Market Commentary  05/24/18 1:56:43 PM Printer Friendly VersionPrinter Friendly Version

Thursday, May 24, 2018


Corn futures were unable to finish the session higher. Today’s rally appeared to stall and sell off when the December contract failed to take out contract highs at $4.29 ½. Weather remains a key variable in the market as does U.S./Chinese trade talk. For the weather, in the short term, there should be a couple systems bring rain across the Corn Belt; one this weekend, and another the middle of next week. The 6-10 day outlook for the U.S. currently shows above normal temperatures for the middle of the country. Precipitation looks like it will be less than normal in a band from TX to WI, but normal/above outside of that. In regards to trade, Ag Secretary Perdue has recently stated that the U.S. is pushing China under the new trade agreement framework to increase its ag imports by $25 bln. annually in the coming years. For reference, that compares to current ag exports of around $20 bln. A U.S. Commerce delegation led by Secretary Ross is expected to be heading to China next week for negotiations. This morning’s weekly U.S. corn export sales number was solid at 33.6 mln. bu. This was nearly double last year's sales this week of 18.0 mln. bu. Total commitments moved above last year for the first time in the 17/18 marketing year. Corn sales only need to average around 7.6 mln. bu./week through the end of August for the USDA's projection to be met. For reference, sales last year averaged 8.3 mln. bu./week from this point forward. In South America, concerns continue to surround Brazil’s safrinha corn crop. Despite the fact many areas recently received some stabilizing rainfall, their forecast has turned dry again.


Soybeans were unable to close firmer, despite the short term bean trend turning bullish early this week on news the U.S. & China agreed to drop tariff threats; easing concerns about U.S. shipments to China. Spillover weakness from lower wheat and corn futures weighed on the beans as did a lack of follow-through buying. In this morning’s weekly U.S. export report, 17/18 beans actually showed cancellations of 5.1 mln. bu. This was the 2nd week of net cancellations in the 17/18 marketing year, with the last occurring in mid-February. Despite weak sales last week and net cancellations this week, the potential to reach the USDA's export projection still looks attainable. Sales need to average approx. 4 mln. bu./week through the end of August vs. last year's 6.5 mln./week average from this point forward. In Brazil, bean processors are being affected by nationwide trucker protests against high diesel prices. In response, Brazil's state-led oil company Petrobras temporarily cut diesel prices by 10% to help the government and truck drivers resolve the protest. News is also circulating out of Brazil today regarding unpaid government subsidies pledged to corn producers and grain handlers that were due weeks ago. (The lack of payment is being blamed on faulty recipient documentation). Some 8.71 MMT’s of corn were traded in the government support programs in 2017, representing 9% of Brazil's output that season. Conab, which administers the programs, budgeted 499 mln. reais ($137 mln.) in subsidies to farmers and trading firms for 2017; providing state compensation for selling and shipping corn when prices were depressed following a bumper crop. Conab confirmed only about a fifth of the total subsidies, or $27 mln. had been scheduled for payment through last Friday.
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