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MARKET COMMENTARY

Weekly Summary September 29, 2018

Saturday, September 29, 2018, 9:09 AM
Submitted by: Landus Cooperative


Hello –

 

On Friday, corn closed down 8c and soybeans closed down 9c. For the week, corn was down 1c and closed at $3.5625. For the week, soybeans were down 2c and closed at $8.4550.

 

Monday through Thursday were relatively quiet days with just a few new pieces of information to trade off of. After a major sell-off in corn in last Friday’s Commitment of Traders report, this week showed little changes as the funds sit net short more than 100k contracts in corn and over 50k contracts short of soybeans. African Swine Fever is still a big problem in China and now has spread to some parts of Eastern Europe. While the disease doesn’t affect any other livestock or pose a risk to humans, it is devastating to hog populations. As can be expected, the problem is rumored to be much worse than what the Chinese government is reporting. It is thought to have spread to Europe in a meat shipment, but that is uncorroborated.

 

Staying on China, trade talks with the world’s most populous nation have stalled. Last week, it was reported that officials from China and the U.S. were planning to pick up discussions again soon. Those were cancelled in light of the most recent tariffs posted by the Trump Administration. Other trade partnerships are showing some promise. While we are still at odds with Canada over the finer details of how to treat each of our respective dairy industries, we have made some great headways with Mexico. Additionally, the administration announced that initial conversations with Japan would begin in short order.

 

Closer to home, rains have slowed/halted harvest progress in Iowa. We estimate Iowa to be a little over 20% done on soybeans and less than 5% done on corn. The 10-day forecast includes a lot of rain – hopefully mother nature cuts us a break and gives us a harvest window.

 

The biggest news of the week came on Friday with the USDA releasing quarterly stocks estimates as of September 1st. This is the final quarterly stocks report for the ‘17/’18 crop year. Corn stocks were reported at 2.140 bln bu, 130 mln bu more than the average trade estimate. This places implied feed/residual usage at 5.298 bln bu, down 3.1% from last year’s 5.470 bln bu. The corn market closed down 8c today in response to the 7% expansion in estimated ending stocks. Many analysts believe this is a function of an under-estimation of last year’s crop size. Soybeans didn’t escape unscathed. The average trade guess for soybean ending stocks was 401 mln bu and the published number came in at 438 mln bu. This adds 43 mln bu to the USDA’s latest balance sheet which had ‘17/’18 ending stocks at 395 mln bu. Soybeans closed down 9c today.

 

The other piece of big-ish news this week came on Wednesday. The Fed is increasing interest rates by 25 basis points (100 basis points = 1%). This caused a rally in the U.S. dollar on Thursday and Friday, pushing the dollar up to levels traded in early September.

 

All-in-all, a bit of a frustrating week. Carryover support from last week pushed us higher into Friday, only to see it all erased by the Quarterly Stocks Report. We will continue following this African Swine Fever issue in China (and now Europe), trade resolutions, and keep one eye on the horizon of the South American growing season.

 

Have a great weekend!

 

 

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