October 26, 2018 Market Summary The grain markets saw an increase in volatility to end the week with December corn declining 7 1/4 cents on Thursday before rebounding 6 3/4 cents on Friday. This follows the market declining 10 cents from the near term high made on October 15th at $3.78 1/2. November beans also saw a sharp drop on Thursday of 8 1/2 cents followed by a slight recovery of 3 1/4 cents on Friday. Prior to this, values had declined 41 3/4 cents from the October 15th high. Finally, December wheat declined 12 1/4 cents on Friday before rebounding 18 cents on Friday. Prior to this, values had declined 27 1/2 cents from the recent high. There are several factors in the recent price action...but at a very high level it feels like we stretched the rubber band a little too far to the downside resulting in the correction back up on Friday. More specifically, I ll start with the wheat market. We ve been talking about for over a month how the Black Sea wheat market was going to run out of wheat with Russia likely to shut off exports at some point. Despite this, US wheat exports have been trailing significantly below last year and far from the pace needed to reach the USDA s estimate. Wheat really needed to find a price level that would make it more attractive on the global market. When wheat dipped below $5.00 this week, we essentially found a level that was starting to draw export attention. That does not make wheat bullish...but it does take away the incentive for funds to sell wheat. Soybeans, continue to lag way behind levels needed to reach the USDA estimate. At this pace, we could see US export sales trimmed significantly with the US carryout potentially pushing up towards 1B bushels. It s hard to make a case for stronger bean values unless a deal gets worked out with China. Even then, it may not justify higher bean values, but the market will likely shoot first and ask questions later. Finally, for corn the market continues to find reasons to reduce the upside potential. We ve expected a strong demand market to help forge early fall lows and work prices higher. However, instead we ve had 2 very poor weeks of exports and find ourselves being challenged more than we expected for export business by Argentina and Ukraine. Even Brazil has competitive offers for Jan/Feb. To be clear, US export sales are well ahead of the pace needed, but in the last week sales were so poor that we dropped from 40% above last year to 32% ahead of last year. Finally, we also see demand threatened in the US by very poor ethanol margins which is gradually reducing domestic demand for corn. For now, it feels like corn is seeking out a level that will spur better export demand which we expect to show up in the $3.50 to $3.65 area on December 18 corn futures. As of: 10/23/18 Long/ Short Inside this issue Weekly Price Change... 2 Drought Monitor... 3 7 Day Precip... 4 Harvest Progress... 4 6-10 Day... 5 8-14 Day... 5 Exports... 6 Technicals.7 Commitment of Corn Traders Managed Money Fund Positions Soybeans Wheat +25K -44K -26k Change +5K -8K -26K
Weekly Price Change: 10/26/2018 Price Change % Change Corn Dec $3.67 3/4 +$0.0075 +0.2% Soybeans Nov $8.45 ($0.1175) -1.3% Wheat Dec $5.05 1/4 ($0.095) -1.9% Feeder Cattle Jan $149.70 $0.95 0.6% Live Cattle Dec $118.40 $1.63 +1.4% WTI Crude Oil $67.74 ($1.37) -2.0% US Dollar Index 96.31 +$0.59 +0.6% DJIA 24688 (758) -3.0% 2
US Drought Monitor 3
7 Day GFS Precipitation Forecast US Corn Harvest Progress Harvest progress was up 10% this week to 49%. SD, IA, and NE are below average pace, while he rest of the Midwest remains above average. Favorable weather this week should continue to push harvest progress forward in next week s report. 4
6 to 10 Day Forecast Precipitation Temperature Precipitation 8 to 14 Day Forecast Temperature 5
Exports Sales Export sales were MY lows this week as we only saw 13.7MM bushels hit the books. This brings the cumulative annual sales to 843MM bushels, which is the second highest YTD total on record Export Inspections Export inspections were slightly higher week on week, coming in at 40MM bushels which is roughly 6MM bushels below the average pace needed to hit the USDA export estimate. Cumulative exports reached 262MM this week which is the second highest YTD exports on record. 6 6
Technical Analysis Dec corn continues to oscilate around it s VPOC (most traded price) of $3.65/bushel. This also happens to be right in the middle of the recent channel that has been established since mid- July, with resistance at $3.77 and support all the way down at $3.37 (where Sept went off the board). RSI remains at a neutral level and does not indicate either overbought or oversold. For now, we seem to have established a trading range of $3.60-$3.75. 7