Reports that indicated China had submitted a written response to US demands for trade changes lifted grains Wednesday night & early in Thursday’s trading session, but gains faded as skepticism for a quick deal emerged. Conflicting reports from Trump Administration trade officials raised doubts about the status of negotiations as some reports suggested the warring sides are still far apart. Soybeans initially pulled corn & wheat higher. When beans faltered near $9.00, corn & wheat gave back most of their gains to close near the session lows. At Thursday’s close, Dec. corn futures edged 1/2c higher, Jan. beans gained 5.25c, Dec. soymeal ticked $0.30/ton lower, Dec. soft red winter wheat rose 2.5c & July SRW was 1.5c higher.
Grains traded with a steady/weaker bias overnight, & two-sided trading continued following the 7:30 am release of USDA’s holiday-delayed Weekly Export Sales report. That data reported export sales for the week ended Nov. 8 near the upper end of trade expectations for corn (35.195 mb vs. 19.7-39.4 mb) & better than expected sales of soymeal (432,400 mt vs. 150,000-350,000 mt), but sales of soybeans (14.808 mb vs. 14.7-25.7 mb), soyoil (14,900 mb vs. 5,000-30,000 mt) & wheat (15.392 mb vs. 14.7-23.9 mb) that were at the low end of trade guesses. Lack of grain sales to China continued to seriously impact US grain exports last week—especially soybean & milo. China did not buy any old- or new-crop US corn, grain sorghum, wheat, rice or new-crop beans in the week that included the mid-term elections. Worse, they cancelled 7.165 mb of previous 2018/19 US soybean purchases. While a very small amount of muscle-cut pork & beef sales went to China last week, the purchases amounted to less than 1% of the totals. Chinese buyers cancelled 7,000 running bales of US 2018 cotton, but purchased 22,000 bales of US 2019 cotton. China continued to be the dominant buyer of US cattle hide exports, taking 198,800 of the 354,200 pieces that were sold worldwide last week. With corn, soybean & milo now 10 weeks into the 2018/19 marketing year, wheat now 24 weeks into the season & the 2018/19 soy products marketing year now 6 weeks old, sales are running below 5-year averages for each of those commodities compared to USDA export projections! Since the full-bore start to the global trade wars that Mr. Trump started, US exports have plunged & imports have surged as US buyers stockpile goods they expect will see even greater tariffs by January. Those are facts borne out by US Census Bureau data, not my personal opinions. At the 7:45 am pause in electronic trading, Dec. corn futures were 3/4c lower, Jan. beans were down 2c, Dec. soymeal was $1.30/ton higher, Dec. SRW wheat were 1.5c lower & July SRW wheat was down 2.25c. Corn extended its losses, beans maintained the overnight weakness, but wheat turned slightly higher during the first hour of trading on Friday morning. Corn were about 3c lower, beans had slid about 5c lower & wheat was fractionally higher by 10:12 am.
In export news, USDA reported on Friday morning that 3.674 mb of 2018/19 US soybeans were sold to unknown destinations. On Thursday, the farm agency did not report any daily export sales. South Korea’s largest feed processor bought about 5.433 mb of optional-origin corn on Friday for late March-early April arrival. The two cargoes of corn were purchased from Cargill. Japan’s ag ministry bought 1.849 mb of US wheat, 1.306 mb of Canadian wheat & 1.262 mb of Australian wheat in a regular weekly tender on Thursday. Also on Thursday, Saudi Arabia issued a tender seeking 17.453 mb of wheat from various sources.
In production news, the French farm office FranceAgriMer rated 82% of that nation’s soft wheat crop as good or excellent as of Nov. 12. That was up 2% for the week, but down from last year’s same-week 97% G-E rating. The agency’s weekly crop progress report indicated that 92% of wheat sowing intentions are completed—up 7% for the week. Winter barley seeding is 95% finished—up 5% compared to the previous Monday. China’s state economic planner, the National Development and Reform Commission, indicated on Friday that it would lower the guaranteed price paid to farmers for wheat by 2.6% in 2019. Based on the US dollar-renminbi yuan conversion rate that existed on Thursday, Chinese farmers would be guaranteed $8.785/bu. for their output, down 23.5c/bu. from this year. China wants its farmers to grow different crops--including more soybeans—to reduce its huge stockpiles of wheat & corn.
The National Oilseed Processors Assn. reported on Thursday that its members crushed 172.346 mb of soybeans in October—the most ever for any month, 11.567 mb more than in September & 8.104 mb more than last year. Pre-report trade expectations averaged 170.0 mb with guesses ranging 165-178 mb. Soymeal exports jumped to 967,174 tons in October-181,907 tons above Sept. shipments, 323,975 tons above last year & a record total for the month. Soyoil stocks dropped by 28 mil.lbs. to an 11-month low of 1,503 mil.lbs. as demand exceeded production. Soyoil stocks were still 279 mil.lbs. above Oct. 31, 2017 supplies, however. The 2018/19 crush pace is record high so far, keeping it on track to reach USDA’s forecast for a record 2,080 mb.
Thursday’s holiday-delayed EIA Weekly Petroleum Status data reported that US corn processors produced 313.698 mil.gal. of fuel ethanol in the week ended Nov. 9. That was 0.09% below the previous week, but 1.23% above last year’s same week output. Using the 2.8764 gallon/bushel ethanol yield implied by EIA & USDA data from 2016/17 as a guide, 109.060 mb of corn & grain sorghum were crushed for fuel & co-products last week. EIA data indicates that ethanol output since the Sept. 1 start of the 2018/19 marketing year has been 0.58% above last year. USDA’s Nov. 8 WASDE data forecast a 0.89% year-on-year rise in corn ethanol crush. Ethanol stockpiles increased 15.288 mil.gal. (+1.57%) to 987.588 mil.gal. last week—92.662 mil.gal. (+9.38%) above last year’s stocks, & the largest inventory in three weeks. Supplies decreased in the Midwest (-6.006 mil.gal.) & the West Coast (-1.230 mil.gal.), but rose in the Gulf (+9.660 mil.gal.), the East Coast (+12.768 mil.gal.), & the Rocky Mountain (+0.168 mil.gal.) regions. December ethanol futures ticked 0.5c/gal. higher on Thursday to $1.263/gal.—down 1.3c from last week’s post-report close. Dec. unleaded gasoline futures eased 0.4c lower on Thursday to $1.5566/gal—down 9.08c from the previous week’s report-day settlement. Ethanol remains at a significant discount to gasoline, but that difference has narrowed dramatically in the past few weeks as gasoline futures have tumbled along with the 26%+ plunge in crude oil since late September.
Thursday's EIA data reported that US crude oil output jumped 100,000 barrels per day to a record-setting 11.700 million barrels per day--2.055 MB/day (+21.31%) above the same week in 2017. Commercially-owned crude oil stockpiles increased 10.270 mil.brl. (+2.38%) to 442.057 MB—the largest stockpile since Dec. 8, 2017. The refinery utilization rate edged 0.1% higher t0 90.1%--the highest weekly operating rate in six weeks, but still 0.9% below last year’s level. Refiners are still transitioning from summer to winter crack rates. US oil imports declined 0.087 MB/day to 7.452 MB/day & US oil exports decreased by 0.355 MB/day to 2.050 MB/day. Net oil imports of 5.402 MB/day were 0.268 MB/day above the prior week, & 1.367 MB/day (-20.20%) below last year. Gasoline supplies dropped 1.411 MB (-0.62%) lower to 226.610 MB—the second-smallest since Dec. 1, 2017. Distillate fuel stocks declined 3.589 MB
(-3.11%) to 119.268 MB—the lowest since June 29. Fueled by the decline in oil product stockpiles, total commercially-owned petroleum supplies ticked 0.406 MB (-0.03%) lower to 1,253.023 MB—6.743 MB below last year. Following the recent plunge in prices, Dec. WTI crude oil futures rebounded 21c on Thursday to close at $56.46/barrel. That was down $5.21 from last week’s post-report settlement & the lowest report-day close since Dec. 1, 2017. Oil traders remain highly concerned that global demand for oil & other commodities is being cut by tariff wars.
Wednesday afternoon's weekly USDA Hatchery report indicated that the US poultry industry set 0.13% more broiler-type eggs in incubators compared to 2017 in the week ended Nov. 10. Producers placed 172,324,000 broiler chicks on feed last week—down 1,552,000 from the previous week & 2.06% below last year. Weekly placements have been below the previous year in eight of the most recent nine weeks as broiler industry trims output in reaction to stable domestic demand & stalled export growth. Turkey prices are cheaper this year for Thanksgiving shoppers as large supplies of both red & white meats depress prices.
Locally, corn basis edged 1/2c higher, soybean basis eased a penny lower, & wheat basis ticked down 1/2c on Thursday. St. Louis barge freight costs were steady, but Gulf bids were under pressure.
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"Closing Comments" are written by David Marshall, First Choice Commodities LLC, Nashville, IL. To learn more about his farm marketing advisory or commodity brokerage services, contact him at firstname.lastname@example.org or call (618) 327-4370 (voice/fax) or (618) 314-0918 (cell). This commentary is not intended for specific trading strategies. We strive to insure this information is reliable, but we cannot guarantee its accuracy or completeness. Commodity trading involves risks. You should fully understand those risks before trading.