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April 17,2018 : Market Summary

Market Report

Tuesday April 17th, 2018

May 17 corn closed down 2 ¼ at $3.80 ¼ and July 18 closed down 1 ¾ at $3.89 ¼. May soybeans closed up 4 at $10.46 and July closed up 4 at $10.57 ¼. May wheat closed up 4 at $4.66 ¼ and July 18 closed up 2 ½ at $4.81 ½. Crude oil closed up $.31 at $66.51.

Corn extended its losing streak to three and five out of the last six sessions. Futures tried to bounce back a little overnight, but failed to carry into the day amid a chronic lack of news. Fund traders pared back their net length again today, and will head into tonight net long an estimated 170,000 futures and options.

Those not occupied with their taxes saw a little back and forth between China and the U.S. China announced they were requiring a large deposit on all imports of U.S. sorghum. Given tariffs have been “built in” to the sorghum export scenario for most of 2018, the impact was not substantial on our futures markets, but sent Chinese feed ingredient markets soaring. At least today, the markets appeared to be comfortable with ideas of improved weather over the next couple of weeks stimulating some U.S. planting progress.  Northern parts will still need plenty of time to “thaw out”, but some of the southern reaches of the Belt could be itching to get into the field next week. Farmers will certainly have some catch up work to do, and the markets will want to see every bit of those 88 million acres get planted. To date, Brazil safrinha growing weather has been pretty good, but there appears to be a growing concern over the dry spot in the south. An area stretching from Mato Grosso do Sul through Sao Paulo, Parana, and neighboring areas have been drier biased since the beginning of April. The next two weeks may stay that way, implying the need for some rain into May to help pollination along.

The Soybean action was two sided today giving up small overnight gains following an absence of fresh export confirmations for a third day but firming back to close higher with support coming from meal. Fear that the larger than expected duties that were announced on sorghum overnight would ultimately flow through to the proposed soybean tariffs and this firmed the local Chinese meal market. Trade uncertainty continues to factor into our price action and that is also reflected in the low trade volumes. Weather is a key input going forward where a drier outlook for the corn belt evolves starting next week and temps warm up for the second week which will be more conducive to field work, planting progress and mindsets for the corn belt.  The more positive weather outlook factored into the weakness in corn and the strength in beans today.  The bean to corn ratio widened out to 2.57%.

For much of the session, wheat slowly gave back its gains made during the opening. Trade would not stay lower for very long, however. Prices rebounded during the final hour of the session and the markets would settle a little better across the board. The higher trade was sparked by the condition reports Monday afternoon that showed conditions across almost every important HRW wheat state deteriorating. Most northern white wheat states along with many of the SRW states saw conditions improve slightly. KC traded as much as seven cents higher overnight, but the rally may have been tempered some by the weather forecast that show rains expected into the dry areas of the HRW wheat belt Thursday through Sunday. The rains should help some of the crops in those areas, but the question going forward is how much.

Anna Kaverman

anna@mercerlandmark.com


April 16, 2018 : Market Summary

Market Report

Monday April 16th, 2018

May 17 corn closed down 3 ¾ at $3.82 ½ and July 18 closed down 3 ½ at $3.91. May soybeans closed down 12 ¼ at $10.42 and July closed down 11 ¾ at $10.53 ¼. May wheat closed down 10 ¼ at $4.62 ¼ and July 18 closed down 10 ¼ at $4.79. Crude oil closed down $1.13 at $66.20.

The corn market picked up right where we left off Friday, finishing lower. Markets were weak overnight and maintained a defensive tone throughout the day, no doubt heavily influenced by double-digit declines in wheat. Futures have now corrected a $.10 off the most recent April 9th high. Managed Money traders were viewed net sellers of 15,000 corn today, which would leave them net long 180,000 futures and options. Grain inspections remained a bullish highlight in an otherwise quiet day for corn news. For the week ended 4/12, U.S. exporters shipped 1.5 mmt of corn, which was down from last week’s dominant 1.94 mmt tally, but above the year ago week’s 1.34 mmt.  This takes total YTD corn shipments for 17/18 to 28.0 mmt (1.1 BB) vs. 35.9 mmt (1.4 BB) at this period in 16/17.

The USDA told us what we already knew after the close. There was very little corn planting progress achieved last week. National corn planting progress was pegged at just 3% complete, which compares to 6% average and 2% last week. Only three states, Texas, North Carolina, and Tennessee registered progress above 10%. This did not seem to excite the markets too much today, likely because better weather is in the forecast beginning this weekend. There is less precip in the mix Fri-Sun, and temps are expected to warm although stay slightly below normal. In South America, harvest disruptions could occur in Argentina given a rainier outlook. Brazil could use more rain in southern growing areas, and this could be a bigger deal as we get into pollination next month. Argentina’s first crop corn is over 25% harvested, Brazil first crop corn is closing in on 80% harvested, and second crop corn has been completely planted.

The Soybean market traded slightly better in the overnight but for a second consecutive session, in the absence of fresh export sales confirmations, we were unable to hold strength and reversed lower. Weather is far from ideal but the forecasts suggest an improving trend as we head into the second half of April. Price relationships do support additional bean acres but don’t fall for the almost annual ‘we won’t get corn in the ground’ hype. Weekly soybean inspections totaled 445 mt slightly above the 430 mt trade estimate. Total shipments to date stand at 42.350 mmt vs. 48.296 mmt this time last year representing a 218 mb deficit to last year’s pace. Keep in mind the recent export activity will increase shipments over the coming months and help to narrow that gap some. In the breakdown, China was the destination for only 33 tmt. Elsewhere in the news, Argentina’s national food health and quality service is looking at regulatory requirements including genetics and sanitary protocals to help open up imports of US soybeans.

The wheat complex started the evening around a nickel lower and trade never really looked back. The funds did not seem to have any intentions on waiting to see what the condition reports this afternoon were going to say. They seemed to have just looked at the rains forecast into the dry areas of the HRW wheat belt later this week and looked at the gap lower start and said it was a time to alleviate some of its long position. Condition reports this afternoon had almost every important HRW wheat state falling. Almost all of the northern white wheat states along with most SRW states saw conditions improve slightly. It will be an important day for the wheat complex Tuesday. State by state wheat condition ratings were out this afternoon. Expectations were for conditions to be mainly unchanged from the week prior and they were. Winter wheat conditions came in at 31% G&E and 37% P&VP vs last week’s data of 30% G&E and 35% P&VP. Every HRW wheat state saw conditions fall. Spring wheat planting came in at 3% complete vs 2% last week.

Anna Kaverman

anna@mercerlandmark.com


April 13, 2018 : Market Summary

Market Report

Friday April 13th, 2018

May 17 corn closed down 2 ½ at $3.86 ¼ and July 18 closed down 2 ¾ at $3.94 ½. May soybeans closed down 6 ½ at $10.54 ¼ and July closed down 6 ¾ at $10.65. May wheat closed down 8 ½ at $4.72 ½ and July 18 closed down 9 at $4.89 ¼. Crude oil closed up $.38 at $67.33.

FOR THE WEEK ENDED 4-13-18

CORN – Another report week, this time the release of the monthly WASDE.  The day before the report, May corn matched the previous week’s high at $3.92 ½ per bushel.  The neutral report didn’t provide a lot of price direction, but prices faded the balance of the week.  Corn was caught between a rallying soybean market and weakening wheat markets.

Results of the March WASDE report included a 50 million bushel cut to feed/residual and a 5-million-bushel reduction in FSI.  Exports were unchanged at 2.225 billion bushels as was corn for ethanol at 5.575 billion bushels.  Ending stocks for 2017/208 rose 55 million bushels to 2.182 billion bushels.  The average trade estimate was 2.196 billion bushels.  World ending stocks fell 1.39 mmt to 197.78 mmt, the smallest since 2013/2014.   The average estimate was 197 mmt. Argentina’s corn crop was estimated at 33 mmt, down 3 mmt from last month.  Brazil’s crop was cut 2.5 mmt to 92 mmt.  The BAGE and the Rosario Grain Exchange are carrying Argentina’s corn crop at 32 mmt.  Argentina’s corn harvest was estimated at 31% complete versus 21% on average.  Conab is pegging Brazil’s corn crop at 88.6 mmt. Brazil’s first corn harvest was pegged at 66% complete versus 64% last year.  The US attaché in Brazil is forecasting their corn crop at 89 mmt, well below the USDA’s 92 mmt outlook.

Weekly export sales were below the pre-report estimates at just 33.1 million bushels for old crop and 2.2 million bushels for new crop.  The sales were above the 15.3 million needed per week to hit the USDA’s 2.225-billion-bushel target.  We are just 2% behind last year’s total commitments when the USDA is projecting a 3% year on year decline in exports.  Weekly ethanol production was down 4,000 bpd to 1.034 million bpd.  Stocks were 600,000 barrels lower at 21.8 million barrels.  Margins improved 4 cents per gallon to 12 cents per gallon.

It may be safe to say we won’t have an earlier than normal planting season this year, but it’s probably too early to say we’ll have a late planting season.  The average corn planting progress for April 15th is 15% complete.  The average planting progress is 25% by April 22nd.  As of April 8th, corn planting in the US was 2% complete, spot on with the average.

OUTLOOK: Uncertain planting weather and underlying good demand likely prevented further losses in the corn market this week.  For the week, May corn fell 2 ¼ cents to $3.86 ¼, July was down 2 ½ cents at $3.94 ½, and December dropped 1 ¾ cents to $4.10 ¾ per bushel.  US planting weather will attract more attention in the coming weeks.  If we continue to be delayed, prices should stay in the upper end of the recent trading ranges. The next WASDE report will be released May 10th.

SOYBEANS – Unlike corn, soybeans shot higher to begin the week.  Gains were cut going into the weekend on profit taking and a lack of fund buying.  Strength was derived from good demand for US soybeans, fading fears of a trade war with China, and a slightly bullish WASDE report.  We have now rebounded back to pre-tariff talk price levels.  The tariff threats pushed Brazilian soybean premiums higher and ultimately made them uncompetitive.  Enter US beans as the cheapest in the world.  Argentina bought 240 tmt of new crop 2018/2019 US soybeans during the week, the first such sale since 2008/2009.  There was reportedly interest even from Brazil.  However, as the concerns eased, so did Brazilian values.

The March WASDE report showed few changes: crush was increased 10 million bushels to 1.97 billion bushels, seed and residual were each reduced 3 million bushels.  Exports were left alone at 2.065 billion bushels.  Ending stocks were up 5 million bushels to 550 million bushels.  The average trade estimate was for a 20-million-bushel increase to 575 million bushels. World ending stocks decreased 3.6 mmt to 90.8 mmt.  The average trade estimate was 90.8 mmt. Argentina’s soybean crop estimate was slashed 7 mmt to 40 mmt and Brazil’s was pumped up 2 mmt to 115 mmt.  The average trade estimates were 42.1 mmt and 115.6 mmt, respectively.

China imported 5.66 mmt of soybeans in March, up slightly from 5.42 mmt imported in February.  In the first quarter of 2018, China has imported 19.57 mmt of soybeans, up just 0.2% from the previous year.  In the first six months of the marketing year, China has imported 43.6 mmt of soybeans.  The USDA is anticipating them to import 97 mmt this year.  For them to reach that target, their monthly imports will need to be at record levels from here on out.

Weekly export sales were record large for this week at 55.5 million bushels for old crop and an impressive 35.1 million bushels for new crop.  The new crop sales were the largest for the year so far.  Old crop total commitments are only 4% behind last year when the USDA is expecting a 5% decline in year on year exports.  We need weekly sales of 6.8 million bushels to achieve the USDA’s 2.065-billion-bushel forecast.  New crop commitments are 122 million bushels versus 98 million bushels on the books last year at this point.

OUTLOOK:  Support from Argentina’s purchases of US soybeans this week helped propel prices higher.  Good demand in general was also supportive.  If we see exports begin to fade, it will weigh on prices, so continue to monitor demand. Nearby soybeans hit new highs for the recent rally this week, before pulling back slightly into the weekend.  For the week, May soybeans rallied 20 ½ cents to $10.54 ¼, July was up 20 ¼ cents at $10.65, and November gained 16 ¼ cents at $10.49 ½ per bushel.  May meal fell $3.50 to $382.80 per ton and May soyoil was down a fraction at $.3148 per pound.  Weather and demand will be the drivers next week.

Winter wheat crop conditions declined again. In the second full rating of the spring, the good+excellent category fell from 32% to 30%. This is the lowest the rating has been for this week since 1996. The wheat market is more concerned with the forecast for rains then the damage inflicted from dry and cold temps. Upcoming rain events took the wheat market down by 20 cents from the highs set on Tuesday. Only one change for the US wheat balance sheet on the WASDE report and that was a cut of 30 million bushels to the feed/residual category. World stocks were 3 million tons above the average guess, adding to a very bearish world supply scenario.

Anna Kaverman

anna@mercerlandmark.com


April 12, 2018 : Market Summary

Market Report

Thursday April 12th, 2018

May 17 corn closed up 1 ¾ at $3.88 ¾ and July 18 closed up 1 ½ at $3.97 ¼. May soybeans closed up 13 at $10.60 ¾ and July closed up 13 at $10.71 ¾. May wheat closed down 6 ¼ at $4.81 and July 18 closed down 6 at $4.98 ¼. Crude oil closed up $.21 at $66.95.

The corn market continued its recent “bob and weave” trade, ultimately finishing a couple cents higher on the day. Overall interest was relatively light, though the final day of the Goldman Roll did plump up the volume numbers a little. Managed Money were viewed net buyers of about 5,000 corn today, which would leave them net long 160,000 combined futures and options. Export sales were slightly disappointing for a second week, though the market did not seem to care. Net new sales of 839,900 MT were very close to the prior week, but down 46% from recent weekly averages. Destinations were Japan, Vietnam, Mexico, Egypt and Saudis. Total sold and shipped now for 17/18 stands 48.2 mmt vs. 49.2 mmt in the year ago week (and USDA estimates of 56.5 mmt).

News wires were humming with Trump’s comments about year-round E-15, which in our interpretation likely refers to his administration finally revisiting the issue of an RVP waiver.  This would allow E-15 to be sold year-round and nationwide without condition. Exxon and Chevron, apparently, are the latest refiners to apply for “hardship waivers”, exempting their smallest refineries from the RFS program. At any rate, an RVP waiver merely opens the E-15 door another inch. Retailers still need to adopt it and deploy the appropriate infrastructure to dispense it.

The Soybean market extended its gains to a new 5-week high in the May contract and established a new contract high close for the November new crop. The weekly export sales report was the driver today as the USDA confirmed 2.464 mmt in combined bean sales which was well above the trade estimates. There were no daily sales announced today but the market is anticipating more sales are coming due to the recent surge in Brazilian export values making us very attractive to world buyers. How long this export interest lasts will be up to China and the US negotiators. For now, at least, this renewed trade has taken some of the downside risk away from the soybean market as the hefty 550 mb US carryout now has an outlet for better export trade.  Fund and spec length is growing.

The wheat complex has tried to fend off negative data the past couple of days, but overnight price action looked as if trade had thrown in the towel. Trade did try to bounce back once we moved into the day session, but around an hour into the day the markets started to unravel. It looked as if Chicago was going to fill in its downside gap, but as prices traded to within a couple cents of filling that gap, trade stabilized. There was nothing friendly in Tuesday morning’s crop report, and now the 6 to 10-day weather maps are showing rains for much of the HRW wheat belt. When you combine that with condition reports Monday afternoon that showed Kansas with a 3% uptick in its ratings (even though they are still the worst on record for this time of year), and a weaker Russian Ruble that hit a 15 year low Wednesday (a weaker Ruble only helps Russian wheat prices become more competitive to the rest of the World. The drought monitor this week showed no change in the areas most affected by the lack of rains across the HRW wheat belt, but that had little effect on price action today as there were just too many negative vibes around the marketplace. Yesterday, trade was able to rebound from a poor start to the day. Did not expect to see a repeat performance of that price action today.

Anna Kaverman

Anna@mercerlandmark.com


April 10, 2018 : Market Summary

Market Report

Tuesday April 10th, 2018

May 17 corn closed down 1 ½ at $3.89 ¼ and July 18 closed down 1 ¼ at $3.97 ¾. May soybeans closed up 3 at $10.50 and July closed up 2 ¾ at $10.60 ¼. May wheat closed up 1 ¼ at $4.92 and July 18 closed up 2 ½ at $5.08 ½. Crude oil closed up $2.01 at $65.44.

“Report day” did not move the needle much in corn today.  Despite a few interesting moves, the USDA data offered no real surprises relative to trade expectations, at least in corn.  Managed Money traders were viewed close to flat on the day, as they hang with net long of 190,000 combined futures and options.

The April WASDE is rarely a market-mover, and fully lived up to its dull reputation, though the balance sheet did feature a few changes worth noting.  The USDA moved closer to private estimates on South American corn and bean crops. They trimmed Argentina corn another 3 mmt to 33 mmt (vs. 41 last year) and Brazil corn -2.5 mmt to 92 mmt (vs. 98.5 last year). With the March Quarterly Stocks data fully in mind, the USDA raised domestic (U.S.) carryout projections to 2.182 BB from 2.127 in March (and 2.350 last year). The feed and residual category took most of the brunt of the damage, and was reduced 50 MB from prior despite evidence of strong animal feed usage. Despite the U.S. bump, world corn carryout down ticked another notch to 197.8 mmt from 199.2 mmt in March (and 231 last year).  Fundamentals continue to move in the “right” direction for corn, though the report played out extremely close to expectations.

Elsewhere, export interest for U.S. corn remains active, particularly out of the usual suspects in Latin America and Asia. Ethanol margins improved again today, as the trade begins to focus more on positive seasonality and less on future export jitters. China will begin their reserve auctions in earnest Thurs-Fri, offering a large quantity of 2014 vintage supply.  Turkey is rumored to be considering reducing or eliminating grain tariffs to boost livestock fodder supplies.

Soybeans finished higher today but well off session highs as bullish news from the USDA  report and new export sales failed to keep traders from taking profits. November held up a little better than May but was unable to break through last week’s contract highs. Futures surged to double digit gains on the morning open, after USDA reported new sales, including 10.25 MB of old crop to Argentina and 9.3 MB of new crop to China and unknown destinations. The deals with Argentina were the largest in some 20 years, as the world’ largest soy product exporter tries to maintain production despite a crop that down 30% from last year. USDA slashed another 257 million bushels off its estimate today following the country’s severe drought, but added 74 million to the size of the crop in Brazil.

Still, it was the bottom line on the U.S. balance sheet that got the market’s attention. While traders braced for an increase due to weaker exports, the government held its forecast of sales steady, cutting 5 million bushels off carryout. Stronger crush helped by the Argentine drought offset lower see and residual usage. At 550 million bushels, however, carryout would still be large, which appeared to temper bulls by the close.

It was Crop report day, and typically, this early April report is non-influential for wheat. Much of the report for wheat saw only very minor changes. The surprise came from World stocks, raising them another 2.33 MMT. Came primarily from increased production in the Middle East. Meaning, there was nothing in the report that was bullish wheat. Price action reacted accordingly, with the knee-jerk reaction. But the markets quickly rebounded, meaning there were buyers looking to buy that break. It also means that these buyers probably are not trading the data from the report, but weather, and conditions here in the US.

Conditions were expected to worsen by around 1% in both G&E and P&VP, and nationally, they slipped 2% in G&E and 5% in P&VP. However, much of the slippage especially in P&VP came in two states, Montana and Oklahoma. The slippage in G&E mostly came in three states, Arkansas, Idaho and Oregon. Kansas conditions actually improved 3% in both G&E and P&VP week over week, and recently, the Kansas conditions usually has taken precedence over how the markets react. So, the initial knee-jerk reaction was a slightly higher start in HRW, and a slightly lower start in SRW because of the overall conditions, but it wasn’t long before the KC markets started to react to the Kansas conditions. Looking ahead to the rest of the week. If nothing else, today’s report reminded us that there is no shortage of wheat around the World, despite the potential problems here in the US. Technically, the market is respecting the gaps left on Monday. It will be important to continue that trend the rest of the week.

Anna Kaverman

anna@mercerlandmark.com


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