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August 17, 2018 : Market Summary

FOR THE WEEK ENDED 8-17-18

CORN – Corn began the week on a soft note, but quickly recovered as crop conditions fell another 1% to 70% good/excellent.  Corn was heavily influenced by the soybean market, as well. Beans were able to shrug off the bearish August WASDE report after spiking lower on Monday.  The recovery in beans spilled over to corn.  Demand for corn continues to provide underlying support with the USDA announcing additional corn sales for both old and new crop during the week.  Political news was thin for corn.  There continues to be reportedly good progress on NAFTA talks with Mexico.  They hope to have a deal in place by month’s end and then bring Canada into the mix.  The strength in the US dollar and improving weather forecast limited the upside in prices.  The US dollar rallied to 14-month highs as Turkey’s failing economy pushed buyers to the US dollar.  Weather forecasts looked cooler and wetter for the Corn Belt on the 6-10-day forecast.

Weekly export sales were good at 13.3 million bushels, bringing total old crop sales for the year to 2.372 billion bushels.  The USDA’s target is a reachable 2.40 billion bushels.  We may see the USDA raise the export category one more time.  New crop sales were a huge 41.1 million bushels.  Total new crop commitments of 348.7 million bushels are almost 55% ahead of last year’s 226 million bushels last year by this date.

Weekly ethanol production fell 28,000 bpd to 1.07 million bpd. The USDA’s forecast of 5.6 billion bushels for ethanol this year seems reasonable to maybe a little low.  Stocks were up 94,000 barrels at 23 million barrels.  Ethanol crush margins were cut in half to 3 cents per gallon.  Corn spreads widened back out during the week as the crop size increases.  The December/March carry was back out to 14 ½ cents and the December/July carry was back to the mid 20’s.  Remember, a carry is only good if you sell it.

Celeres projected Brazil’s 2018/2019 corn acres to be up 7% with the corn production growing to a record 104.1 mmt versus USDA’s 94.5 mmt outlook.  In Argentina, the Buenos Aires Grains Exchange is forecasting corn acreage to rise to a record 14.3 million acres, up 7% from this year.  The Rosario Grains Exchange is forecasting Argentine corn acreage at 16.8 million acres.  UkrAgroConsult increased their Ukrainian corn crop estimate 1.2 mmt to a record 28.5 mmt.  They also raised their corn export outlook 1.5 mmt to 22.5 mmt, up 25% from last year.

OUTLOOK:  The Midwest Crop Tour will be conducted from August 20 through August 23.  With the crop well ahead of the average, the findings of the tour will be closely scrutinized by the trade.  As of August 12th, 73% of the crop was in the dough stage versus 56% on average, and 26% was in the dent stage versus 13% on average. Remember, in each of the last four years, the USDA has raised the US corn yield from the August report to the final report.   Each Twitter comment and picture may sway market direction.   December corn was up 7 cents for the week at $3.78 ¾, December 2019 was up 4 cents at $4.00 ½ and December 2020 was ¼ cent higher at $4.15 ½ per bushel.   Corn may be stuck in a $3.65 to $3.85 trading range without surprises in the crop tour’s findings or a turn in political events.  Begin setting targets for your first 2019 crop sales.

SOYBEANS – The market got a sweet surprise toward the end of the week when it was announced that the US and China would hold low level trade meetings later this month in Washington.  This would be the first official talks in two months.  While nothing specific was mentioned, it does provide hope that the next $200 billion in proposed tariffs may be avoided.  The trade perceived the news as positive and rewarded the market with a rally that sent November soybeans to $8.99 ½ per bushel.  The day before the bearish August WASDE report, November soybeans closed at $9.04 per bushel; we essentially nearly recovered all of the post-report decline.  The Trump administration downplayed expectations from the upcoming talks, stressing they are low level talks.  This resulted in profit taking into the weekend on ideas the Thursday rally was overdone.  My take is these meetings may best be described as trying to get “high level” officials to the table.  At a minimum, it’s a move in the right direction. From this week’s Monday low to the Thursday high, November soybeans rallied 48 ¼ cents.

Prior to the trade talk announcement, November soybeans had extended their losses from the August WASDE report on Monday, but managed to settle higher as meal strengthened.  Meal showed additional gains on Tuesday when Argentina said they would suspend their monthly cut in soymeal and soyoil export taxes for six months.  Their current tax rate is 23%.  The monthly export tax cut for soybean exports will remain in place for the time being.  They need to balance their budget by 2020 to keep their $50 billion credit line open with the International Monetary Fund.

The soybean crop condition fell 1% as of August 12th to 66% good/excellent.  Will the recent USDA 51.6 BPA soybean yield be the biggest of the year?  The August 12th condition report showed Nebraska’s crop in the good/excellent category dropped 4%, Iowa and Missouri were down 2%, Illinois and Minnesota fell 1%, and North Dakota plunged 11%.  Ohio’s crop improved 2%, with Indiana and South Dakota up 1%.  Keep in mind, the USDA has raised the US soybean yield from the August report to the final report in each of the last four years.  There were 96% of the beans blooming as of August 12th versus 92% average, and 84% were setting pods versus 72% on average.  Other long term negative news included China working closer with Brazil to source meal and Russia offering 2.5 million arable acres to foreign investors.  The land isn’t the highest quality, but it’s thought China would be in the market for the land to produce soybeans.

Weekly export sales were 4.9 million bushels, bringing the marketing year total to 2.156 billion bushels, down 4% from last year when the USDA is projecting a 2.6% decline.  The USDA’s target is 2.110 billion bushels.  With the average sales rollover of 61 million bushels, we are on target for the USDA projection.  New crop sales were 21 million bushels, bringing new crop commitments to 421.7 million bushels.  This is nearly 45% ahead of last year; however, this is just 21% of the projected sales versus 28% on the books by this time.

The first US soybean boat since the 25% tariff to China went into effect was unloaded this week after waiting since July 6th to unload. A second boat was also off-loaded that had been waiting since July 24. There are three other US soybean ships bound for China or waiting to unload in China. The US loaded its third soybean vessel for Argentina, with two more in the line-up.

Celeres predicted Brazilian farmers will plant 89.4 million acres this fall, up 3% from last year.  Their soybean production outlook is a record 119.6 mmt, up 1% year/year, and versus USDA at 120.5 mmt.   A potential ban in Brazil on the herbicide glyphosate could be a “disaster” for their agricultural industry, according to Brazil’s agricultural minister.

OUTLOOK:  The proposed trade talks with China later this month was the positive force this week.  On the negative side, weather forecasts are cooler with rain, global stocks to use ratio for 2018/2019 are a 28 year high at 12.8%, US stocks to use ratio is a 12 year high at 18%, and the August to final US soybean yield has increased in each of the last four years.  We’ll keep a close eye on what comes out of the crop tour in the coming week, as well as any indication of a change in the trade war status.  For the week, November soybeans rallied 31 cents to $8.92 ¾ and November 2019 beans gained 23 cents to $9.28 ½ per bushel.  Politics and the crop tour’s data will drive direction next week.  Without fresh, bullish news, soybeans will find resistance at the $9.00 level, with next resistance at $9.22 ¼ per bushel.  First support will be the recent $8.51 ¼ low, then the contract low at $8.26 ¼ per bushel.

Turning to the wheat market, a surge higher into the weekend came after reports out of Russia suggested they may limit wheat exports this year once exports exceed 30 mmt.  The news was denied by the Ag Ministry after the ministry had met with grain exporters.  The ministry said they only talked about “operational volumes.”  They estimate they will export 35 mmt this year, compared to 42 mmt last year.  The USDA is forecasting Russia’s wheat exports at 35 mmt also. Russia has experienced a severe drought this year. For the week ended August 17, 2018:  Chicago wheat was up 10 ¼ at $5.79 ¾.

Anna Kaverman

anna@mercerlandmark.com


August 15, 2018 : Market Summary

Market Report

Wednesday August 15th, 2018

September corn closed down ¾ at $3.61 ½ and December closed down ½ at $3.76.  November beans closed down 10 ¾ at $8.69 and January 19 closed down 10 ¾ at $8.81. September wheat closed down 9 ½ at $5.32 ¼ and July 19 closed down 8 ¾ at $5.78 ¾. Crude oil closed down $1.87 at $64.46.

The corn market featured back-and-forth trade today, ultimately finishing fractionally lower. Not a bad performance overall, given a broader “sell commodity” bias that negatively impacted many related markets. Managed Money funds were believed net buyers of 5,000 corn today, which would leave them net short 65,000 combined futures and options. The start of a cooler and wetter stretch of U.S. Midwest weather was likely behind much of the early weakness in the markets. At this point, the benefit to corn is fairly limited, with over one-quarter of the crop dented, but more immature crops will see better kernel fill under better weather conditions. Key dry areas in Eastern North Dakota could be left wanting for rain.  Private crop tours will fire up next week and no doubt twitter feeds will be scoured for comments given the uncertainty surrounding yield potential in such a rapid maturing crop.

The weekly EIA report today was more mixed for ethanol, coming on the heels of the prior week’s solidly bearish data.  Production backtracked 2.6% this week to a 1.072 mil bbl/day rate, which is still among the strongest levels recorded. Elsewhere, macro markets were a negative input today. The US Dollar continues to hang near one year highs, while Crude Oil pushed to new six week lows. USDA disclosed a small private corn sale today to “unknown” 55k mt for 17/18 year, almost 60k for 18/19. Export sales tomorrow should stay on a familiar trajectory

The soybean market set back on weather selling today as a more active rainfall pattern sets up for the coming week. While the benefit to the early corn crop at this stage is supportive it probably isn’t a game changer for yields. On the other hand, this pattern of non-threatening temps with good rains is likely to be a big help to bean yields and as a result beans and meal gave back most of yesterday’s gains. Trade volumes continue to shrink with Nov bean futures trading 81k contracts compared to Friday’s high volume flush on 183k.

Yesterday the talk of the market was China buying Argentine meal for Sept/Oct. Today the wires are reporting that China bought 10 cargoes of Brazilian beans and 15 cargoes last week. Chinese crush margins are $20/mt in the black despite the big premiums paid. It was noted that the buying overall is subdued and normally they would be taking 25 cargoes/week but that is likely due to a build-up of supply from their aggressive earlier buying posture.

The early overnight gains were not very lasting, with prices trading slightly weaker most of the night. The European wheat market opened and stayed slightly lower throughout the morning which added to some of the negative tone, and with the lack of any positive fundamental news around the market place today, and with the US Dollar into new contract highs again. It did not take too long into the day session to find that out, with prices hitting double digits lower within the opening hour. Things did not improve much over the course of the day, with trade mostly staying within a $.07-$.12 lower trading range.

Anna Kaverman

anna@mercerlandmark.com


August 14, 2018 : Market Summary

Market Report

Tuesday August 14th, 2018

September corn closed up 5 ¾ at $3.62 ¼ and December closed up 6 at $3.76 ½. November beans closed up 11 at $8.79 ¾ and January 19 closed up 11 at $8.91 ¾. September wheat closed up 8 ¼ at $5.41 ¾ and July 19 closed up 6 ¼ at $5.87 ½. Crude oil closed down $.24 at $66.33.

“Turnaround Tuesday” across the grain room today as corn finished higher, erasing over half of the USDA report day deficit. Managed Money traders were net buyers of 10,000 corn today, and will head into tonight net short 70,000 combined futures and options.  As has often been the case, today’s rally started overseas.  Argentina announced overnight that it was temporarily suspending new export registrations. This was in response to active buying over the past several days and represents the latest major ag exporter to flinch amid uncertainty over world crop production and trade flows.

One more day of hot and dry weather and rising levels of crop stress occurred today in the Eastern Belt before more favorable conditions move in mid-week. One to two week outlook maps have been trending in a cooler and wetter direction. Unfortunately, this may be “too little, too late” for some of the more advanced crops. Last night’s condition reports found 73% of the corn in the “dough” stage and 26% in the “dent” stage, well ahead of normal and the prior year. They have also found some rather serious deterioration in recent reports, particularly in the state-by-state’s. Illinois (off -5% G-E) and the Dakotas (ND down -6% G-E, SD off 3%) were the important ones in the latest update. In many ways, the 2018 growing season is the near spiritual opposite of 2017 (which featured stress early/mid season but ideal finishing weather).

Technically, today’s rally puts corn right on the cusp of the new initial resistance level in the $3.75-$3.80 CZ neighborhood.  Keeping the bull mojo flowing would leave behind Monday’s low ($3.65 CZ) as important support looking forward, and might allow the market another look at recent highs near $3.85.

The soybean market built on yesterday’s reversal trade with a strong rally effort that was driven by gains in soybean meal.  Talk is that China came in and bought a package of Argentine meal for Aug/Sept. The news wires this morning were reporting Argentina halted its scheduled incremental reduction in export taxes for meal and oil for the next 6 months. Argentina has also closed export registrations for the next three days and are suddenly showing signs of tightness due to a production shortfall. With product export duties holding steady while soybeans export duties continue to be reduced by .5%/month it in effect reduces crush margin and incentive.

Argentina’s soybean crop fell to 37 mmt from 55 mmt last year and they require imports in order to meet their meal commitments which have grown due to China’s aversion to US beans that are penalized with a 25% tariff. There were 33 tmt of US beans shipped to Argentina out of the SE in yesterday’s inspections data which takes Argentine purchases to 890 tmt to date (100 old and 790 new crop) and that is before you uncover and account for unknown sales. US meal exports were record large in July.

Uncertainty surrounding China’s status as our biggest buyer going forward limits the upside potential in beans. Supply side realities will also limit the upside potential of beans as the US crop has the potential to be a monster. Bean yields are largely made in Aug/early Sept. and the forecast is ideal for almost everybody, with conditions in ND rapidly deteriorating due to dryness and heat. The maps show plenty of moisture on the way and non-stressful temps which is a perfect scenario for yields. Big premiums for Brazilian beans have growers in that country looking to expand soybean acreage while if the US-China situation remains unresolved you should see producers respond to lower prices with a significant shift in acreage out of soybeans.

Markets firmed late in the session and would finish the day with some positive enthusiasm. Offers in the GASC tender did not do the markets any favors as there were plenty of Russian and Romanian offers and at offers $3.00-$5.00 lower than a few weeks ago. There were no US offers, and even though none were expected, the fact that there were so many other offers diminishes hope, at least for the time being that the wheat export programs in those countries might be letting up soon.

As we moved into the day session, the strength in soy (mostly meal) seemed to have a ripple down effect across the rest of the grain complex. Corn found it first, and that combination may have been enough to tug wheat higher. Spring wheat conditions coming in better than expected kept Mpls wheat prices lower throughout most of the morning, but all three classes of wheat would rally over the latter half of the day.

Anna Kaverman

anna@mercerlandmark.com


August 10, 2018 : Market Summary

FOR THE WEEK ENDED 8-10-18

CORN – WOW!  The government never ceases to amaze me.  The monthly crop report was a bearish surprise for the market when the US average 2018/2019 corn yield jumped from 174 BPA to a record 178.4 BPA!  The average guess had been 176.2 BPA.  The USDA used the third highest implied ear weights and record ear counts for their yield forecast.  Post-report chatter wondered if this will be the highest yield estimate of the year.  Production rose to the third highest ever at 14.586 billion bushels, up 356 million bushels from last month and well above the 14.416-billion-bushel estimate.  Other changes on the 18/19 balance sheet included a 100 million increase in feed use, no change to ethanol, and an increase of 125 million in exports to 2.35 billion bushels.  Ending stocks were raised 132 million bushels to 1.684 billion bushels, down 343 million year on year, but were slightly higher than the pre-report estimate of 1.636 million bushels.  There were no changes on the 2017/2018 US corn balance sheet, leaving carryout at 2.027 billion bushels. The trade was expecting a drop to 2.016 billion bushels.  The market was down 11 – 11 ½ cents on Friday because of the crop report numbers.

World carryout numbers for 2018/2019 were up 3.5 mmt from last month at 155.5 mmt and versus the estimate for 152.6 mmt.  Brazil’s 18/19 corn crop was reduced 1.5 mmt to 94.5 mmt and the European Union’s corn production was lowered 1.7 mmt to 59.8 mmt.  The FSU was raised 1.2 mmt to 47.7 mmt and, despite questionable weather, Ukraine’s corn was increased 1 mmt to 31 mmt.  Will we see reductions in world corn production on subsequent reports?  Don’t be surprised if you do.

December corn consolidated in the $3.80’s in the week ahead of the August 10th WASDE report, but pushed to new lows for the month in post-report trading. Weather forecasts were uninspiring with heat returning to the Midwest, but scattered rains helped limit the impact.  The crop is pushing to maturity faster than usual.  As of July 5th, corn conditions were down 1% to 71% good/excellent.  57% of the crop was in the dough stage versus 37% on average; 12% dented versus 6% average; 96% silking versus 92% on average.

Weekly export sales were very good for old crop and decent for new crop.  Old crop sales were 21.8 million bushels, bringing total commitments to 2.36 billion bushels.  The USDA is forecasting 2.4 billion in exports this year.  New crop sales were 35.9 million bushels.  Total new crop sales are 317.6 million bushels versus 199.5 million last year.  The new export forecast for new crop is 2.35 billion bushels.   Weekly ethanol production was up 36,000 bpd to 1.1 million bpd, the second highest monthly production ever.  Stocks were up 40 million gallons to 963 million gallons.

The US and Mexico are getting closer to a NAFTA deal.  Once they come to an understanding, Canada will likely be brought to the table.  They hope to have something in place by the end of the month. The WASDE report showed the all wheat crop at 1.877 billion bushels, down 4 million bushels from last month, but 27 million bushels higher than the trade estimate.

OUTLOOK:  Questions may linger over the accuracy of the new US corn yield number, but that’s what we’ll have to use for now.  Historically, the US corn yield from August to the final has gone up in 4 out of the last 5 years.  However, the US still has the cheapest corn in the world and demand has been decent.  Old crop bushels were sold by the grower this week and the market absorbed them fairly well.  We may have further downside in corn, but believe it could be limited as end users look for a bargain and the yield number is viewed with some skepticism.  How much lower soybeans go may have a negative impact on corn.  There has been increased interest in the December 2019 and 2020 corn contracts.  With current price ratios and no end in sight to the trade war, how many acres will switch back to corn next spring?  December 2019 corn closed the week down 10 ¼ cents at $4.00 ½ and the 2020 contract was down 5 ½ cents at $4.15 ¼ per bushel.  The September 2018 corn contract fell 12 cents this week to $3.57 ¾ and the December 2018 corn was 12 ½ cents lower at $3.71 ¾ per bushel.

SOYBEANS – November soybeans eased higher into the WASDE report despite more tariffs added against additional Chinese imports.  China’s new retaliatory 25% tariff on $16 billion on US goods didn’t include anything new for soybeans, but it drives home the fact that we’re not getting any closer to settling the trade war.  The new tariffs on both sides go into effect August 23rd.  The relatively quiet trade for the week was shot out of the water with the bearish August 10th WASDE report.   The USDA jumped the 2018/2019 US bean yield 3.1 BPA to 51.6 BPA, just 0.40 BPA under the record!  In 4 out of the last 5 years, the bean yield has increased from the August to the final crop report. The trade was anticipating a 49.8 BPA yield.  Record production of 4.586 billion bushels surpassed the average 4.425-billion-bushel estimate and was 276 million bushels higher than last month.  Other changes on the 2018/2019 balance sheet included a 15-million-bushel increase in crush and a 20 million bushel rise in exports, with both categories showing 2.060 billion bushels.  Year on year exports are only expected to fall 50 million bushels. The USDA didn’t figure in any US soybeans exports to China for 2018/2019.   If the trade war is extended, the export line could be expected to shrink.  Soybean ending stocks at a record 785 million bushels obliterated the 648-million-bushel trade forecast and was 205 million bushels higher than last month’s 580-million-bushel projection.  The 2017/2018 balance sheet raised crush 10 million and upped exports 25 million for a cut in ending stocks of 35 million bushels to 430 million bushels.  Pre-report estimates were looking for ending stocks of 463 million bushels.

Record world 2018/2019 ending stocks of 105.9 mmt were sharply higher than the 99.5 mmt expected.  Brazil’s 18/19 soybean production forecast was unchanged at 120.5 mmt and Argentina’s was unchanged at 57 mmt.  China’s imports were steady at 95 mmt.  Brazil’s soybean acreage could be expected to increase 3% – 5% next year on strong Chinese demand.

Oil World this week pondered that China will need to import up to 15 mmt of US soybeans between October and March.  This is when South American supplies will be tight to non-existent.  Earlier in the week, China’s July soybean imports were reported at 8 mmt, down nearly 8% from June and down over 20% from last year.  This led to a huge jump in Chinese prices.  For the calendar year, China has imported 52.9 mmt, down 3.7% from last year.  China is also considering allowing Argentine meal to be imported.  China continues to look for alternatives to replace US protein.  China expects to cut their soybean imports 10 mmt in 2018/2019, due to new meal technology and use of supplements.  The China Academy of Science said the use of low protein formula in animal feed could lower their annual meal demand by 5% – 7% or 5 mmt of soybeans.

Brazil’s freight situation hasn’t improved much.  The President signed a bill setting minimum truck freight rates.  The government will publish prices in January and July.  Higher freight costs have become a huge irritation for farmers and exporters.

Weekly export sales were above expectations for old crop at 15.5 million bushels.  This brings old crop sales to 2.151 billion bushels compared to the USDA forecast for 2.11 billion bushels.  The average rollover of old crop sales into new crop is 67 million bushels.  New crop sales were at the high end of estimates at 19.5 million bushels.  Total new crop sales are 400.7 million bushels, well above last year’s 258.4 million bushels.  The USDA’s updated new crop export sales projection is 2.06 billion bushels. As of July 5th, the US soybean crop was rated 67% good/excellent, down 3% for the week.  There was 92% of the crop blooming versus 86% on average and 75% setting pods versus just 58% on average.

OUTLOOK:  For the week, November soybeans plunged 40 ½ cents to $8.61 ¾ per bushel.  Going into the report, they had been higher on the week, but the 42 ¼ cent dive in post-report trading erased the gain.  November 2019 soybeans settled at $9.05 ½ per bushel, down 28 ½ cents per bushel for the week.  Until the trade war with China shows some sign of easing or unless August’s weather turns very hot and dry, it will be difficult to find a reason to stage a significant rally in soybeans.  August weather could hold some surprises, but it’s chancy to count on Mother Nature for a bail out.

In contrast, USDA projects 2018 U.S. all-wheat production slightly lower from its July estimates of 1.881 billion bushels, edging lower to 1.877 billion bushels. Spring wheat projections of 614 million bushels were unchanged month-over-month, while winter wheat production forecasts moved from 1.192 billion bushels to 1.189 billion bushels. Analysts were expecting a bigger reduction of wheat production estimates, with an average guess of 1.857 billion bushels. U.S. wheat ending stocks for 2018/19 also moved lower, from 985 million bushels a month ago to 935 million bushels. World ending stocks this marketing year also fell, from 260.9 MMT down to 259.0 MMT – but remain just 5% lower than record levels from a year ago.

The European Union is the primary culprit for lower worldwide supplies, which are down an estimated 7.5 MMT (275 million bushels) month-over-month. Total EU wheat production could land at 5.052 billion bushels, which would be the lowest total in six years. USDA raised its projected season-average price for wheat by 10 cents at the midpoint, with a range of $4.60 to $5.60.

There are three primary reasons wheat couldn’t find traction for a rally today. First, futures were weighed down by soybeans. Second, the surge in the value of the dollar tends to be bearish for wheat. Finally, charts at all three markets show a break below support lines from the July rally that tend to trigger more technical selling.

Anna Kaverman

anna@mercerlandmark.com


August 9,2018 : Market Summary

Market Report

Thursday August 9th, 2018

September corn closed down 2 at $3.69 ¼ and December closed down 2 ¼ at $3.82 ¾. November beans closed down 6 ½ at $9.04 and January 19 closed down 6 ¼ at $9.15 ½. September wheat closed down 5 ½ at $5.64 ½ and July 19 closed down 5 at $6.04 ¼. Crude oil closed down $.11 at $66.14.

Thursday was a “Red Day” in the markets, corn pushed as much as $.05 lower on the day, though that break tended to find a few commercial buyers. In the end, corn would finish $.02 lower. Managed Money traders were viewed net sellers of about 10,000 contracts today, which would leave them net short an estimated 70,000 combined futures and options tonight.

With European markets “pausing to refresh”, U.S. markets also lost one of their primary drivers. Most of the news around today was not bearish, but buyers remain somewhat cautious, only willing to buy corn on weakness in front of tomorrow’s important USDA report. The parade of world production downgrades continued unabated overnight, mostly centered around European and FSU wheat. Not to be outdone, CONAB (Brazil’s USDA) trimmed second crop corn estimates once again. Full year corn estimates seen 82.2 MMT, which compares to 82.9 mmt in prior estimates and 97.8 mmt last year.  No surprises here, and we would expect the USDA to do similar “damage” tomorrow.

Weekly USDA Export sales report was pretty good for corn. Old crop sales were better than expected, new crop sales a little worse. Old crop sales of 554,500 MT were mostly to Mexico and South Korea and were roughly double expectations. New crop sales were 657,700 MT, which was toward the low end of estimates, mostly to unknown, Japan, Mexico, and Korea. Combined old crop sales + ship are just under 60 mmt, which compares to USDA estimates of 58.3. Note, though, it will be a challenge to ship out the 7+ mmt in outstanding sales over the four remaining weeks of the marketing year, so there will no doubt be some carry-over sales to new crop.

The soybean market closed lower on the day on liquidation of some recent length ahead of tomorrow’s crop report. Trade volumes remained light. The USDA flashed a 135 tmt sale of meal to the Philippines following a record month of meal exports in July. We expect the strong pace of meal sales to continue as Argentina’s ability to meet commitments and demand is strained as bean supply tightens in that country. Recent rains were needed and beneficial for crops.  Now, we have entered a drier pattern where rains will mostly be limited to the eastern belt and S Plains. The Dakotas and MN appear to be most vulnerable to warming and drying conditions during this stretch of 10 days or so. Follow up rains will be counted on to maintain top end yield potentials in beans.

Weekly export sales report featured strong soybean (422 old and 533 new) business coming in on the top end of trade expectations. In the breakdown, there was 292 tmt of old crop beans cancelled by unknown and another 252 tmt resold to alternate destinations while China straight cancelled 74 tmt.   These cancellations and resales are not unexpected and overall sales are very good for this time of year.

There are two sides to this report, US crops and World crops. The US crop side of the report is expected to be bearish because the USDA is likely to increase their corn and soybean yields, adding to the new crop carryouts. This is a survey-based estimate by the USDA based off of stalk and ear counts, they will not pull back husks until the September estimate so tomorrow’s yield historically can be quite different than final yields. The average estimate on corn yield is 176.2 with the USDA last at 174.0 – the average estimate on bean yield is 49.6 with the USDA last at 48.5. The carryout in corn will go up, but it is still going to be well below last year’s and recent year’s carryouts. The soybean carryout will go up and be well above last year’s but part of that is due to the uncertain status of export demand longer term.

It was a mostly uneventful trading session today as the markets await the crop report Thursday morning. Most of the price action stayed between $.04-$.08 lower in Chicago. It also did not help that Matif was trading a couple Euro’s lower. With the report tomorrow, there was just not enough power to sustain the early run. US export wheat basis continues to drop. EU saw another production downgrade overnight Wednesday. This time from Strategie Grains as they put out a projection of 127.7 MMT. But keep in mind, their estimate is not including durum and that crop is probably around 8 MMT so their overall EU crop estimate would be roughly 135.5 MMT. That is in-line, and maybe even a little larger than some of the other private analysts estimates for the EU, and the Matif wheat reacted accordingly falling a couple Euros and remaining on the defensive throughout most of the session. Another disappointing export sales report this morning did not help prices today either.

It is hard to imagine Friday’s crop report data as anything but friendly. It is easy to say that with our markets having already rallied a dollar off its July lows, and Matif having rallied an astonishing 41 Euros over the past month that most of the World production reductions are already in the market, and there is a strong bias to the long side heading into Friday’s report. The thing is, there are just too many areas in this report that the USDA could give us friendly data, and the major downside risk is that the USDA is not as aggressive with the reductions as most people think.

Anna Kaverman

anna@mercerlandmark.com


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