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June 21, 2018 : Market Summary

Market Report

Thursday June 21st, 2018

July corn closed up 2 ¾ at $3.57 and December closed up 2 ½ at $3.78 ¼. July soybeans closed down 9 at $8.80 ½ and November closed down 9 at $9.01 ½.  July wheat closed up 7 at $4.95 ¼ and September closed 7 ½ at $5.06 ¾.  Crude oil closed down $.38 at $64.86.

The corn market was almost boring Thursday. The only excitement was a brief $.05 stab lower overnight. Steady/better was the theme during the day. Managed Money traders were net buyers of about 10,000 corn today. CFTC data tomorrow afternoon will be extremely helpful, given the massive move in the board and pending expiry of July options. Export sales this morning took a breather, dipping below 1 mmt in new sales for the first time since May 3rd. Old crop sales totaled just 165,900 metric tons, as cancellations of 584,700 metric tons to “unknown” (China??) bit into the total. Mexico and Japan were the largest buyers of record.

Weather remains somewhat bearish, though we were a little disappointed in some of the areas missed by rains overnight.  Northern Missouri and Western Illinois continue to go without.  Rains still in the five day maps are expected to greatly favor the Eastern Belt, which will be quite welcome in dry IN/OH, as well as even-drier Kansas. 6-10 & 8-14 day maps turn much hotter, but precip estimates lean wet over that timing as well.  On the world scene, Ukraine corn is expected to get a timely drink this coming week, though Russia stays dry?  South American harvest/maturation weather seen good. Argentina corn moved up to 51% harvested versus 45% average (and well behind normal).

While corn and wheat came up for some air, the soybean market couldn’t tag along and closed nine lower with another late push of selling. It was a much quieter trade than the first part of the week with volume in November beans less than half of what was traded on Tuesday’s high-volume spike trade. What does all that mean? Absolutely nothing other than the market is exhausted and has spent two days trading around after the blow off spike trade. The cloud of trade tariffs remains over the market and likely keeps a lid on rallies until a resolution which opens the floodgate on new crop purchases is reached. The wires this afternoon report the White House National Economic Council is considering high level talks with China before the tariff date on the 6th. The other potential game changer of course could be weather pattern shift but at this point the outlook remains benign.  Some concern over the heavy rains of late with reports of disease in some of these areas but there is nothing in the forecasts that raises any alarm bells with plenty of heat and moisture seen through early July that should continue overall favorable development. With that said, the models are now debating the setup of a ridge in early July and the consensus at this point is a lighter rainfall bias and warm temps where the SW of the corn belt would be most susceptible to crop stress.

Soybean weekly export sales totaled 530 mt of which 302 was old crop which was within expectations.  The old crop sales are -42% from last week, but up 48% 4-week average. Unknown cancelled 204 and China -66. Funds have continued to sell beans going from a net long peak of +156k in mid April to an estimated net short of around -85k as of today.

After a back and forth night that saw wheat prices finish higher across the board, trade was able to maintain most of those gains throughout the day. The entire wheat complex looks to be finally benefiting from some positive news. The first came on talk that the USDA was considering bringing back the CCC to support prices for farmers. If that were to happen, it would be supportive to wheat the most. That was followed by Agritel pegging the Russian wheat crop at 67.4 MMT. And we cannot take our eye off the US Dollar. This morning trade moved into new contract highs and a strong Dollar usually benefits wheat the most. News seems to run in cycles, and right now the wheat market is trying to build a positive one to end the week. The crop report next Friday has the potential to give trade additional positive momentum, with the idea that the USDA will lower harvested acreage estimates in several states. For now, look for buying on breaks. Export sales this morning came in at the high end of expectations at 462 MT. Total sales are now 183 MB vs 277 MB last year.

Anna Kaverman

anna@mercerlandmark.com


June 20, 2018 : Market Summary

Market Report

Wednesday June 20th, 2018

July corn closed up ½ at $3.54 ¼ and December closed up ¼ at $3.75 ¾. July soybeans closed up ½ at $8.89 ½ and November closed down ½ at $9.10 ½.  July wheat closed up 10 ½ at $4.88 ¼ and September closed up 9 ¾ at $4.99 ¼.  Crude oil closed up $.68 at $65.24.

The corn market Wednesday featured both near-thrills and near-spills, as we managed to lop the prior day’s $.20 range in half.  Futures would ultimately finish with fractional gains. Mid-day, the markets had a slippery feel, trading as much as $.06 lower.  Corn battled back to trade as much as $.03 higher shortly before the close. Managed Money traders were believed net sellers of about 5,000 corn today, which netted out could leave that class of trader net short the corn market for the first time since winter. Positive weather developments likely helped limit gains of the day in corn, while “Trade War” headlines tend to be greeted by macro selling. Welcome rains fell along some of the dryer areas of the southern Corn Belt overnight. Forecasts suggest more in store, with good rains seen for all but the extreme Northern Plains. World weather is also in a mostly “non-threatening” posture, with the exception of portions of Ukraine and Russia, which still trend dry. This could have a bearing on corn export availability out of that region next year which could favor US sellers. South Africa also about to start harvesting, with a smaller crop likely relative to the prior year’s bin-buster; 13 mmt vs. 16.8 prior.

The soybean market had a back and forth trade as we look for some stability after our extended break. Modest overnight strength melted away after the break following comments from Commerce Secretary Ross that implied the administration is likely to move forward with the threatened tariffs on China on July the 6th. Ross was quoted as saying that ‘Trump concluded we need more than just talk with China’ and also noted that we are ‘unlikely to succeed unless we make it painful for China’.  President himself Trump later provided a more optimistic slant saying that he expects to announce new trade deals with unspecified countries “rapidly,” with the recent market volatility and sharp losses in the Ag perhaps creating urgency to move negotiations forward. When the market ran some sell stops taking the board lower on the day, it would have been very easy for beans to fold, but instead we held and rallied back for a modest reversal in the front months despite an effort by some determined seller to wreck the settlement with some size hitting the market in the closing seconds. This display of resiliency is an important second step following yesterday’s spike trade in trying to create some confidence along with a bottom.

It was a back and forth day for the wheat complex today, but when all was said and done, it was the wheat complex that finished on top. Price action overnight was quietly higher, but after the European Commission announced this morning that they would begin implementing tariffs on $3.2 billion worth of US imported goods starting on Friday, it seemed to send a negative vibe to trade that washed away the overnight gains and sent trade lower. But the grain complex recovered on the talk of the USDA considering bringing back the CCC to support prices for farmers. If this were to happen, it would benefit wheat prices more than corn and beans. Maybe that is why wheat finished the day the strongest. The crop report next Friday has the potential to give trade additional positive momentum, with the idea that the USDA will lower harvested acreage estimates in several states. Finally seeing some positive news for wheat. For now, look for buying on breaks.

Anna Kaverman

anna@mercerlandmark.com


June 18,2018 : Market Summary

Market Report

Monday June 18th, 2018

July corn closed down 5 ¼ at $3.56 and December closed down 5 ½ at $3.77 ¼. July soybeans closed up 3 at $9.08 ½ and November closed up 1 at $9.31 ½. July wheat closed down 9 ½ at $4.90 and September closed down 12 at $5.01 ½. Crude oil closed up $.84 at $65.69.

Corn maintained a defensive posture to start the week, with rains in the forecast, longs still suffering, and tariff talk on everyone’s lips. Managed Money were viewed net sellers of about 25,000 contracts today, and by reckoning could be close to “even” when including option deltas. Note, the most recent CFTC reports have established most of the selling in recent weeks as “new spec shorts” and not “long liquidation”.

Crop progress data after the close found a small uptick in US corn ratings.  Good-Excellent ratings improved 1% wk/wk to 78% nationally, which compares to just 67% last week. 4% was rated Poor-Very Poor unchanged from last week, but half of the year ago’s 8%. Notable state-by-state changes included additional slippage in Missouri (-8% G-E) and Texas (-7% G-E), though Iowa improved a whopping 3%, while the Dakotas were up +8% in North and +3% in South.  98% of the crop was emerged, with only Michigan and Pennsylvania significantly behind trend.  First silking report comes out next Monday.

The week ahead is expected to be a fairly good one for US corn growing weather. 5 day maps suggest widespread coverage for most of the Corn Belt.  Temps also cool off along with the stormier front.  6-10 & 8-14 day maps are hotter, but do not set off any alarm bells yet given some moisture still included.  China looks good, while Canada is trending a little dry. South American harvest/maturation forecast looks favorable. FSU/EU still not seeing consistently good weather, but the situation is not nearly as bad as several weeks back.

The soybean market reversed higher out of new lows led by the front months which briefly dipped below $9 after the break.  This is the first time front month soybeans traded below $9 since March of 2016. This afternoon’s crop progress report showed soybean conditions at 73% gte compared to 74% last week and 67% this week last year. Beans are 97% planted vs. 93% last week and 91% avg. For this date this leaves 2.669 MA left to plant which are primarily double crop behind wheat. Soybean emergence is 90% vs. 83% a week ago.

Weekly grain inspections came in stronger than expected with bean shipments at 818 mt vs. 500 mt estimated. This compares to 676 mt last week and just 292 mt this week a year ago. Year to date soybean shipments stand at 48.307 mmt vs. 51.929 mmt this time last year representing a 133 million bushel deficit to last year’s pace as we continue to narrow the gap to the USDA’s export projection of a 109 million bushel deficit. Non-Chinese export activity remains strong. There was a cargo to China off the PNW in the report. They had been shipping two/week of late, this week down to one. Logistical issues that originated with a trucker strike and have moved to freight rate dispute at Brazil’s ports continue to slow load outs which gives the US additional opportunity to pick up some trade. This issue takes on more urgency once Safrinha corn harvest begins and compete for storage space.

July 6th is the new target date for US-Chinese tariffs to be enacted. This can go one of three directions. 1)  Both sides come to the table and work out a deal. In this scenario the market reaction would be positive and likely prints a bottom in prices. 2) Tariffs are delayed to allow more time to negotiate and leaves the black cloud of uncertainty over the market. 3)  Tariffs are enacted and both sides see economic losses. In the case of number 3, Sec Ross stated that it is too early to detail what government assistance farmers would receive to offset their losses.

Another start to a week with not a lot of positive news around for the wheat complex, and another Monday that resulted in double digit losses. Today was the sixth consecutive week the wheat market started the week lower, and today it was the KC market that led the declines. As harvest moves along, talk of HRW wheat conditions being better than expected in some areas as well as protein levels being much higher than last year were a couple factors behind today’s poor price action. Russian wheat prices falling more than $3.00 week over week was also a big influence to today’s price action, and with Egypt in for wheat after the close, it won’t take long to see exactly how much they have fallen as we could compare prices to the GASC’s tender from a week ago. Crop progress this afternoon will only weigh on futures further as overall winter wheat conditions came in 1% better. HRW conditions improved the most, up two pct, while SRW wheat conditions fell around two%. Most of the decline in the SRW wheat conditions came from Missouri and Illinois.

After the close Egypt’s GASC announced they were in for wheat for Aug 1 to Aug 10. Their last purchase was just last week when they bought a total of 420 MT of wheat, of which 300 MT was Russian and 120 MT was Romanian. The average price paid was somewhere around $225.32, which was $9.63 cheaper than the avg price paid on May 15.

Anna Kaverman

anna@mercerlandmark.com


June 14, 2018 : Market Summary

Market Report

Thursday June 14th, 2018

July corn closed down 13 at $3.63 and December closed down 12 ½ at $3.84 ½. July soybeans closed down 8 ¾ at $9.27 ¼ and November closed down 8 ¾ at $9.50. July wheat closed down 15 at $5.01 ½ and September closed down 15 ½ at $5.17 ¼. Crude oil closed up $.217 at $66.69.

The bear returned with a vengeance, pushing the market lower overnight and kept the pressure on during the day. Futures would end right near the lows of the day, notching $.13 losses. The day’s low was within a $.01 of the July contract (lifetime) lows made back in January. Heading into Friday, the corn market is sporting another $.15 decline for the week, the third such down week in a row. Funds were viewed net sellers of at least 35,000 corn today, which will leave funds net long well under 100,000 combined futures and options for the first time since this winter.

Large spec capitulation remains the name of the game in corn.  A souring technical picture, ensuing margin calls, and a difficult-to-quantify “tariff war” story has the long racing for the exit. The trigger today is no doubt the looming Friday “deadline” imposed by the Trump administration on issuing new Chinese tariffs. Trade continue to be a little confused as to why corn is taking the brunt of this damage. While China could potentially be a massive future market for US corn, they have imported less than 1 million metric tons each of the past three years.

Make no mistake, though, early year conditions in corn have gotten off to a tremendous start. Beneficial rains fell overnight in most of Iowa, applying early pressure to the corn market. Much of the Midwest has favorable soil conditions today, but remain surprised the market is not putting some “risk premium” back in, given prospects for rather erratic rains over the next two weeks?  It gets pretty hot, too, this weekend, which will dry things down more quickly.  Rains advertised one-two weeks out (June 23-28) will be closely watched. Contrary to market price action, crops are not made just yet. On the world scene, despite some showers this week, Europe and the FSU are still trending a little too dry and could use a broader drink.  Argy corn harvest moved up to 45% complete.

It was corn’s turn in the “tariff barrel today”, as the bean complex managed to get off with just a light whacking. Beans extended the decline, pushing to new lows for the year in most actively-traded contracts. Meal finished $4 lower, while Oil actually closed higher, posting an encouraging bounce after trading to new lows of its own. Managed Money continues to aggressively liquidate length in meal and beans. The sea of bearishness continues to weigh on prices as favorable growing conditions, the absence of a weather threat, fund liquidation, tech sellers, panic sellers and lack of a Chinese trade deal all contribute to the selling. The dollar is trading sharply higher, to boot. Markets will be watching the news tonight and tomorrow for more details on the tariffs expected to be issued by the US and China.  No doubt China will retaliate, and beans could be in the crosshairs.

Three consecutive sessions with at least a $.15 move makes for an exhausting week, and we still have one more day to go. The defensive price action started overnight with Chicago lower. During the opening hour of the day, twice we saw trade make a run below $5.00, but each time that level held. A late morning rally across the entire grain floor gave the wheat market a spark. We probably began to see those who bought the market post-report start exiting their position today, but more so it sure feels like we are seeing funds exit their long position across all commodities as so to limit their exposure with Friday being the deadline on whether tariff’s will be imposed by the US on China. The thinking this morning was psychologically, the $5.00 level should provide support for July wheat, and it did. But if this level cannot hold tomorrow, a test of the May lows would not be too far behind. Iraq buying only Aussie wheat overnight and no US had to be a little disappointing, but not unexpected, and export sales were once again mediocre at best. I know it is a few weeks away, but the June 30 crop report should be favorable to wheat – especially KC, as we will probably see a big reduction in acres in Kansas, and a slight reduction in Oklahoma, Texas and Colorado. That will finally give us the drop production estimates that everyone is looking for. But until we get a little closer to that report, positive influential data might be hard to come by. Maybe the rhetoric surrounding US/China trade relations will ease and we can find a silver lining there.

Anna Kaverman

anna@mercerlandmark.com


June 13, 2018 : Market Summary

Market Report

Wednesday June 13th, 2018

July corn closed down 1 ½ at $3.76 and December closed down 1 ¼ at $3.97. July soybeans closed down 18 at $9.36 and November closed down 15 ¾ at $9.58 ¾. July wheat closed down 18 at $5.16 ½ and September closed down 17 ¼ at $5.32 ¾. Crude oil closed up $.24 at $66.52.

Corn prices slumped slightly on spillover weakness from other grains, although losses were mostly minimized. Corn basis bids were steady to mixed Wednesday, accounting for regional variances in supply and demand. Bids trended as much as 6 cents higher and 2 cents lower across Midwestern locations. Informa Economics has lowered its latest 2018 U.S. corn acre estimates from 89.0 million acres last month to 88.706 million acres. Ahead of Thursday morning’s USDA export report, trade analysts expect the agency to report between 31.5 million bushels and 51.2 million bushels in corn export sales for the week ending June 7. French consultancy FranceAgriMer says the country’s 2017/18 corn stocks are up slightly to 110 million bushels – up 3.7% from a month ago.

The soybean market resumed its break, unable to build upon yesterday’s reversal as a modestly higher overnight opening trade turned into another sharply lower settlement and another new low for the move. Favorable growing conditions, the absence of a weather threat, fund liquidation, tech sellers, panic sellers and lack of a Chinese trade deal are all weighing on prices.

The US is preparing a list of tariffs that is scheduled to be published on Friday, the tariffs can legally be enacted at that point or thereafter. If the 25% tariff on $50 billion of Chinese imports is enacted, it is expected that China would immediately retaliate with tariffs on US goods including agriculture. This has been a black cloud hanging over the soybean market since the trade talks began but we are now approaching a critical timing where either China makes a deal or we take the trade war to a new and more painful level for both sides.

China cannot source its soybean needs on South American production alone and it is safe to say they will not disrupt their people’s diets by just going without. The US has the benefit of supporting farmers with government assistance in the case of economic loss due to a tariff situation as the administration has already stated. When a deal is made you will likely see a significant sales intention headline accompanying it for new crop beans among other agricultural products. On a near term basis, China is struggling with too much supply from their aggressive purchases of Brazilian beans but that backlog will work its way through and fourth quarter needs still have to be covered. Even though China has been largely absent from our market (which is seasonally normal for this time of year), other export demand has been quietly decent and we are bridging the gap in USDA export projections and our pace of shipments.  Everyone sees the record crush and overall soybean demand is strong as was reflected in yesterday’s crop report. Elsewhere in the news, Informa acres – corn 88.7 beans 89.9 compared to the USDA last at 88.0 and 89.0 respectively.

Price action tried to follow up Tuesday’s explosive trade with early gains overnight, but the rally quickly fizzled and the markets spent the rest of the night trading lower. The selling continued once we moved into the day session, with prices gradually weakening throughout the day. The bleeding seemed to finally stop during the final hour of the day, but futures remained in the lower end of the day’s range through the close. There was really no story to justify today’s price action, similarly to yesterday when there was no story to justify Tuesday’s post-report move.

It was all about the crop report yesterday, and as we have been saying for the past 24 hours, the data from the report did not justify a rally. Trade wants to talk about US ending stocks being lowered 9 MB. Well, that came on the heels of a 25 mil increase in exports, and there are some that want to talk about the USDA raising that figure a couple more times this year. But, we could not meet our expectations on exports this past year, and the start of the new year and foreseeable future is not very promising. Why the increase then? Maybe because trade wants to talk about World production being lowered. Granted the Russian wheat crop reduction was a big surprise, but most of the other World reductions were expected, and World ending stocks for this year and next year were raised and remain enormously large. Not to mention here in the US, production was increased in all three classes, with the HRW wheat increase probably the biggest surprise of the report. Don’t know what was behind the strong price action Tuesday post-report, but was not surprised at all to see trade give most of that rally back today. Looking ahead to the rest of the week, a big export number in the morning would go a long way to justifying why the USDA raised exports 25 mil yesterday. Nothing over the past ten days leads me to believe we will see one. Friday is the deadline on whether tariff’s will be imposed by the US on China.

Anna Kaverman

anna@mercerlandmark.com


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