Excuses or reasons?
Sep 25, 2018
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Some mornings it seems we find more excuses than reasons concerning market action and this would seem to be one them. The consensus appears to be that grain markets are under a little pressure due to the rapid rate of harvest so far this fall, but on the other hand, beans are higher because of the wet weather forecast. Okay… There is no denying that we have gotten off to a good start with the corn harvest this year and as of Sunday were 16% complete versus the normal 11% but bean harvest was also ahead of schedule with 14% complete compared with the normal 8%.
At the opposite end of the globe, Brazilian farmers have planters rolling at a record pace. According to AgRural, 1.9% of the intended bean acreage has been planted compared with a 5-year average of .3%. In the largest producing state, Mato Grosso they estimate that .8% is planted versus an average of .1% and in the second largest state, Parana, they are on a record pace with 11.2% in the ground compared with 1.9% for the 5-year average. Keep in mind as well that last year, wet weather delayed planting which created complications for the planting of the safrinha corn crop, i.e., lower production, and it would appear that will not be the case this year. Dr. Cordonnier issued his first estimates for South American production and is starting with a 120.7 MMT bean crop and 96 MMT corn crop in Brazil and 57 MMT of beans and 41 MMT of corn in Argentina. These were in line with the estimates that the USDA published on the last supply/demand report. Last year Brazil produced 119.5 MMT beans and 82 MMT corn, while Argentina came in at 37.8 and 32 respectively.
The is nothing positive to report on the US/China negotiation front. I guess I should call that the non-negotiation front. As noted previously both nations upped the tariff ante yesterday and speaking at speaking at the U.S.-China Business Council and National Committee on United States-China Relations meeting, Vice Commerce Minister Wang Shouwen stated that it would be difficult to proceed with discussions when Washington is putting “a knife to China’s neck.” That would not sound like anything positive should be showing up soon on the horizon.
Mexico continues to find bargains in the U.S. shopping aisles. The USDA reported this morning that they added another 239,630 MT of corn to their shopping cart.
This coming Friday morning, we will see the quarterly grain stocks estimate released. As it comes right at the onset of harvest, this is probably one of the most overlooked reports of the year but regardless, here are pre-report trade estimates. September 1stcorn stocks are estimated to come in at 2.343 billion bushels, beans at 401 million and wheat at 2.343 billion. There will also be a wheat production update, and the trade is expecting to see a total number of 1.872 billion bushels. Of this total 1.188 billion is winter and 684 million spring.
Macros are primarily supportive this morning with metals and energies higher and the dollar weaker. I should note that the CRB index is beginning to show signs of a bottom, and while this has been largely aided by the recent strength in crude, if a low is confirmed we should see investment money begin to flow back in our direction.