buyers of another 5,000 corn today, which would leave them net long an estimated 50,000 combined futures and options.  If you listen real close, you will hear traders shuffling their feet under their desks, as they await the big USDA reports on Friday. Or a resolution on China, perhaps, but that is the “next” issue on the docket at this point. In the mean time, futures continue to struggle with light news flows and interest.  Keep in mind, most traders who want a position have likely already acquired it on the various dips and blips seen over the past few weeks, if not months.

We do get some hard data out of the EIA tomorrow morning. The EIA reports should be interesting sooner or later, given the extreme weather seen in the Midwest over the past week-plus. We suspect it will not appear in this week’s release due to usual reporting delays. In this report, we are looking for production to uptick 1% or perhaps slightly more. Note, in next week’s report, we would be looking for a subsequent 3-4% decline in production off those levels. Blender demand will likely be weaker, while residual flows should be stronger. Weather continues to be a mixed bag for Brazil, along with mostly favorable conditions in Argentina. The long prophesized increase in precip for Brazil appears to be materializing, though southern growing areas could continue to dry down for a time.  Argentina weather will improve with less frequent and less significant rain this week. U.S. gets a little chilly again in parts of the Plains, though not nearly as severe as that seen last week.

The soybean market continues its choppy overall pattern with a higher flat price settlement. The USDA flashed 2.603 mmt of beans sold to China and another 274 tmt of beans to unknown. When combined with yesterday’s 612 tmt it takes the total confirmed this week to 3.49 mmt out of an expected 5 mmt commitment from last week. This follows 5 mmt that was purchased in December (but not yet confirmed) ahead of the G20/Trump-Xi meeting in Argentina.

The crop report on Friday is expected to re-enforce a bear stat scene in soybeans where both domestic and global supplies sit at record highs. The Chinese business is encouraging and if the stars align just right, maybe just maybe we could get a bailout if we reach a deal that removes tariffs and China executes on their purchase commitments (and adds to them) to reduce our domestic oversupply. But that is far from assured as negotiations in Beijing will be critical. If talks fall apart again they could easily wash out those sales and replace with cheaper Brazilian supply. Lurking in the background of all the trade war excitement is the demand black swan of African Swine Fever in China reducing overall demand from the world’s biggest buyer. Chinese markets are closed this week for Lunar New Year holiday.

Friday, we will get US final 2018 Crop Production, Quarterly Grain Stocks data and winter wheat seeding reports. First the bearish side of the report. Analysts are forecasting US 18/19 wheat ending stocks at 989 MB vs the Dec report of 974 MB and it may be even eclipse 1.0 BB as the export program over the first half of the year was abysmal. World ending stocks should see little change, but there too we will probably see a little bigger number than the 268.1 MMT we saw in the December report. Now for some friendly data. USDA quarterly US wheat stocks as of Dec 1, 2018 should come in around 1.957 BB vs 2.379 BB on Sept 1 and 1.873 BB on Dec 1 of 2017. The biggest piece of friendly data should be winter wheat acres. Expectations are for the report to show around 32 MA of winter wheat planted vs 32.535 mil last year. Of this total, HRW acres should come in around 22.5 mil, SRW acres around 6 mil and white wheat acres around 3.5 mil for 2019.

Because of the government shutdown, it does not look like as if we are going to receive crop condition reports for most states, at least in the near future. The only state that has thus far reported was Texas, and they put their state’s winter wheat conditions at 27% G&E and 21% P&VP. Keep in mind, last year during February conditions were only 4% G&E and 73% P&VP, yet they still managed to get a 31 yield and production of 55.8 mil on 4.6 mil planted acres and 1.80 mil harvested acres.

The second installment if the CFTC’s weekly commitment of trader’s report resumed this afternoon as they continue to play catch up.It was from data thru Dec 31, and it was expected to be released on Friday, January 4. Reports going forward will be published in chronological order, with the CFTC expecting to publish one report on Tuesday and another on Friday of each week until the reports are current as per the normal schedule. During the week ending December 31, funds were sellers of a little over 13,100 contracts of Chicago wheat. At that time, it increased their net short position to over 60,200 contracts. As far as managed money, they were sellers of more than 15,000 contracts in Chicago, which at the time, increased their short position to around 32,000 contracts.

Anna Kaverman

anna@mercerlandmark.com


February 4, 2019 : Market Summary

Market Report

Monday February 4th, 2019

March 19 corn closed up 1 at $3.79 ¼ and December 2019 closed up ¼ at $4.02 ½. March beans closed up ¾ at $9.18 ½ and November 19 closed up ¾ at $9.58. March wheat closed up 1 ½ at $5.25 ¾ and July 19 closed up 1 ¼ at $5.33 ¼. Crude oil closed down $.66 at $54.89.

The corn market managed a “slightly better” start to the week, though volumes were light and the ranges tight. There was more talk today about Super Bowl ads than trading, especially with that high-fructose corn syrup ad in the mix. Managed Money traders were viewed net buyers of another 5,000 corn today, which would leave them net long an estimated 45,000 combined futures and options.

Futures continue to bide their time, likely awaiting something concrete on the export front, or the big USDA “data dump” slated for Friday. The rumor was the apparent “delay” in China reporting their official grain import quotas for the year. Some took this to mean that they are holding off in anticipation of larger future business booked with the U.S. Either way, this business has yet to show up in the “hard” data reported by the USDA. Mid-Day Inspections remain very benign for corn, with just 901,214 metric tons shipped for the week ended 1/31.  This was down slightly from the prior week, and almost 20% less than the prior year week.  This takes YTD corn shipments to 22.47 million metric tons, which is well ahead of the prior year’s 14.89 mmt.  In recent weeks, corn exports have mostly been falling short of the ~1.4 mmt/wk pace needed to meet USDA sales forecast. On the weather front, Brazil precipitation remained erratic over the weekend. Temperatures were quite warm. Rain will increase during the middle and latter parts of this week. Mato Grosso second crop corn said to be 30% planted. Argentina’s bottom line is mostly quite good.

The soybean market firmed slightly on renewed export demand from China although the board once again struggled to hold strength into the close. The USDA flashed 612 tmt of old crop beans sold to China which is the first official sales confirmation of the latest round of business. Reportedly, Cofco and Sinograin have each bought 1 mmt purchased as part of the 5 mmt commitment from last week. Trade volumes were sharply reduced from Friday’s high volume session with March beans trading only 70k today vs. 168k Friday.

The feature trade once again was soybean oil where flat price and negate Friday’s outside day lower performance. The USDA released the delayed census crush for November where total crush was 178.1 mb which was about .5 bigger than estimates. Oil stocks were 1.903 bln lbs vs. 2.030 bln expected.  Friday’s crop report is a major report and will feature the final US corn and soybean production numbers, quarterly stocks and winter wheat acres. The trade estimates for the January report are posted below, updated estimates should hit the wires today. The big difference from the January estimates to current trade estimates will be Brazil’s soybean crop where instead of a 120 mmt production estimate, the trade likely pricing in a 115 mmt type of crop compared to the USDA last at 122 mmt back in December. While Brazil’s bean crop may be 5 mmt below last year’s record crop, Argentina’s crop likely at 53-55 mmt is 15-17 mmt BIGGER than last year’s (38 mmt) keeping overall SAM soybean production well ahead of last year. Global and domestic soybean supplies are extremely burdensome. Soybeans have been well supported by optimism over Chinese trade progress and Brazilian production declines, Friday’s report will offer a start reminder of those statistical realities.

After a quiet overnight session that produced slightly weaker trade throughout, the wheat complex caught a bid shortly after the day session began and for a short time it looked as if we were going to see similar price action to Friday. The problem today at possibly keeping that early momentum going may have been simple. Lack of market participants. The Asian markets were closed due to their Lunar Chinese New Year holiday break and we had a relatively quiet news cycle from the weekend. Following the enthusiasm on Friday from the US/China trade negotiations, this morning’s comments from White House advisor Hassett saying we still must be patient to see how much progress can be made on China trade talks, adding that much work still remains to be done with negotiations had to come across as a little disheartening.

A quiet day today for wheat may have not been the worst of things. Tuesday we get Stats Can data and Friday we will finally get winter wheat acreage data, and both reports could be influential and could have an impact on trade. Friday’s report will be substantially more important and probably lead to much greater market volatility. If you take a look at the export lineup to start the week, it is pretty bare, so we are hopeful announcements may be on the horizon. Because of the huge crop report Friday, until we actually see that demand surface, it might prove to be too difficult to extend gains much until later in the week. One thing that will probably continue to happen is that the back months will probably continue to trade weaker than the fronts.

Anna Kaverman

anna@mercerlandmark.com


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