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Grain and soy markets are trading just a bit “squishy” but quiet this morning, which is quite understandable as we begin winding down to the Thanksgiving break. Granted, if there were some substantial news item that took everyone by surprise, we could witness an interesting swing, particularly seeing that the volume is not huge, but so far, new releases are pretty run of the mill. The harvest progress reports fell right in line with expectations with corn now estimated to be 90% complete and beans 96%. This is 5% behind average for corn, with Wisconsin still pulling up the rear with just 69% harvested. Do note though that winter wheat conditions are rated 52% good/excellent versus 58% a year ago, but it would be premature to read much into that just yet.
The USDA did report a sale of 130,000 MT of soybeans to China this morning. While it always provides at least a psychological boost to see sales released, the corn market is still awaiting confirmation of possible corn sales that were rumored yesterday. What makes this a bit more interesting is that the “talk” is that China may have been purchasing corn off the Pacific northwest. We have discussed the potential for this to begin a number of times, believing they will need good corn to blend with some of their “questionable quality” inventory, and it may begin to occur sooner that some think. Also keep in mind that historically, once China embarks on a purchasing program, it is never in a small way and if they are truly going to gear up their ethanol production as forecast, the balance sheet could change (for the better) rather quickly.
If you are in the camp that believes bigger is not necessarily better, particularly when it comes to competition, you probably will not welcome the information published by the consulting firm Oliver Wyman. According to their paper, with gross revenues from commodity trading down 6% in 2016, we should expect to see more and more consolidation in the industry as cost-cutting and increasing efficiencies, i.e., eliminate redundancy and people through mergers and acquisition, will be sought after. Realistically this should not come as a shock as we have been watching the entire industry restructure since the commodity bubble burst around 2011 with some of the oldest and biggest names struggling to adapt to the new norms. This, of course, reaches far beyond grain or energy traders as we continue to see the consolidation in the chemical/seed/technology world as well. While this is a natural part of the cycle as we adjust to the famine to feast realities of commodities production/demand and forces everyone to become leaner and meaner, but ultimately it will leave us with less competition, which is not a good thing.
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