FacebookTwitter
Mercer Landmark, Inc.
Mercer Landmark :: Grain :: Comments

Click here for CHS Hedging’s Market Commentaries



April 1, 2019 : Market Summary

Market Report

Monday April 1st, 2019

May 19 corn closed up 5 ¼ at $3.61 ¾ and December 2019 closed up 4 at $3.88 ¾. May beans closed up 11 ¼ at $8.95 ½ and November 19 closed up 9 ¼ at $9.14 ¾. May wheat closed up 5 at $4.62 ¾ and July 19 closed up 4 ½ at $4.68. Crude oil closed up $1.45 at $61.59.

Markets bounced back Monday after Friday’s report-inspired break. Corn finished the day with $.04-$.05gains, beans $.10-$.11 higher. Managed Money traders appeared to take some profits on shorts today. They were believed net buyers of 20,000 corn (to take them to 240k net short), 10,000 beans (now 75k net short), 4,000 meal (10k net short), and were net even on oil (30k net short).

Exports have been a sore point for the bull in recent months, but it was a point of support today. Overnight, South Korea announced they were in for more corn, obviously spurred on by the recent market break. Last week’s trade rumor of China buying more beans also appeared to be confirmed, when the USDA announced a private sale of 828,000 MT of old crop soy to China.  Last but not least, the weekly grain inspections release mid-day found a very solid week of corn shipments. For the week ended 3/28, exporters shipped 1.26 mmt of corn, which compared favorably to the prior week’s total just under 1 mmt, but still lagged the year ago week’s 1.45 mmt. Mexico was easily the number one destination. Corn shipments YTD moved to 29.7 mmt, which compares to 24.6 mmt on the books this time last year.  Soybean inspections of 0.731 mmt saw a small wk/wk reduction from 0.860 mmt the week prior, but still easily bested the year ago week’s 0.584 mmt. YTD bean inspections stand at 29.3 mmt versus 41.5 mmt on the books this time last year.

Weather influences remain largely unchanged to start the week. Flooding in the U.S. Midwest continues, which continues to raise the possibility of acreage switches and/or lost yield potential, should it persist too long. Temps are expected to warm-up, but the lower Midwest and Delta are still expected to see frequent rains. Short-run conditions in South America are mostly favorable. Crop watchers there would like to see a little more rain in the April outlook. Brazil export/import data for March was fairly pedestrian, showing modest increases in most commodities.

Technically, May Corn never seriously checked out the report day lows, which is now interim support. Expect selling back near “old support” just below $3.70. Beans also held their support shelf, and came close to challenging initial support just below $9 in May. Same story for Meal, which remains solidly within the recent range. Support near $300, initial resistance starts at $310 and intensifies every $5 higher.

Hopefully, Monday’s wheat price action will not be remembered as a bad April Fools day joke, and the price action in wheat may be coming to an end. After a mixed overnight session, the wheat complex caught a bid and raced out to double digits higher in Chicago. That strength may hot have held, but futures did remain higher over the balance of the day. Trade looks like it may still be trying to adjust after Friday’s crop report data, which was not overly bearish to trade, but not friendly either. Monthly condition reports this afternoon showed the SRW wheat crop well behind where it was last year, but the HRW wheat crop much better than where it was last year. The data was mostly expected, but it still may give a boost. Algeria is in tomorrow, and Bangladesh is in later in the week, and they may give us a better gauge as to where World wheat prices are week over week. Talk this morning that they may have been a couple dollars lower, but that data was hard to come by.

All state by state weekly wheat condition ratings started this afternoon. Many states are below, with some compared to last week, while others are compared to this time last year. Overall conditions came in at 56% G&E and 9% P&VP vs 32% G&E and 31% P&VP this time last year. HRW states were rated 57% G&E compared to only 18% last year, while SRW states were rated 41% G&E vs 58% last year. Spring wheat planting will start next week.  Colorado wheat conditions declined slightly from last week with G&E falling 2% up to 66%, while P&VP was unchanged at 5%.

South Dakota wheat conditions fell slightly week over week, with G&E dropping 6% up to 38%, while P&VP remained at 3%. Ohio wheat conditions are the worst on record to start a year, with 28% of the crop rated G&E (vs 75% last year), while 26% of the crop is rated P&VP (vs only 3%last year). Tennessee wheat conditions are off slightly from this time last year. In its first report of the year, G&E was pegged at 54% vs 57% last year, while P&VP was 14% vs 6% this time last year.

Anna Kaverman

anna@mercerlandmark.com


March 19, 2019 : Market Summary

Market Report

Tuesday March 19th, 2019

May 19 corn closed down ¼ at $3.71 ¼ and December 2019 closed up ½ at $3.95 ¼. May beans closed down 1 ¾ at $9.04 and November 19 closed down ¾ at $9.38 ¼. May wheat closed down ¼ at $4.56 ½ and July 19 closed down ¾ at $4.62 ¾. Crude oil closed down $.09 at $59.29.

Choppy day overall for the markets, though much like yesterday, the feature in our view was the inability to sustain downside momentum. Corn finished near unchanged. Managed Money players remain firmly ensconced on the short side. They sold 7,000 corn (to take them to 240k+ net short).

The “Trade War Sentiment Wheel” spun again, and one could argue that it did so twice in the same day. Around noon, one news service reported that China was “walking back” some of the concessions made in past negotiations. This tended to drive markets down to session lows. Not fifteen minutes thereafter, another news service report signaled a U.S. and China trade deal was entering the “final” phase, which firmed markets right back.  President Trump called China trade talk progress “very well”, and also labelled ongoing discussions with Brazil as “great”.  Sigh. At least we know the next ministerial level talks will occur March 25th, as negotiators are due to take turns shuttling back and forth between DC and Beijing.

Also helping the corn market in particular is the shift in model runs suggesting a continued wet bias to weather into late March and early April. For now, the markets are not pricing in much risk of any weather event, let alone delayed U.S. planting, but such premiums will likely take root should current trends continue. Note as well that U.S. farmers were not able to do much of their fall prep due to an unusually early cold snap this November. The risk is not only that plantings get delayed, but also potentially that yields could suffer due to less inputs applied. Texas corn planting was pegged at 26%, which is close to average, but lagging behind last year’s 34%. Brazil weather remains mostly favorable, while Argentina has evolved into a more mixed situation as the week drags on. In particular is a dry pocket in SW Cordoba province. Crop Scout Cordonnier did not change his estimates much

Soybean prices turned lower on disappointment in trade war outcome and lack of Chinese purchases for US soybeans. Trade guesses are starting to surface with reductions in acres planted coming in less than earlier thoughts. Weather patterns are expected to change for the better in Brazil, which should allow active harvest progress to resume.

It was a back and forth trading session wheat, which at the end of the day turned out to be rather disappointing as the market settled marginally lower. For the second day in a row Mpls wheat has separated itself from the other two and has traded higher throughout. Trade there has been influenced more on the extreme flooding seen across many parts of the northern plains. There continues to be limited influential news around for both the HRW and SRW wheat markets, and after a short covering bounce that has taken futures some $.30 off their contract lows. At some point we were eventually going to see the funds say enough is enough and start defending their position. This has kept a lid on rallies over the past week, and until some new development surfaces, this trend will probably continue. World wheat prices have been flat to a little lower over the past several weeks, and the export lineup is rather bare. Not too concerned at these prices that the US is not securing any business, but with World prices as low as they are, trade is not expecting huge export sales data in the coming weeks either.

Anna Kaverman

anna@mercerlandmark.com


March 15, 2019 : Market Summary

Market Report

Friday March 15th, 2019

May 19 corn closed up 3 at $3.73 ¼ and December 2019 closed up 2 at $3.96. May beans closed up 10 ¾ at $9.09 ¼ and November 19 closed up 9 ¾ at $9.42 ½. May wheat closed up 9 ½ at $4.62 ¼ and July 19 closed up 8 ½ at $4.68 ¼. Crude oil closed down $.09 at $58.82.

FOR THE WEEK ENDED 3-15-19

CORN – Corn tumbled to new contract lows early in the week, but fund short covering engaged to push corn to four straight higher closes.  For the week, May corn rallied 9 cents to settle at $3.73 ¼ after setting a new contract low of $3.61 per bushel.  July corn settled 8 ¾ cents higher at $3.82 ¼ and the December contract gained 7 ½ cents to close at $3.96 per bushel.

There didn’t seem to be one major headline that precipitated the steady upswing in corn this week.  The news from China was perceived as friendly, although the two world leaders won’t likely meet until April.  China passed new laws to protect the IT and IP rights by making it illegal to force companies to give up their rights, and they also passed laws to open their markets to more foreign investment.  The US had been asking for these measures.

Mother Nature has provided significant moisture across the Midwest this winter.  As a result, we are seeing widespread flooding.  This makes traders nervous about the possibility of a late planting season.  A lot can happen in the next 45 days.  While it is too early to say planting will be late, many would agree we won’t have an early planting season.  This leads to ideas that we may not see as many acres switch from soybeans to corn.  The USDA’s early forecast is for 92 million corn acres this year, up from 89.1 million acres last year.  They are projecting 85 million soybean acres versus 89.2 million acres last year.  IEG Vantage (formerly Informa Economics) pegged US corn acreage this year at 91.8 million acres and US soybean acreage at 85.5 million acres.  Conab’s latest corn production forecast for Brazil is 92.8 mmt, up 1.1 mmt from their February outlook.  The USDA is carrying their corn crop at 94.5 mmt.  Brazil’s safrinha crop is 70% planted in favorable conditions.  Argentina’s corn crop is estimated at 47.3 mmt by the Rosario Grains Exchange compared to the USDA’s outlook for 46 mmt.

Weekly export sales were below expectations at 14.6 million bushels.  Total commitments fell from just 1% behind last year in last week’s report to 6% behind this week.  Total sales stand at 1.61 billion bushels.  The USDA is calling for a 2.6% decline in exports year on year.  We need to average 26.9 million bushels of sales per week to hit the USDA’s current 2.375-billion-bushel export forecast.  New crop sales were 18.7 million bushels, bringing new crop sales to 69.8 million bushels versus 62.5 million last year at this time.  Weekly export inspections have fallen below the weekly average needed for seven straight weeks.  Weekly ethanol production was down 19,000 bpd to 1.005 million bpd.  Stocks fell by 600,000 barrels to 23.7 million barrels.  Weekly ethanol production has been below last year in 15 out of the last 17 weeks.  Further cuts to the ethanol usage line could be coming on future balance sheets.

The USDA announced this week they plan to discontinue the objective yield survey used in their August report.  They will continue with farmer surveys and satellite imagery for the August report, and will continue to use objective yield surveys for the September through November reports.  However, the objective survey will use about half the number of what they historically used.

OUTLOOK:  Funds had built a sizeable short position coming into this week, leaving the market susceptible to a short covering rally.  Rumors that China is on the verge of buying US corn/ethanol/DDGs and the major snow storm provided a spark to lighten up on short positions.  However, as we’ve seen over the past several months, rumors about Chinese buying can turn on a dime. Have your upside targets in mind as we are fighting just to get back to mid-February price levels.  If China actually makes purchases of US grains, the rally could be extended.  For now, we may have found an interim bottom.  The March 29 Prospective Plantings is right around the corner and could provide price direction for the next month.

SOYBEANS – Soybeans dropped to a new low for the move early in the week, but a resulting reversal higher on the chart helped kick start a rally that extended through the balance of the week.  Of course, Chinese rumors and how the trade talks are progressing were positive inputs. China did buy 926 tmt of US soybeans to begin the week.  This brought their total purchases to 11 mmt so far this marketing year compared to 28.2 mmt by this time last year. Fund short covering was apparent in soybeans, as it was in corn.

Weekly export sales were above trade estimates at 70.2 million bushels.  This brings total commitments to 1.5 billion bushels and 16% behind last year.  To hit the USDA outlook for 1.875 billion bushels of exports, we need to average 15.9 million bushels of sales per week for the balance of the marketing year. The February NOPA Crush report showed 154.5 million bushels were crushed, much less than the trade estimate of 158.7 million bushels.  Soyoil stocks were up to 1.75 billion pounds versus 1.61 billion pounds expected.

China’s problems with African swine fever in their pig herds was reinforced this week when they purchased 52.5 million pounds of US pork.  This is the third biggest weekly purchase ever made by China.  China reported their hog inventory had fallen nearly 17% in February from last year and their sow numbers had plunged 19% versus a year ago.  There were reports this week that some schools, businesses, and military units in China will no longer serve pork in their cafeterias.  China’s poultry production is expected to be up 8% this year due to ASF.

Conab updated their Brazilian crop estimates this week.  They cut their soybean forecast 1.9 mmt from last month to 113.5 mmt.  The USDA is using 116.5 mmt.  The Rosario Grains Exchange in Argentina upped their soybean crop estimate from 52 mmt to 54 mmt.  The BAGE left their estimate at 53 mmt versus the USDA’s 55 mmt projection.

OUTLOOK: May soybeans were 13 ½ cents higher for the week at $9.09 ¼, July rallied 13 ¼ cents to $9.23, and November was 12 cents higher at $9.42 ½ per bushel.  Soybeans may have found a short term low ahead of the March 29 plantings report.  China’s situation is still up in the air and US weather is becoming a headline.  Short term we may see some short covering rallies, but longer term it’s difficult to get overly bullish without a threat to the next crop.

WHEAT- On a week/week basis funds did not impact their short position in SRW to much extent. On 3-12-19 funds were approximately short 108,200 contracts in Chicago.  Ahead of the visit to Washington D. C. by Brazil’s President Jair Bolsonaro’s , Brazil is considering granting an import quota of 750,000 tons of U. S. wheat per year without tariffs in exchange for other trade concessions. Brazil is looking for the U. S. to reopen the import of fresh beef from Brazil as well as access to the U. S. market for its exports of limes.  Ethiopia has issued an international tender to purchase 400,000 tons of milling wheat. The tender deadline is April 19, 2019. China sold 2,000 tons of imported 2013 wheat at an auction of state reserves overnight. The sale represented less than one-half of one-percent of the total grain wheat available at the auction.

Updated wheat crop condition for the states of Kansas, Oklahoma and Texas will become available this afternoon. Texas conditions should improve given the mid-week rain event last week. More extensive state generated condition reports should be forthcoming next week. Government generated crop conditions begin on April 1, 2019.          


March 12, 2019 : Market Summary

Market Report

Tuesday March 12th, 2019

May 19 corn closed up 3 ¾ at $3.65 ¾ and December 2019 closed up 5 at $3.91 ½. May beans closed up 7 at $8.97 and November 19 closed up 6 ¾ at $9.32 ¼. May wheat closed up 24 ½ at $4.53 and July 19 closed up 23 ¾ at $4.60 ¾. Crude oil closed up $.08 at $57.20.

Finally, a “Turnaround Tuesday” worthy of the name. The corn market overcame a slightly uncertain start, riding on the back of a short-covering bounce in wheat. While futures couldn’t quite stick the “good trade” (a close above Monday’s high), the resulting four cent higher close is a welcome break from recent bearish trends. Managed Money traders basically bought back what they sold yesterday, trimming their net short to 235,000 combined futures. Make no mistake it was all wheat today. After a near-relentless $1 dive, wheat recovered 25% of it in a single day of short bashing. Corn and soy merely rode its coat-tails. Trade was unable to identify a single catalyst for the rally (other than a record large fund short), but it was broad-based, encompassing the equally beaten-up European markets.

There was a little news around today, but it was not ultra-bullish. Brazil’s gov’t (CONAB) raised projections of the corn crop by 1 mmt from prior to 92.8 mmt. This is sharply higher than the drought-shortened 80.7 mmt crop last year, but still 2 mmt below current USDA projections. If weather continues in a favorable direction, the USDA may look smart. Still a lot of growing season there, though, with safrinha planting still ongoing. Argentina is also in decent shape, with crops there broadly in pollination mode; condition ratings have been slipping, but the forecasts still appear mostly good. U.S. Midwest gearing up for another winter storm. Elsewhere, exports remain a sore point for the bull. South Korea continues to actively source corn for summer, but little/none is going to U.S. sellers. U.S. is roughly $15/mt uncompetitive. Turkey/Iran are both in for feed grains, but that business will almost certainly go to the Black Sea, on freight and politics.

The soybean market reversed higher as part of a broad-based short covering/technical recovery across the grain complex. Beans and meal nearly had key reversal trades (outside day up out of new lows for their respective moves) but were unable to hold the momentum into the close and had to settle for standard reversals. Follow through to confirm these trades will be important tomorrow and would help to stabilize our downside for a moment.

South American weather remains favorable overall with production estimates on the upswing although the privates generally are coming in below the latest USDA projections. There were plenty of private estimates around the headlines today. Cordonnier sees Brazilian beans at 113.5 mmt with harvest now 57% complete with his corn production estimate at 93.5 mmt. He estimates Argentina’s soybean crop at 54 mmt and corn at 44 mmt. Agrural puts Brazil soybeans at 112.9 mmt. CONAB estimates the Brazilian soybean crop wat 113.459 mmt vs. 115.543 mmt last month, they are using a yield of 3.168 mt/hecatare and lowered exports by 1.5 to 70.0 mmt. CONAB put the Brazilian corn crop at 92.807 (26.21 and 66.59) vs. 91.652 mmt last month, they are using a yield of 5.436 mt/hectare and left exports unchanged at 31.0 mmt. USDA is at 116.5 mmt and 94.5 mmt respectively for Brazil  beans and corn and 55.0 mmt and 46.0 mmt for Argy beans and corn. Big crops in Brazil and Argentina are going to compete hard with US corn and soybean exports moving forward with combined soybean production around 11-13 mmt above last year and combined corn production around 23-26 mmt bigger.

Informa updated US acreage estimates with corn 91.8 million (up 180,000 from Feb), beans 85.5 million (down 550,000 from Feb), all wheat 46.7 million (down 60,000 from Feb), spring wheat 13.580 million (down 60,000 from Feb)and cotton 14.7 million (up 50,000 from Feb).

The enticing carrot of a China trade deal remains in the background, but time has eroded market optimism and until we see a conclusion and final details confirmed, the bull has retreated to a full defensive posture.  Chinese media reports that trade rep Liu He spoke with US reps Lighthizer and Mnuchin by phone today to further discuss the trade deal text and make plans for the next stage of work. There were no follow through export sales confirmation after the USDA flashed 1.5 mmt Friday-Monday.  The talk was 2-3 mmt+ of purchases so we will be on the lookout for additional sales confirmation over the coming days.

Price action across the wheat complex was a little better throughout the night, and when trade moved into the day session the markets took it to a whole new level. After moving above yesterday’s highs some buy stops looked to be triggered, and the rally continued through the midday time frame.

Trade was looking to rebound after yesterday’s disastrous start to the week, and even though one day’s gains are not an indication that the break is over. One would think that traders will take a step back at look at things a little differently now. Today’s trade does the same thing as what happened on March 1. If you recall, that was when we saw that big reversal, thus putting in a base low. At that time, prices eventually went back down to those lows, took them out, and proceeded to fall another $.20. If that were to happen again, we would probably expect to find the same type of price action, with the $4.00 level probably providing huge support. The funds do not feel threatened, and even after Tuesday’s $.20 pop, they probably have no intentions of throwing in the towel. But remember at these levels, wheat could be used for just about anything. After yesterday’s break, traders started hearing of famers thinking of plowing under their wheat with intentions of planting corn. In the areas where it has been extremely wet, or maybe they have had some sort of winterkill, maybe they have enough of an insurance guarantee to plow their wheat under and plant a different crop. Keep in mind, Informa lowered their winter wheat acreage estimates today.

Anna Kaverman

anna@mercerlandmark.com


March 11, 2019 : Market Summary

Market Report

Monday March 11th, 2019

May 19 corn closed down 2 ¼ at $3.62 and December 2019 closed down 2 at $3.86 ½. May beans closed down 5 ¾ at $8.90 and November 19 closed down 5 at $9.25 ½. May wheat closed down 11 at $4.28 ½ and July 19 closed down 10 ½ at $4.37. Crude oil closed up $.69 at $57.12.

The corn market finished a couple cents lower, producing new contract lows for old crop futures. Futures once again made a brave stab at a bounce overnight, but turned decisive sellers shortly after the day open. Did not help that wheat finished double-digits lower. Managed Money traders continue to pad their large net short in the market. They are estimated to have sold another 10,000 contracts today, which would leave them net short close to 245,000 combined futures and options heading home tonight.

Mid-Day Grain Inspections report did nothing to staunch the bleeding, finding another rather subpar week of corn shipments.  For the week ended 3/7, exporters shipped 765,618 metric tons of corn, which was down slightly from the prior week, and compares to 1.377 million metric tons in the year ago week. YTD inspections total 26.6 mmt versus 20.4 mmt in the year ago period. Still a large lead, no doubt, but it is certainly in jeopardy given strong foreign competition this spring and summer, combined with last year’s back-end loaded pace.

The soybean market extended its slide despite some trade confirmations with China. The USDA flashed 926 tmt of US old crop beans sold to China. This takes the total confirmed to 1.590 mmt on the latest round of purchases with more possible in the coming days if the 2-3 mmt+ rumored total from last week is realized.

There was a more upbeat tone to US-China trade talk rhetoric over the weekend with both sides commenting on an agreement being finalized. There may be two different interpretations of an agreement at this point, but they continue to work toward a deal. Once terms are agreed upon by both sides, then a Trump-Xi signing ceremony will be scheduled with sometime in April now the best guess for that to take place. The White House this afternoon confirmed that no date has been set for a summit and that negotiations are ongoing. Weekly grain inspections data was delayed by a technical issue but eventually did get published and showed bean inspections of 874 tmt compared to estimates for 800 tmt and last week’s shipments of 848 tmt. Total soybean shipments to date stand at 26.832 mmt compared to 39.730 mmt this time last year. This represents a deficit of 474 million bushels to last year’s pace, the USDA sees total soybean exports for the year falling short of last year by only 254 million bushels.

Existing soybean fundamentals tell a clear story, but even more disconcerting is the outlook moving forward which suggests ending stocks will continue to grow. Larger than anticipated US soybean acreage this spring is likely due to a combination of favorable price relationships, a slow start to spring fieldwork/planting due to weather and a tight farm economy that doesn’t favor the higher input cost of planting corn. Even if China and the US reach a trade agreement, overall Chinese soybean demand is wounded by the spread of African Swine Fever that some reports say will limit feed demand by 30% this quarter from the prior year and may still be getting worse. It is not a rosy outlook for soybean fundamentals. China may come to the rescue, but any deal would appear to be longer term supportive rather than solving our oversupply problem this marketing year.  We have plenty of competition out of the Southern Hemisphere this year where net production is estimated 13-14 mmt higher than last year and it is competitively priced.

For much of the night, price action in wheat was two-sided, but in the few hours leading up to the morning pause all trade turned a little lower. Funds seem to care less about the size of their position they are building. There was nothing in the report on Friday that was friendly, and the funds do not feel threatened at all. Looking back over the past 17 years, the biggest percentage move from Chicago wheat has had from the end of January to the end of March was a move of a little under 12% back in 2013. After Monday’s settle, since the end of January, Chicago wheat has experienced a move of more than 18%. Granted, today is only March 11, and there are three more weeks to the month, but Chicago wheat futures will have to rally more than $.30 just to get back to that 12% threshold.

Impossible to tell when the fund selling will stop. Today may have been the last day, or it may not come till next week. For now, there are no threats around, and look for them to be there to sell any extended rally. On Friday trade talked about the USDA trimming all the fat after Friday’s report, and that may be true, but there is still going to have to be that one phenomenon to occur to spook the fund into a significant short covering rally. There has been plenty of demand around, and the US seems to be getting its fair share, but so far that has not slowed the break. At these levels, wheat could be used for just about anything right now, but the funds don’t seem to care.

Anna Kaverman

anna@mercerlandmark.com


Return to Top
For questions or comments, contact webmaster@mercerlandmark.com.