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Closing Grain Comments: 1/17/19

Grains bounced off chart support on Thursday, but traders struggled to explain the move. Midday weather maps turned a bit drier for Brazil, & the release of that data did correspond with a sharp upsurge above opening high prices. But rumors of a big export sale also circulated on Thursday amid talk that was China seeking offers on corn, wheat & dried distillers grains. No confirmation of sales has surfaced in the absence of USDA employees being furloughed. At Thursday’s close, March corn futures surged 6c higher, March beans soared up 13.25c, March soymeal gained $2.10/ton, & March & July soft red winter wheat each rallied 5.25c.

 

Grain markets attempted to build on Thursday’s gains in the Thursday’s overnight trading with prices peaking following the early morning release of South American weather maps.  Prices faded to modest, mid-range gains by the end of the trading session. News was otherwise quiet with lack of USDA data continuing to keep the ag community & traders guessing & flying blind. At the 7:45 am pause in electronic trading, March corn futures were up 1/2c, March beans were 4.5c higher, March soymeal gained $2.10/ton, March SRW wheat rose 2.75c & July SRW wheat was 1.75c higher.

 

Have exports improved since the Dec. 22 government shutdown?  No one knows.  Although St. Louis corn basis jumped 7c higher on Wednesday-Thursday to a level that’s “normal” for this time of year, soybean basis declined 1.5c during that period to fall to historically weak levels.  How bad is it?  The highest St. Louis bids on Thursday for January-May delivery soybeans were from a farm co-operative located miles from the river.  The firm is presumably buying beans for storage to profit from eventual basis gains. Truth is, neither corn or soybean basis hint of strong Gulf export demand right now.  In the absence of USDA reports due to the partial government shutdown, US farmers find themselves in the same position that existed in 1973 when lack of mandatory reporting enabled Russia to accumulate large, under-the-radar positions in what’s still known as the “Russian Grain Robbery.”  Then, prices soared once the huge sales were completed & the reality of how those massive, secret purchases would sharply reduce US stockpiles was understood.  The vast majority of farmers missed out on the 1973 rally. USDA’s daily & weekly reporting regime was then established to prevent a repeat of that situation.

 

After the grain markets closed on Thursday, equity markets soared higher after the Wall Street Journal reported that US Treasury Secretary Mnuchin has discussed lowering or lifting tariffs as good faith measure to get a trade deal advanced with China. The report was later denied by US Treasury officials who claimed talks are “nowhere near completion.” The WSJ report indicated the tariff reduction move is opposed by US Trade Representative Robert Lighthizer, & the proposal has not yet been presented to President Trump.  Mnuchin & Lighthizer represent the moderate & hardline members of the US negotiating team, respectively, & they have butted heads repeatedly during the past year.  President Trump appointed Lighthizer as the lead negotiator, showing his bias. But Trump is also said to be pressing Lighthizer for a deal, adding drama. Concurrent with the Chinese trade talks, negotiations with the EU on tariffs & market access are also underway.  EU officials insist that agriculture must not be part of the negotiations that are centered on manufacturing & autos. President Trump’s threat to impose 25% tariffs on EU autos is roiling US-EU relations. Chaotic government leads to chaotic markets!

 

In export news, USDA did not report any daily export sales on Friday as Day 28 of the budget impasse arrived. There is no end in sight to the mess.  The Interfax news service reported on Friday that the Russian ag ministry will regulate domestic grain prices, but gave no starting date. The ministry does not expect domestic grain prices to rise in the mid-term, but the news would suggestion that Russia expects that stocks will tighten by new-crop harvest.

 

In production news, the Buenos Aires Grain Exchange reported on Thursday that Argentine bean planting was 98.8% completed as of Jan. 16. That was up 2.7% for the week & 1.3% ahead of the 5-year average pace. Soybean conditions are rated 51.2% good-excellent, 38.8% fair & 9.9% poor-very poor.  That’s substantially higher than the 35.0% G-E, 45.2% fair & 19.7% poor same-week rating last year when dry weather during the growing season & excessively wet weather during harvest slashed output by 40%.  Corn planting is said to be 86.1% completed—unchanged for the week & 5.1% below average.  Corn conditions are pegged at 58.3% G-E, 39.9% fair & 4.8% P—VP.  The exchange reports that some areas remain too wet & they lowered their soybean planting expectations by 494,000 acres to reflect that difficulty. Wheat harvest is now completed. Overall, Argentine crop conditions are much better than last year, & that is muting reports of excessively dry weather in Brazil.

 

Locally, corn, soybean & wheat basis levels were steady on Thursday.

 

Would you like CBOT futures prices reported to your phone? Top Ag can send you nearby & harvest futures prices for corn, soybeans & wheat at 9:45 am, 11:15 am & 1:45 pm each day.  We provide the service for free, but you may have to pay for text messages--depending upon your phone plan. Call Scott or Seth at Okawville at 243-5293 or Mike at Trenton at 224-7332 & we'll get you set up! 

 

"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 dmarshall@firstchoicecommodities.com 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.


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