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August 16, 2017 : Market Summary

Market Report

Wednesday August 16th, 2017

September corn closed down 2 ¾ at $3.52 ½ and December 17 corn closed down 2 at $3.66 ½. November beans closed up 1 at $9.25 ¼ and January 18 closed up 1 at $9.33 ½. September wheat closed down 10 ¼ at $4.19 ¼ and July 18 closed down 5 ¼ at $4.96 ½. Crude oil closed down $.76 at $46.94.

Corn traded weaker with another new low close as the shorts continue to pile on. Funds are expanding their short position from near flat before last week’s crop report to an estimate of around 55,000 short after selling 9,000 more today. The market did manage to float back off its lows by a few cents but that is about as positive of a comment that can be made at this point as the bear remains fully in charge. The chart is nearing its downside targets in the December $3.60 to $3.55 range where the contract low and price count objective lie. Today’s ethanol report was bearish to that market as production surged +47,000 bbls to 1.06 mln bbl/day and stocks jumped by +481k to 21.83 mln bbl. Next week we’ll have the pro farmer/farm journal crop scouts out in the fields in force and numbers smaller coops and other tours taking place. While you should see some pictures of ugly looking ears in addition to some good looking crops depending on where you stop and final yield estimates will be weighed carefully in light of the USDA’s 169.5 yield projection.

The soybean market had a two-sided performance and ended the session a penny better on the day in another light volume session. Weather remains positive for crops overall and forecasts call for plenty of warmth and moisture through the end of the month. The market did get something new to chew on however that could help provide some stability perhaps as trade talks heat up with China and the US. Yesterday the Chinese trade delegation was in Omaha and signed another frame contract agreement for future purchases of 3.8 mmt of beans. This follows the July agreement signed in Des Moines for 12.5 mmt for a total 16.3 mmt. Keep in mind these are only agreements for intended future purchases and not actual sales for the books and the market understands this. Last year China imported 33.65 mmt of US beans which is approximately 40% of their total bean imports.

What is important is the actual export trade taking place.  Beans priced in reals are trading into new lows today which suggests the farmer in Brazil is likely holding tight to his remaining bushels for now – in addition to likely reducing hectares this coming planting season. As Chinese crush margins improve renewed buying interest could benefit US exports more as a result. China has always responded to value and firming Brazilian basis has made US competitive. The quality of US beans always carries some weight too. First, there were the 5 cargoes of beans were shipped out of the Gulf to China last week that stood out. Now, there is talk that China bought 25 bean cargoes or more in addition last week with most coming from the US for Sept-Oct, 4 out of Brazil. Be on the lookout for confirmation of this business.

Prices were firm throughout the evening led by Mpls which traded as much as $.22 higher before finishing the night a still healthy $.15 higher. Chicago and KC were not nearly as strong, but still managed to trade as much as $.06 to $.08 higher. But the HRW and SRW wheat markets were not able to hold their gains, with that struggle intensifying during the day. Both markets would post double digit losses at some point during the day, before settling a few cents off their lows. It is hard to figure what got into the bearishness tone of price action today in both Chicago and KC, but a couple influences could have been a continuing growing world wheat crop (India came out and said they will have a record crop of over 98 MMT) and offers out to Egypt this morning some ten dollars off from its previous tender. Looking ahead to tomorrow we have export sales. Last week’s sales rebounded from a dismal week the week prior, coming in at 464 MT. Look for wheat sales tomorrow to range between 300 and 500 MT.

Anna Kaverman

anna@mercerlandmark.com


August 15, 2017 : Market Summary

Market Report

Tuesday August 15th, 2017

September corn closed down 7 ½ at $3.55 ¼ and December 17 corn closed down 7 ¾ at $3.68 ½. November beans closed down 14 at $9.24 ¼ and January 18 closed down 14 ¼ at $9.32 ½. September wheat closed down 11 ½ at $4.29 ½ and July 18 closed down 11 ¾ at $5.01 ¾. Crude oil closed down $.03 at $47.70.

Corn negated its key reversal trade from yesterday in a very disheartening performance that dropped Dec corn to its lowest level since late last September. The violation of $3.70 opens the chart up for a run to our next downside targets in the $3.60 to $3.55 range where the contract low and price count objective lie. Just like beans, corn is unable to shake off the USDA bearishness and an uptick in crop conditions by 2% yesterday threw a bucket of ice water on any ideas of stabilizing for a moment, particularly with the weather outlook supportive to crops as we head into the home stretch.  Next week we’ll have the crop scouts out in the fields and while you should see some pictures of ugly looking ears in addition to some good looking crops depending on where you stop, you potentially may not get a really friendly jolt for prices until the September 12th crop report.

The soybean market extended its slide to establish a new low close for the break as the chart takes aim at its June low and $9.00 objective area. Beans remain under pressure due to follow through selling from Thursday’s bearish crop report – despite yesterday’s 1% drop in gte crop rating – and an improving weather outlook that includes rains for IA today with more in the forecasts for other key Midwest regions dealing with dry conditions the next couple of weeks.  Unless the forecasts turn dry again it should be a difficult environment to rally much in the near term but beans do have a way of finding reasons.  The previous 4 times the RSI on November was sub 30 (last 27.05) over the past 9 months, you triggered rallies of $.51, $39, $.43 and $1.40 low to high (chart below).  For the bull, you can point to better demand from both the export and processor side.   At some point that will be the justification for a rally back but first we’ll need to identify that support/value area and there is no indication we are there yet as we price in the record crop projected by the USDA. Beans priced in reals continue to trade near their lows which suggests the farmer in Brazil is likely holding tight to his remaining bushels for now. As Chinese crush margins improve renewed buying interest could benefit US exports more. Note 5 cargoes of beans were shipped out of the Gulf to China last week.  USDA flashed 132 new crop beans sold to China and 132 tmt new crop beans sold to unknown.

For the second consecutive evening the entire wheat complex was under a little pressure, but today trade was unable to bounce back, instead gradually weakening throughout the session. Both Chicago and KC not only traded through Monday’s lows, but they also settled below Monday’s lows, leaving trade in a vulnerable position for the rest of the week. After a quiet start to the week, Jordan, Taiwan and Bangladesh are all in for wheat, and this afternoon Egypt announced they were in for wheat. Offers will be out in the morning, and we can speculate that some offers will be as much as five dollars below the GASC’s tender from a few weeks ago. Futures are some $.60 lower than they were back in late July, and Russian wheat prices have fallen several dollars as well over the past few weeks. Interesting conversation in the central plains today. There is so much more carry in wheat prices than corn so no one is looking to move wheat out of space to make room for corn harvest. Hard wheat mills continue to pay up for protein but lower proteins are also firmer this week than last. Insurance prices for wheat next year will be based on the average price of wheat over the next 30 days. They use July contract for southern acres and the Sept contract for the northern acres. Prices are starting slightly higher than last year due to the carries in the market. Weekly charts are very close to the levels trading at this time last year.

Anna Kaverman

anna@mercerlandmark.com


August 11, 2017 : Market Summary

Market Report

Friday August 11th, 2017

September corn closed up 3 ½ at $3.60 ¾ and December 17 corn closed up 3 ¾ at $3.74 ¾. November beans closed up 4 ¾ at $9.45 and January 18 closed up 4 ¾ at $9.53 ¾. September wheat closed down 1 ¼ at $4.39 ¼ and July 18 closed down 1 at $5.13 ¼. Crude oil closed up $.22 at $48.97.

FOR THE WEEK ENDED 8-11-17

CORN – Surprise! This is exactly how to describe the August WASDE report.  Anything that happened in the first three days of the week was totally overshadowed by the surprising WASDE report on August 10th.  December corn had rallied 5 ¼ cents for the week going into report day, only to plunge to its lowest level since last September.  The report did not cut the 2017/2018 yield nearly as much as anticipated (and traded) by the market.  The resulting production and carryout numbers for 2017/2018 were much larger than projected, which precipitated a significant 15 ¼ cent one-day sell-off in December futures.

The August report left everything on the 2016/2017 balance sheet unchanged.  On the 2017/2018 balance sheet, the yield was above the highest private estimate and was only cut 1.2 BPA to 169.5 BPA from July’s 170.7 BPA forecast.  The average guess was 166.2 BPA with a range of guesses from 162.8-168.5 BPA.  Iowa and Illinois were pegged at 188 BPA and Minnesota at 183 BPA.  Production came in at 14.153 BB, down 102 million from last month, but well above the 13.855 BB average guess and higher than the 13.590-14.07 BB range of estimates.  The feed/residual and export categories were each lowered 25 MB.  This brought exports down to 1.850 billion bushels.  Ending stocks fell 52 MB to 2.273 BB compared to the average estimate of 2.003 BB.  World ending stocks reflected the US trend with ending stocks at 200.9 mmt versus the average estimate of 194.91 mmt.  Brazil’s 2016/2017 corn crop was raised 1.5 mmt to 98.5 mmt.

The first monthly report from the FSA on prevented plant acreage was also released this week.  It will be updated monthly through January.  There were two trade theories to the report which was 86.8 million corn acres.  One: corn acres could be 300-500,000 too high and soybean acres 100-300,000 acres too high.  Two: corn acres are close to the USDA at 90.9 million acres and bean acres could be underestimated by 500-700,000 acres.  Based on the two diverging opinions, the report was mostly ignored since the 4.1 million acre difference between FSA and USDA is fairly typical.

Not wanting to completely ignore early week action:  Corn reversed direction higher to begin the week on less than expected rainfall in Iowa.  Corn rallied to fill the gap left in the previous week ahead of the monthly WASDE report.  The crop condition report as of August 6th showed a 1% decline in the good/excellent category to 60% from 61% the previous week.  Both Minnesota and Iowa’s conditions fell 1% and Illinois declined 5% in the good/excellent category.  Corn in the silking and dough stage were close to average, but dented corn was only 7% versus 11% average.  Besides a small new crop export sale of 181 tmt, demand news was limited as traders focused on potential supply.  The European Union also announced they will reinstate a $6.10 per ton import tariff on corn, rye and milo.  This is the first time they have done so in three years due to current large supplies.  Volumes and trading interest was termed lackluster for the first half of the week.

Weekly export sales were disappointing for old crop, but decent for new crop.  Old crop sales were 2 million bushels, bringing total commitments to 2.221 billion bushels.  We will likely meet the USDA’s target of 2.225 billion bushels.  New crop sales were 24.7 million bushels.  This was at the upper end of expectations and brought total new crop commitments to 200 million bushels.  This is 44% below last year’s 357 million bushels on the books at this time.

OUTLOOK:  The contract low for the December 2017 contract is $3.58 ½ per bushel.  The contract low last year in the December 2016 contract was $3.14 ¾ per bushel.  The trading range this week was $3.70 ¼ to $3.89 per bushel.  The contract low will act as the next support target and the week’s high at $3.89 will be viewed as first resistance.  The trade may not believe the USDA’s yield, but it’s all that’s available until the September 12th report.  This may be one of those years that we really won’t know what we have until the combines roll.  For the week, September corn fell 5 ¾ cents to settle at $3.60 ¾ and the December contract was 6 ¼ cents lower at $3.74 ¾ per bushel. Follow up on the tidbit leading to the August crop report: August corn production has now been higher than the average trade guess in 10 of the last 14 years.

SOYBEANS – Not to be left out of the surprise party, the November soybean contract plunged 33 cents lower on report day’s bearish numbers.  The average yield forecast was 47.5 BPA, but the USDA shocked the trade with a 1.4 BPA increase to 49.4 BPA!  This is a record yield for an August report. It was sharply higher than the 46.9-48.0 BPA range of estimates and last month’s outlook for 48.0 BPA.  Iowa’s yield was 56 BPA, Illinois at 58 BPA and Minnesota at 49 BPA.  Also keep in mind that in the last six years the bean yields have a tendency to increase from the August to the final report.  The move was also interesting from the point that this year’s crop was only rated 59% good/excellent at the beginning of August versus 72% good/excellent last year.  Production rose 121 million bushels to a record 4.381 billion bushels.  This was higher than the range of estimates where the average guess was 4.212 billion bushels.  The crush category was cut 10 million bushels, exports were raised 75 million to 2.225 billion bushels and residual was increased 1 million bushels.  The big export number is a little surprising since new crop sales are the lowest in 5 years for this time of year.  Taking into account a 40 million bushel lower carryin due to changes on the 2016/2017 balance sheet, ending stocks for 2017/2018 were up 15 million bushels to 475 million bushels.  The average estimate was 424 million bushels with a range of 369-474 million bushels. Update on the history of the August WASDE bean production estimate: the August soybean production number has been below the average trade guess in 12 out of the last 15 years.

World ending stocks for 2017/2018 were significantly larger than projected at a record 97.8 mmt compared to the average estimate of 92.12 mmt.  Last month’s number was 93.53 mmt.  No changes were made to Brazil or Argentina’s 2016/2017 estimates at 114 mmt and 57.8 mmt respectively.

Soybeans trended higher early in the week despite some changing forecasts and diminishing demand prospects.  Talk in the trade centered on chatter that up to 500 tmt of soybeans had been resold by Chinese buyers.  Reasons behind the resale included high stocks at the ports and poor crush margins.  The announcement of the cancellation of 130 tmt of old crop soybeans by unknown at mid-week played into the poor export scenario.  However, we did see a new sale of 206 tmt of 2016/2017 soybeans to unknown early in the week.  Domestically, basis improved to encourage movement after it shut-off in the wake of last week’s flat price decline.  The soybean crop condition improved 1% to 60% good/excellent for the week that ended August 6th.  South Dakota’s good/excellent category improved 4%, North Dakota was up 3%, and Minnesota increased 1%. Iowa’s condition declined 1%, and Illinois dropped 2%.  Beans blooming were 90% versus 88% average and setting pods was at 65% compared to 62% on average.

Weekly export sales were dismal for old crop, but we don’t need anymore, and good for new crop.  Old crop sales were 1.7 million bushels.  New crop sales were 23.5 million bushels, but new crop sales commitments are just 258 million bushels compared to 505 million last year.  China reported record soybean imports in July at just over 10 mmt. This is a 30% increase over last year.  It’s assumed some unloadings may have been held until July, when the VAT import tax was lowered.

OUTLOOK: This week’s crop report was a game changer.  We have likely moved our trading range to a lower bracket, but have room to trade weather events, or the lack of them.  Weather will continue to be a major focus for soybeans as their final yield is yet to be determined.  November soybeans traded to its lowest level since the June 30th report, trading a $9.37 to $9.88 ½ range during the week.  Its contract low is well below us at $8.57 per bushel.  Short term support is this week’s low, then the June low at $9.07 per bushel.  The weather isn’t done with soybeans yet, but in which direction?  For the week, November soybeans were down 11 ¾ cents at $9.45 per bushel.

The Russian wheat crop looks to be on the rise.  SovEcon increased wheat production by 5 million tons to 77.9 million. The USDA is in line with that number and they also increase wheat production in the Ukraine and Kazakhstan by 2.5 and 1 million tons respectively.  World wheat stocks grew on the latest WASDE by 4 million tons. The WASDE report was a big surprise for corn and beans but not for wheat.  A small downward adjustment to yield was expected.

Anna Kaverman

anna@mercerlandmark.com


August 10, 2017 : Market Summary

Market Report

Thursday August 10th, 2017

September corn closed down 15 at $3.57 ¼ and December 17 corn closed down 15 ¼ at $3.71. November beans closed down 33 at $9.40 ¼ and January 18 closed down 32 ½ at $9.49. September wheat closed down 19 at $4.40 ½ and July 18 closed down 16 ½ at $5.14 ¼. Crude oil closed down $.97 at $48.75.

The USDA shocked the market today, making only token changes to the balance sheet. Corn futures were trading slightly higher pre-report, but those gains evaporated quickly once the data was released, and the slide continued slowly but surely over the next two plus hours of trade.  Spot futures closed at their lowest levels in a month-and-a-half, while individual contracts closed roughly a dime above last year’s contract lows. The funds were net sellers of about 30,000 corn today, which would take their net position in corn close to flat.

The focus of this report was on US production, and the USDA did not show the larger yield downgrades many in the trade were expecting. In the end, the USDA lowered 2017 US corn production just 100 million bushels from their July “trend-line yield” style estimate. The resulting 14.153 BB estimate was well above the average trade guess of 13.85 billion, but was still 1 billion shy of last year’s final of 15.148 BB. Harvested acres were left unchanged, while yields were down-ticked to 169.5 bpa from 170.7 bpa in July. The larger supplies maintained US carryout forecasts near 16/17 levels. They left 16/17 unchanged from July at 2.37 BB, while 17/18 was down ticked to 2.273 bil from 2.325 bil in July. The absence of a sharp adjustment was enough to KO many weak “yield bulls” in the market, and no doubt sent farmers scrambling to check how much old crop they had left in the bin.World numbers lacked many fireworks, though much like in the US, traders were disappointed there was not much downward adjustment from July forecasts. World 16/17 carryout up ticked 1 mmt to 228.6 mmt, while new crop 17/18 was left unchanged at 200.9 mmt.

The soybean market was hit with a surprisingly bearish crop report of a left hook and went down for the count like a sack of potatoes. The US soybean crop is projected record large at 4.381 bb compared to last year’s crop of 4.307 bb. This was an increase of 121 mb from the July report while the trade was expecting a reduction 48 mb on avg. This comes on a yield of 49.4 bpa which compares to last month at 48.0 and avg. trade estimate for a small cut to 47.5. This was a major surprise with nobody in the published trade estimates looking for an increase in yield. Harvested acres were left unchanged at 88.7 million.  Old crop bean carryout tightened to 370 mb from 410 previously which was a bigger reduction than the trade estimate for 400 mb and perhaps one of only two bullish elements of an otherwise soundly bearish report. The reduction came on an increase in exports by 50 mb which more than offset a reduction in crush.  The new crop carryout increased by 15 mb to 475 mb which was 50 mb bigger than trade expectations. The increase came on a 121 mb increase in production and a 10 mb decrease in crush that more than offset a 75 mb increase in exports.

The wheat complex battled both sides of unchanged overnight, but during the morning time frame leading up to the crop report, most of the price action was slightly lower. It was an omen for things to come as data from the report was negative to trade, not only in wheat, but across the entire grain complex. Trade in wheat seemed to be a little slow to react to the negative data. Instead the market saw a more gradual decline, but by day’s end Mpls prices had fallen to more than $.30 lower, Chicago was close to $.20 lower and KC was around $.15 lower.

On the production side we saw an adjustment, but by no means did we see a reasonable adjustment. All wheat came in at 1.739 BB, only a 21 mil reduction from July’s 1.760 BB. The avg guess was around 1.710 BB. As expected, much of the reduction came from the Spring wheat crop, which the USDA pegged at 401 MB. Granted, this is 22 MB less than July’s estimate, but it is around 10 MB above the average estimate and 50 MB above what the Spring wheat crop may eventually come in at. We saw almost no change in all winter, but that was expected as well. The USDA pegged the SRW wheat crop at 306 mil vs last month’s 306 mil and pegged the HRW wheat crop at 758 mil vs last month’s 758 mil. The USDA lowered 2017/18 ending stocks from 938 MB in July to 933 MB. Everyone was looking for some sort of reduction, but the average estimate was for around a 30 mil reduction. And even though the USDA is rarely aggressive in its August report, some were even thinking we might get as much as a 100 mil reduction, so this aspect of the report was a little bit of a head scratcher as well, with prices NOT benefitting from the data.

Anna Kaverman

anna@mercerlandmark.com


August 9, 2017 : Market Summary

Market Report

Wednesday August 9th, 2017

September corn closed up 2 ½ at $3.72 ¼ and December 17 corn closed up 2 ½ at $3.86. November beans closed unchanged at $9.73 ¼ and January 18 closed unchanged at $9.81 ½. September wheat closed up 2 ½ at $4.59 ½ and July 18 closed up 3 ½ at $5.30 ¾. Crude oil closed up $.37 at $49.72.

The corn market maintained radio silence for most of the day, although a late day pop allowed the market a two plus cent higher settlement. Once again, the Goldman Roll represented most of trade today, topping yesterday’s volume and accounting for roughly half of all corn trade. The funds were small net buyers of about 10,000 corn today, which would maintain a small amount of length (35,000) for them, as a class, in the corn market. Corn was clearly in “hurry up and wait” mode ahead of tomorrow’s duo of reports. US corn production will be the focal point of the August WASDE, as the USDA will introduce the first piece of “objective” yield data in the form of a pure stalk count.  Everything else will be “inferred”.  The average trade guess on corn yields is 166 bpa, down from 170.7 bpa trend-line used in July.  This should bring 17/18 US carryout forecasts closer to the 2 bb mark. The corn market featured an interesting mid-day pivot higher, after updated model runs suggested a dryer two week outlook than previously implied. Portions of Iowa & Illinois are quite dry and desperately need a drink. Mostly dry and cooler than usual conditions continued across the Midwest Tuesday.

The soybean market spent most of the session in positive territory as the market works to recover some of its recent losses in front of tomorrow’s USDA crop report, ultimately however, new crop beans settled unchanged on the day. A USDA cancellation of a previously announced sale of 130 mt old crop beans to unknown created some selling after the morning break. But then a mid-day GFS weather update removed much of the rain for the Midwest in the second week of the outlook and that helped firm the market back to 4 higher but late selling showed up to erase those gains into the close. There is not a lot of news around and in addition to weather forecast updates, the trade will look to the USDA tomorrow for guidance on price direction. For the crop report, the trade is estimating on average for the USDA to lower bean yields by .5 to 47.5 bpa for a total crop of 4.212 bb on harvested acres of 88.669 million.  Ending stocks are est. at 401 mb in the old crop, down from 410 mb last month and 424 mb in the new crop, down from 460 mb last month.

The wheat complex battled both sides of unchanged early in the session, but moved higher late morning and stayed a little better the rest of the day. It was nice to see the markets rebound after Tuesday disappointing performance, but keep in mind that trade was unable to extend too much either. Outside of the roll, volume has been light all week, but that should change tomorrow as crop report day finally arrives. Coming into this week the thought process was we might see a little bounce leading up to the report, especially after the big drop in wheat prices since the beginning of July. Instead we have seen indecisive price action with support building around the $4.50 level in both Chicago and KC, and double digit rallies being sold.

Anna Kaverman

anna@mercerlandmark.com


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