News Source: SETZ

Closing Comments; Friday, January 12th, 2018

The early portion of today’s session was spent getting final positions in place ahead of the monthly supply and demand report. Fresh news was very limited which held futures in a narrow range. The reaction to the U.S.D.A. numbers was rather muted as most numbers came out within trade estimates. There was not enough of a change to alter fund attitude, which is what is really needed for futures to break out of their current sideways pattern.

The U.S.D.A. bumped up the national average corn yield by just over 1 bushel per acre in the January supply and demand report to a 176.6 bushel per acre average. This was enough to increase total crop size to 14.6 billion bu, and with current demand, will leave the United States with 2.47 billion bu of carryout. We did see an increase in global corn stocks which increased 2.49 million metric tons to a 206.6 million metric tons total.

The U.S.D.A. actually made a small decrease to the national soybean yield, putting it at 49.1 bushels per acre. This was enough to decrease crop size as well, as we now have 4.39 billion bu of production. The U.S.D.A. made several changes to soybean demand though, which were enough to raise carryout to a comfortable 470 million bu. The global soybean reserve also increased a small amount to a 98.6 million metric ton total.

The U.S.D.A. also reported its grain and soybean reserves as of December 1st in this release. Even with several changes to production and usage, the stocks numbers were actually little changed from a year ago. At the end of the 1st quarter the United States had 12.5 billion bu of corn, 3.15 billion bu of soybeans, and 1.87 billion bu of wheat in inventory. These were slight increases on corn and soybeans, and a minimal decrease on wheat.

March corn finished today’s session 2 cents lower at $3.46 , March soybeans rallied 10 cents at $9.60 , and March wheat in Chicago was down 12 cents at $4.20 .

For more information, you may contact Karl Setzer at 1-800-383-0003, or e-mail at ksetzer@maxyieldgrain.com.The opinions and views expressed in this commentary are solely those of Karl Setzer. Data used in writing this commentary obtained from various sources believed to be accurate. This commentary is intended for informational purposes only and is not intended for developing specific commodity trading strategies. Any and all risk involved with commodity trading should be determined before establishing a futures position.

Weekly Market Review; Friday, January 12th, 2018

Stocks, Production Figures Contain Few Surprises

The U.S.D.A. bumped up the national average corn yield by just over 1 bushel per acre in the January supply and demand report to a 176.6 bushel per acre average. This was enough to increase total crop size to 14.6 billion bu, and with current demand, will leave the United States with 2.47 billion bu of carryout. We did see an increase in global corn stocks which increased 2.49 million metric tons to a 206.6 million metric tons total.

The U.S.D.A. actually made a small decrease to the national soybean yield, putting it at 49.1 bushels per acre. This was enough to decrease crop size as well, as we now have 4.39 billion bu of production. The U.S.D.A. made several changes to soybean demand though, which were enough to raise carryout to a comfortable 470 million bu. The global soybean reserve also increased a small amount to a 98.6 million metric ton total.

We did see an increase to the wheat carryout estimate of 29 million bu, placing it at a comfortable 989 million bu. This increase was the result of a decrease to wheat feeding as corn remains the cheaper feed grain.

The grain and soybean reserves as of December 1st were also reported in this release. Even with several changes to production and usage, the stocks numbers were actually little changed from a year ago. At the end of the 1st quarter the United States had 12.5 billion bu of corn, 3.15 billion bu of soybeans, and 1.87 billion bu of wheat in inventory. These were slight increases on corn and soybeans, and a minimal decrease on wheat.

There is a significant difference between this years and those in recent history for the U.S. soy complex. In the most recent years we have seen U.S. soybean carryout start out high and then erode as the marketing year progresses. Given the ongoing pressure in the global market from Brazil we could actually see our carryout increase this year. Even if it simply holds steady at its current level the market would struggle to rally.

Trade is also looking at how many days of corn and soybean usage current ending stocks would cover. As expected, this is more than in recent years. Right now the U.S. will have 61.4 days of corn needs covered with our projected carryout. For soybeans this is 37.74 days of demand. These are not levels that would cause buyers to show urgency in covering needs ahead of time.

We have recently heard reports that soybean usage will increase in the United States in the near future. Several crush facilities are expanding operations and hope to add nearly 120 million bu of demand by the end of 2019. While this is positive news, U.S. soybean production has been increasing at an equal rate in recent years. This demand may prevent stocks from building as fast as they have in the past few years, but they may not reduce our carryout as much as hoped.

Trade is starting to pay closer attention to the lack of precipitation across the Corn Belt in recent weeks. Since the end of harvest very little precipitation has been received. As a result, we are already starting to see drought conditions expand. While this is far too early to impact production, trade will keep an eye on it as the spring planting season approaches.

A more immediate reaction to dry conditions is how it is impacting commodity movement on U.S. waterways. Water levels have dropped to a point where barge draft is again being reduced. In turn we are seeing higher rail bids, which can be more favorable for the interior market. The total impact of this will be more limited than it was in summer months though, as barge movement is much lighter in the winter to begin with.

We continue to hear concerns voiced over the quality of this year’s soybean crop, mainly oil and protein content. These are not deterring export sales, but they are affecting what an importer is willing to pay for them. What we could easily see take place this marketing year is fewer sales of whole soybeans and more interest in meal and oil. The content level of oil and protein in South America’s crop once harvest starts will also impact what can be asked for U.S. soybeans.

While it has been a topic since the end of harvest, we are at a stage of the marketing year where more attention will be placed on country movement. Buyers have been hoping we would see elevated country movement in early January and have been holding back on bids in anticipation of it. Some buyers have even resorted to pulling deferred sales forward to cover needs until we could get to this point. If movement does not increase as expected, we could see much improved basis values as a result.

Karl Setzer is a Commodity Trading Advisor/Market Analyst at MaxYield Cooperative. His syndicated commentary and market analysis is available daily on radio, in newsprint and on the Internet at www.MaxYieldCooperative.com. The opinions and views in this commentary are solely those of Karl Setzer. Data used for this commentary obtained from various sources believed to be accurate. This commentary is intended for informational purposes only and is not intended for developing specific commodity trading strategies. Any and all risk involved with commodity trading should be determined before establishing a futures position.

Morning Comments; Friday, January 12th, 2018

Trade is anxiously awaiting the release of today’s U.S.D.A. reports. Trade is widely expecting higher production numbers, and in turn, carryout as well. The real question is how much commodity reserves may increase. In today’s market even an unchanged number could actually be friendly for futures.

There is little strong correlation between these numbers and how the market reacts. Of the past 8 January reports, we have seen corn trade higher six times following the data and lower twice. Soybean reaction is split with four times higher and four times lower. Given the fact fund are already holding large short positions, it may be hard to pressure the market more than we already have.

While the January WASDE report normally focuses on the supply and demand numbers, quarterly stocks can have a much greater impact on the market. This is because the market will show us the first quarter usage numbers. Historically, this is the greatest quarter for usage for the marketing year. If we would happen to see less than anticipated demand today it could easily weigh on trade for the remainder of the marketing year.

Market Movers: U.S.D.A. Reports, Fund Activity

For more information, you may contact Karl Setzer at 1-800-383-0003, or e-mail at ksetzer@maxyieldgrain.com.The opinions and views expressed in this commentary are solely those of Karl Setzer. Data used in writing this commentary obtained from various sources believed to be accurate. This commentary is intended for informational purposes only and is not intended for developing specific commodity trading strategies. Any and all risk involved with commodity trading should be determined before establishing a futures position.

Closing Comments Thursday, January 11th, 2018

Trade was mixed today as final positioning ahead of the January supply and demand report took place. Trade really is not expecting any significant changes to current balance sheets, which caused most to simply exit the market, and weighed on futures. Elevated production numbers for South America also weighed on today’s trade. We did see a rebound in export sales which offered market support.

Export sales for the week ending January 4th rebounded from the prior week. Sales for the week totaled 17.2 million bu on corn, 22.3 million bu of soybeans, and 2.6 million bu for wheat. Corn and soybean bookings fell within trade expectations while wheat sales were well below estimates. Only soybeans topped the volume needed per week to reach yearly projections.

The Brazilian firm CONAB was out this morning with their estimates for that country’s corn and soybean crops. CONAB projects soybean production at 110.4 million metric tons compared to last year’s 114.1 million ton crop. The soybean crop is estimated at 25.1 million metric tons, down from last year’s 28.4 million tons. CONAB’s corn prediction does not include the Safrinha crop though, as that will not be published until February.

Tomorrow’s WASDE report could end up having just as much if not more of an impact on cash markets than it may on futures. Many producers across the interior market have been holding inventory to see the data rather than making sales up to this point. At the same time, buyers have been waiting to see how much movement would take place following the first of the year.

March corn finished today’s session cent lower at $3.48 , March soybeans fell 5 cents to finish at $9.50, and March Chicago closed a penny lower at $4.33 .

Early Market Update; Thursday, January 11th, 2018

Nearly all activity in today’s trade is a result of positioning ahead of tomorrow’s WASDE report. Given the fact that report will have several different possibilities for market reaction, traders are simply exiting the market today. Trade did get a look at the CONAB numbers on Brazilian production today. The group’s soybean crop estimate is at 110.4 million metric tons compared to last year’s 114.1 mmt. The firm also predicted the summer corn crop of 25.1 mmt. This is down from last year’s 28.4 mmt corn crop. This does not include the Safrinha crop though, as that crop is not projected until February. This crop has been highly debated for the past several weeks though, and likely will be even after the initial release. Export sales were released this morning, and while better than a week ago, were still nothing to get trade excited. Corn sales on the week totaled 17.2 million bu and soybeans came in at 22.3 million bu. These were both within trade estimates, but only soybeans were greater than the amount needed to reach yearly projections. Wheat sales were pathetic with just 2.6 million bu being sold. Look for the remainder of today’s session to be spent getting final positions in place ahead of tomorrow’s data. Interesting to see that corn has rallied 6 times and been down in 2 of the past 8 years following the January balance sheets. Soybeans are split with 4 higher and 4 lower. Trade is not really expecting to see anything that will cause a substantial shift in market fundamentals tomorrow. While this is possible, all we really need to see is enough of a change to alter speculator attitude. This is what is really needs to change market direction at this stage. The cash market remains firm as buyers attempt to secure needs. Country movement remains slow and is showing no sign of building. Until it does the majority of cash needs will be covered by commercial deliveries.

Headlines

  • CONAB raises Brazil soy crop estimate
  • US ethanol production down in 4 of last 5 wks
  • US soy sales to China -21% from last Dec to this Dec
  • SAM corn supply +22.1 mmt from a year ago
  • Buyers starting to show interest in new crop soybeans
  • Ukraine export terminals to increase capacity
  • Brazil vegetation imagery better than year ago
  • Funds short 206,000 corn, 94,000 soybean, and 133,000 wheat contracts

Bull Side

  • Global corn supply to shrink
  • Soy crush off-setting slow exports
  • Country movement

Bear Side

  • Ethanol production dropping
  • Export sales have slowed
  • Brazilian production estimates

For more information, you may contact Karl Setzer at 1-800-383-0003, or e-mail at ksetzer@maxyieldgrain.com.The opinions and views expressed in this commentary are solely those of Karl Setzer. Data used in writing this commentary obtained from various sources believed to be accurate. This commentary is intended for informational purposes only and is not intended for developing specific commodity trading strategies. Any and all risk involved with commodity trading should be determined before establishing a futures position.

Morning Comments; Thursday, January 11th, 2018

Much of today’s session will be spent getting final positions in place ahead of tomorrow’s U.S.D.A. reports. Not only will the final old crop production revisions be released, but so will the quarterly stocks data. Trade is fully expecting to see not only higher yields but record inventory. In many years this report sets the tone of the market for the remainder of the year.

Not only will trade focus on changes to U.S. production but to global numbers as well. Of these, the most interest will be on South America. For the past several weeks analysts have been reducing Brazil’s corn production estimate and increasing it for soybeans. While these changes could easily take place, the U.S.D.A. may wait until more definitive data can be collected, especially since the corn figure hinges on double cropping.

While this positioning will be a key factor in today’s trade, this morning’s export sales data will also impact the market. Last week’s sales were very poor which was credited to the Christmas Holiday. This week’s numbers will be influenced by the New Year’s break. While demand may rebound after the holidays are no longer a factor, any missed sales are critical given the fact total demand is already being questioned.

Market Movers: Pre-Report Positioning, Export Sales

For more information, you may contact Karl Setzer at 1-800-383-0003, or e-mail at ksetzer@maxyieldgrain.com.The opinions and views expressed in this commentary are solely those of Karl Setzer. Data used in writing this commentary obtained from various sources believed to be accurate. This commentary is intended for informational purposes only and is not intended for developing specific commodity trading strategies. Any and all risk involved with commodity trading should be determined before establishing a futures position.

Closing Comments; Wednesday, January 10th, 2018

Trade was on both sides of unchanged today as positioning intensified ahead of Friday’s U.S.D.A. reports. This favored the grains where short covering was evident in each complex. Soybeans favored the downside today from large South America production forecasts and favorable weather. We did see light support to today’s trade from overnight export sales and a hesitation to establish new positions at this time.

Ethanol manufacturing for the week ending January 5th continued the recent trend of declining from the previous week, with output down 36,000 barrels per day. This put the weekly average at 996,000 barrels, breaking the psychological 1 million barrel average. Even with the decrease in production ethanol stocks increased 100,000 barrels to a large 22.72 million.

The United States and Brazil continue to compete against each other for soybean export business. While soybean values are a major factor in this, we are seeing just as much influence from currency values. Recent weakness in the Brazilian Real has brought that country business, even though soybean values are nearly equal between the two sources. As a result, soybeans from the U.S. have actually had to trade at a discount to those from Brazil to be competitive.

Buying habits in the global market are changing on a whole. Buyers in today’s market are more willing to go hand to mouth when it comes to securing bushels than in the past. This is the result of surplus global commodity inventories and how there is no urgency in getting needs covered. As a result, buyers are willing to wait for the market to come to their bids rather than pay elevated asking prices.

March corn futures finished today’s session unchanged at $3.49, March soybeans were 8 cents lower at $9.55, and March wheat in Chicago was 2 cents higher at $4.34 .

For more information, you may contact Karl Setzer at 1-800-383-0003, or e-mail at ksetzer@maxyieldgrain.com.The opinions and views expressed in this commentary are solely those of Karl Setzer. Data used in writing this commentary obtained from various sources believed to be accurate. This commentary is intended for informational purposes only and is not intended for developing specific commodity trading strategies. Any and all risk involved with commodity trading should be determined before establishing a futures position.

Early Market Updaye; Wednesday, January 10th, 2018

Much of today and tomorrow will be spent getting final positions in place ahead of Friday’s USDA reports. There are really four separate reports released on Friday; final old crop production, supply and demand, quarterly stocks, and wheat acreage. Each of these can have very separate impacts on the market. It is also not uncommon to see one of these be bullish or bearish, but be negated by the others. It is not uncommon to see quarterly stocks data be the driver in this release. This is from the fact that the 1st quarter tends to give us our highest usage of the year, especially in corn. In fact, 2/3 of US corn demands comes in the first half of the marketing year. As a result it is not uncommon to see demand over the next few weeks to set market direction for the remainder of the marketing year. Trade will also be focused on South American production figures. Private analysts are not reducing their production figure on corn as much as some had thought they would. In fact, many are very similar to what the USDA released in December. We continue to see increases to the Brazilian soybean crop, with many at 112-114 mmt. Last year’s Brazilian soybean crop was just under 115 mmt. The USDA is currently at 108 mmt. Very little other fresh news for the market this morning. We are seeing more interest on the outside markets today as China announced it was concerned with US securities and declared it did not see them as a good investment. This caused both the US dollar and the financial markets to drop hard. We have seen some recovery since this was announced, but values are still in the red. Hopes are if the financials drop we will see a correction in the grains from new found investors. The cash market remains firm with buyers pushing for immediate ship deliveries. Building concern over commodity demand both domestically and globally are limiting what buyers are willing to push for bids right now. We are seeing a lot of debate in the cash market surrounding proposed tax changes that are further limiting country movement and affecting bids as well.

Headlines

  • Ice jams still impacting US logistics
  • Firms raising Brazil soy production forecast
  • China to slow/halt buying US securities
  • USDA 2% increase to feed grain demand being questioned
  • Corn mkt up in 6 of last 8 years following Jan report
  • Soybeans +4/-4 after Jan balance sheets
  • Wide price ranges are not uncommon on day of Jan report
  • Funds short 206,000 corn, 86,000 soy and 136,000 wheat contracts

Bull Side

  • Weaker financials bring buyers
  • Delays to Brazil soy harvest
  • US sells soybeans overnight

Bear Side

  • SAM crop estimates
  • Global production rising
  • No major changes expected Friday

For more information, you may contact Karl Setzer at 1-800-383-0003, or e-mail at ksetzer@maxyieldgrain.com.The opinions and views expressed in this commentary are solely those of Karl Setzer. Data used in writing this commentary obtained from various sources believed to be accurate. This commentary is intended for informational purposes only and is not intended for developing specific commodity trading strategies. Any and all risk involved with commodity trading should be determined before establishing a futures position.

Morning Comments; Wednesday, January 10th, 2018

China continues to book U.S. sorghum over corn as use for a feed grain. This is being done to avoid the import regulations that surround corn imports. A result of this is that corn will have less competition in the domestic market, mainly in ethanol and feed. This could easily end up being more positive for the U.S. market than if China simply bought corn.

The Brazilian soybean harvest is finally getting underway. Trade has been waiting for this as it will finally give the market a clearer picture of actual yield numbers and total production. We will also get a better indication of how much double cropping may take place in Brazil this year. Weather conditions have greatly improved in recent weeks which may increase the number of double cropped acres, and in turn elevate corn yield expectations.

There will be a large amount of interest placed on today’s ethanol manufacturing data. Trade is fully expecting to see a decrease in ethanol output from last week due to declining margins. What may receive more market attention is what happens to ethanol stocks as even with decreased production recently we have seen stocks build. Any further build in ethanol stocks will only pressure margins even more.

Market Movers: Technical Indicators, Global Production Estimates

For more information, you may contact Karl Setzer at 1-800-383-0003, or e-mail at ksetzer@maxyieldgrain.com.The opinions and views expressed in this commentary are solely those of Karl Setzer. Data used in writing this commentary obtained from various sources believed to be accurate. This commentary is intended for informational purposes only and is not intended for developing specific commodity trading strategies. Any and all risk involved with commodity trading should be determined before establishing a futures position.

Closing Comments; Tuesday, January 9th, 2018

Traded was mixed today, with the grains on the positive side and soybeans under pressure. Grains took support from short covering and a stronger energy complex. Soybeans struggled all day from a lack of buying interest and declining export interest. All contracts were limited by technical resistance, but supported by thinning pipeline reserves in the domestic market.

We continue to see a strong influence in the commodities from the outside markets, mainly the financials. In recent years we have seen buying take place in both commodities and financials at the same time. This has changed, and now when we see buying in one market, we tend to see selling in the other. As a result, we have seen moves in the commodity market recently that have been contradictory to traditional fundamentals.

Trade continues to focus on current soybean sales and historical trends. At the present time U.S. soybean sales are 145 million bu behind a year ago with a 50 million bu increase on the year being forecast. Typically we see yearly soybean sales come in 40 million bu under the volume seen at this time of the year. This means yearly sales could be over-estimated by a large 185 million bu this year, and likely more. Needless to say this would greatly affect current stocks to use ratios.

One factor that is not helping the U.S. export market is weather. Bitter cold temperatures have caused a larger than normal amount of ice to build on both the Mississippi and Illinois Rivers. This leaves just the Ohio River open for navigation to the gulf, and there is no grain flowing out of the region. As a result, nearly all U.S. grain and soybean exports at the present time are taking place in the Pacific Northwest.

March corn futures finished today’s session 1 cents higher at $3.49, March soybeans were 3 cents lower at $9.63 , and March wheat in Chicago was up 4 cents at $4.32 .

For more information, you may contact Karl Setzer at 1-800-383-0003, or e-mail at ksetzer@maxyieldgrain.com.The opinions and views expressed in this commentary are solely those of Karl Setzer. Data used in writing this commentary obtained from various sources believed to be accurate. This commentary is intended for informational purposes only and is not intended for developing specific commodity trading strategies. Any and all risk involved with commodity trading should be determined before establishing a futures position.

Early Market Update; Tuesday, January 9th, 2018

We are already starting to see traders move to the sidelines ahead of Friday’s WASDE report. There really is not much for fresh news in today’s market to entice buyers, which is weighing on futures more than anything else. Weather in South America remains questionable, but trade already has that factored into the market. Trade instead continues to focus on the export pace we are seeing. Interesting to see corn loadings are starting to pick up while soybeans are gradually working lower. We are also seeing a shift in fund attitude. Funds are holding a record short position in the grains and we are starting to see some of this covered, mainly in corn. While trade is not expecting to see any big changes in Friday’s supply and demand numbers, the possibility is flushing out weak shorts. Corn is also taking support from questionable world production reports. Not only is trade debating South American crop size, but now we are hearing reports that the South African crop is going to be down from last year’s record production. At the same time Russian officials believe their corn crop will be larger than a year ago. Right now global corn balance sheets hinge on the Safrinha crop in Brazil. While this crop may be smaller than a year ago, the obvious question is by how much. This will be debated for the next several months. Advances are being held in check today by ongoing interest in the outside markets over the commodities and a simple lack of interest. Unbelievable low trade volume is also limiting today’s market activity from both sides. The cash market remains firm as buyers attempt to extend coverage following last week’s arctic temperatures across much of the interior market. Now buyers in the Plains have a winter storm in the forecast that will further reduce deliveries. Even without these weather issues it is questionable as to how much movement we would see at today’s market values.

Headlines

  • China resumes corn auctions
  • Brazil soybean harvest slowed by rains
  • Ethanol exports down from Chinese competition
  • Tariffs not slowing Brazilian ethanol imports
  • Russia raises grain crop estimates
  • Drought to reduce So African corn crop
  • Funds short 210,000 corn, 83,000 soy and 141,000 wheat contracts

Bull Side

  • Slow selling in SAM
  • Global weather concerns
  • Corn loadings rising

Bear Side

  • Large crop estimates
  • Russian grain crops
  • Soybean loadings slowing

For more information, you may contact Karl Setzer at 1-800-383-0003, or e-mail at ksetzer@maxyieldgrain.com.The opinions and views expressed in this commentary are solely those of Karl Setzer. Data used in writing this commentary obtained from various sources believed to be accurate. This commentary is intended for informational purposes only and is not intended for developing specific commodity trading strategies. Any and all risk involved with commodity trading should be determined before establishing a futures position.

Morning Comments; Tuesday, January 9th, 2018

While it has been a topic since the end of harvest, we are at a stage of the marketing year where more attention will be placed on country movement. Buyers have been hoping we would see elevated country movement in early January and have been holding back on bids in anticipation of it. Some buyers have even resorted to pulling deferred sales forward to cover needs until we could get to this point. If movement does not increase as expected, we could see much improved basis values as a result.

We have recently heard reports that soybean usage will increase in the United States in the next year. Several crush facilities are expanding operations and hope to add nearly 120 million bu of demand by the end of 2019. While this is positive news, U.S. soybean production has been increasing at an equal rate in recent years. This demand may prevent stocks from building as fast as they have in the past few years, but they may not reduce our carryout as much as hoped.

Now is a time of year when several analysts give their expectations for price potential for the calendar year. While markets do have seasonal patterns they tend to follow, it is very hard to accurately predict market potential. This is from the fact that today’s trade is affected by outside influences more than ever, particularly the financial markets. The growing impact of the world market on the United States market is adding to the difficulty in price-prediction.

Market Movers: Fund Activity, Global Weather

For more information, you may contact Karl Setzer at 1-800-383-0003, or e-mail at ksetzer@maxyieldgrain.com.The opinions and views expressed in this commentary are solely those of Karl Setzer. Data used in writing this commentary obtained from various sources believed to be accurate. This commentary is intended for informational purposes only and is not intended for developing specific commodity trading strategies. Any and all risk involved with commodity trading should be determined before establishing a futures position.

Closing Comments; Monday, January 8th, 2018

Heavy weekend rains and the prospects for more in South America weighed on the early portion of today’s trade. This weakness triggered sell stops which took out technical support, causing losses to build. Not even the announcement of weekend export sales offered much support to the day’s trade. We did see support from a lack of selling in the cash market though, but this failed to fully compensate for losses in futures.

Export loadings for the week ending January 4th were favorable. For the week the United States loaded out 33.4 million bu of corn, 43.5 million bu of soybeans, and 8.6 million bu of wheat. These were all at or above trade estimates. Only the soybean figure was above what is needed to meet our yearly projections though, which limited market reaction.

Economists are already starting to make predictions on what the markets will do for the remainder of the marketing year. At this stage it appears as though the market is taking a similar pattern to last year. Given current fundamental outlooks, this is not surprising. While this may hinder the chance of a rally, it should also help prevent further declines.

The bigger question is what will it take to encourage a market rally at this time. The easiest and most influential change would be fund short covering and buying. Funds continue to hold a short position in the grains which has prevented their ability to rally. If this mindset would change it would easily negate any bearish fundamental factors the market is facing.

March corn futures finished today’s session 4 cents lower at $3.47 , March soybeans were 4 cents lower at $9.66 , and March wheat in Chicago was down 3 cents at $4.27 .

For more information, you may contact Karl Setzer at 1-800-383-0003, or e-mail at ksetzer@maxyieldgrain.com.The opinions and views expressed in this commentary are solely those of Karl Setzer. Data used in writing this commentary obtained from various sources believed to be accurate. This commentary is intended for informational purposes only and is not intended for developing specific commodity trading strategies. Any and all risk involved with commodity trading should be determined before establishing a futures position.

Morning Comments; Monday, January 8th, 2018

There is a significant difference between this years and those in recent history for the U.S. soy complex. In the most recent years we have seen U.S. soybean carryout start out high and then erode as the marketing year progresses. Given the ongoing pressure in the global market from Brazil we could actually see our carryout increase this year. Even if it simply holds steady at its current level the market would struggle to rally.

Trade is also looking at how many days of corn and soybean usage current ending stocks would cover. As expected, this is more than in recent years. Right now the U.S. will have 61.4 days of corn needs covered with our projected carryout. For soybeans this is 37.74 days of demand. These are not levels that would cause buyers to show urgency in covering needs ahead of time.

The big story in today’s session will be positioning ahead of Friday’s supply and demand report. This is one of the most watched releases of the year as it contains the final old crop production estimates. From this point forward we will only see alterations to demand on the domestic side of balance sheets. We will see changes to the global side though, and these will be closely watched by trade.

Market Movers: Fund Activity, Outside Markets

For more information, you may contact Karl Setzer at 1-800-383-0003, or e-mail at ksetzer@maxyieldgrain.com.The opinions and views expressed in this commentary are solely those of Karl Setzer. Data used in writing this commentary obtained from various sources believed to be accurate. This commentary is intended for informational purposes only and is not intended for developing specific commodity trading strategies. Any and all risk involved with commodity trading should be determined before establishing a futures position.

Early Market Update; Friday, January 5th, 2018

Trade is mixed today with grains under pressure and soybeans posting moderate advances. Much of what we are seeing in the soy complex is pre-weekend short covering. Weather forecasts in South America are being credited for some of the buying, but that is more of a “news matching the market” story than anything. Planting is only 5% behind normal in Argentina, and a large portion of the country did pick up decent rainfall in the past 24 hours. More is needed, but that is not uncommon during any growing season. Interesting to see that one reason being given for the slower planting pace on Argentine soybeans is that double-cropped acres are being factored in. This will distort the total regardless of the actual planting pace. The financial market is again firm today and continues to take some of the interest away from commodities. Interesting to see that the monthly jobs report came in less than expected, which could pressure the financials. This would be a welcomed relief for the commodity market. Weekly export sales this morning were marketing year lows with 4 mbu of corn, 20.4 mbu of soybeans, and 4.8 mbu of wheat. These were all under trade estimates and also below the volume needed to reach yearly projected totals. Trade is quick to write these off as being affected by holiday trade and not a good indicator of actual demand. This may be possible, but definitely bears monitoring. This is especially the case in a year where every bushel of demand is needed to keep reserves from swelling even further. Nearby corn has bounced off technical support at $3.50 today, which is a key factor in whether that grain follows soybeans or wheat today. The cash market remains firm today as we see continued pushes paid for immediate ship bushels. These are starting to become further apart though, as end users are saying they are at a point where slowing operations makes more economic sense than pushing for inventory. This is mainly in the ethanol industry where margins were break-even at best to begin with.

Headlines

  • Corn basis 2c better on the week
  • Soybean basis 17c better than week ago
  • Export sales disappointing on the week
  • Ethanol demand on corn 3.8% greater than year ago
  • 93% of Brazil soy crop this year is GMO; +9% on the year
  • EU to import less corn from US this year
  • Rally in crude oil helps ethanol
  • Widespread logistic issues in US
  • Funds short 210,000 corn, 73,000 soy and 144,000 wheat contracts

Bull Side

  • Soy meal demand to rise
  • Short covering
  • Technicals

Bear Side

  • Export sales
  • Ethanol margins
  • More interest on outside mkts

For more information, you may contact Karl Setzer at 1-800-383-0003, or e-mail at ksetzer@maxyieldgrain.com.The opinions and views expressed in this commentary are solely those of Karl Setzer. Data used in writing this commentary obtained from various sources believed to be accurate. This commentary is intended for informational purposes only and is not intended for developing specific commodity trading strategies. Any and all risk involved with commodity trading should be determined before establishing a futures position.

Closing Comments; Thursday, January 4th, 2018

All interest was on the financial markets early in today’s session as the DOW finally broke above the 25,000 mark. While this has been expected for some time, it did remove what little buying interest we were seeing in commodities at this time. Losses were held in check by a firm cash market and ongoing export interest. Additional support came from technicals, primarily in the corn complex.

Ethanol manufacturing for the week ending December 29th offered little support to the industry. Production declined by 58,000 barrels per day during the week, but still maintained a 1.03 million barrel per day average. Ethanol stocks made a considerable jump of 588,000 barrels though. This put them at a record sized 22.62 million barrels.

We are now approaching a pivotal time for soybean planting in Argentina. History shows that any soybeans planted past this date tend to show noticeable yield drag. As a result, many farmers in Argentina may opt to plant additional corn acres instead of soybeans, similar to what takes place in the United States at times. Under this scenario it is not out of the question we could see elevated production of both corn and soybeans in South America this year as Brazilian soybean crop estimates keep rising.

Cumulative US export sales this year are raising many questions. Bookings of both corn and soybeans are trailing last year and bringing into question projected totals. What we could be seeing however is a shift in how importers make purchases that will have little if any impact on yearly sales at all. Buyers used to make large purchases for harvest delivery, then gradually decrease their buying for the remainder of the marketing year. What appears to be happening now is that buyers are spreading out their import purchases, which actually is more of a benefit to a market.

March corn futures finished today’s session 2 cents lower at $3.51, March soybeans were 1 cent lower at $9.67 , and March wheat in Chicago was down 2 cents at $4.34.

For more information, you may contact Karl Setzer at 1-800-383-0003, or e-mail at ksetzer@maxyieldgrain.com.The opinions and views expressed in this commentary are solely those of Karl Setzer. Data used in writing this commentary obtained from various sources believed to be accurate. This commentary is intended for informational purposes only and is not intended for developing specific commodity trading strategies. Any and all risk involved with commodity trading should be determined before establishing a futures position.

Closing Comments; Wednesday, January 3rd, 2018

The lethargic start to the year continued today with little interest in either buying or selling shown in the market. There was more interest on the outside markets today, mainly the energy complex and financials. This drew trader interest away from commodities and kept trade volume to a minimum, as well as price action. Futures did find support from a firm cash market, but this was limited by building concerns over future demand, both domestically and globally.

There is a seasonal shift in the global soybean market that is starting to gain interest. Importers are starting to show more interest in South American soybeans over those from the United States. As a result we have started to see the vessel count in South America rise while numbers waiting for U.S. soybeans is decreasing. There are currently four-times as many vessels lined up for Brazilian soybeans than those from the U.S.

This is concerning for the U.S. soybean market as our sales are well behind a year ago. At the present time the United States has 22% fewer unshipped soybean sales on the books as a year ago. This is mainly from the lack of business with China, who has only booked 75% as many U.S. soybeans as last year. With buyers already shifting away from the U.S. this deficit may be hard to cover.

One of the most contested numbers heading into next week’s updated balance sheets is Brazilian soybean production. The U.S.D.A. currently projects a soybean crop of 108 million metric tons. Many private analysts believe the crop will fall between 110 and 112 million metric tons, but a few are closer to 115 million tons, which would top last year’s production. If correct, these would greatly reduce any market impact from crop loss in Argentina.

March corn futures finished today’s session cent lower at $3.53, March soybeans gained 4 cents at $9.68 , and March wheat in Chicago was 2 cents higher at $4.36.

For more information, you may contact Karl Setzer at 1-800-383-0003, or e-mail at ksetzer@maxyieldgrain.com.The opinions and views expressed in this commentary are solely those of Karl Setzer. Data used in writing this commentary obtained from various sources believed to be accurate. This commentary is intended for informational purposes only and is not intended for developing specific commodity trading strategies. Any and all risk involved with commodity trading should be determined before establishing a futures position.

Early Market Update; Wednesday, January 3rd, 2018

Futures started out the session on the positive side, but are now mixed with soybeans firm and grains under pressure. There really is not anything to drive grains down today, but at the same time, there is nothing to provide support either. Corn has underlying technical strength but this may simply prevent losses from taking place. Wheat is focused on weather in the Plains and how winterkill may be taking place. As with the technicals in corn, this is more supportive than a reason to “buy” at this time. Trade is showing slightly more interest in soybeans this morning. It was interesting to see soybeans continue their trend of selling off at mid-session yesterday, but unlike previous days, losses were wiped out by the close. Much of this was likely new month, quarter, and year short covering. Until we see actual buying in the pits, advances will be limited. Bottom line is that we are not seeing a reason to buy at this time. The financial market continues to creep higher which is still taking interest away from commodities. One favorable point of current trade is that energy values have been on a steady climb while corn has remained flat. This is starting to give some much needed life to the US ethanol industry. Fresh news is quite limited this morning which is keeping all commodities in check. We are just starting to see volume build in trade following the holidays, which will also start to be more of a factor in price discovery. The cash market is firmer today as we see buyers try to encourage movement across the interior market. Frigid temperatures have stalled nearly all movement. Even where basis is becoming inviting, farmers admit they will sell the inventory but not deliver anything until temperatures rise. This putting all deliveries into commercial hands, and even then, movement is light.

Headlines

  • Nov corn for ethanol @ 475.7 mbu
  • Nov soy crush @ 173.3 mbu
  • EU raises its corn crop estimate
  • Brazil corn exports up in December
  • YTD corn loadings indicate a total 100 mbu under estimates
  • YTD soy loadings indicate a 185 mbu shortfall
  • La Nina indicators fading
  • Brazil/US soy now equal in global mkt
  • Funds short 196,000 corn, 79,000 soy and 144,000 wheat contracts

Bull Side

  • Technicals
  • Country mvmt very slow
  • Global mkts higher

Bear Side

  • Larger Brazil soy crop
  • Transit issues hurt demand
  • More rains for SAM

For more information, you may contact Karl Setzer at 1-800-383-0003, or e-mail at ksetzer@maxyieldgrain.com.The opinions and views expressed in this commentary are solely those of Karl Setzer. Data used in writing this commentary obtained from various sources believed to be accurate. This commentary is intended for informational purposes only and is not intended for developing specific commodity trading strategies. Any and all risk involved with commodity trading should be determined before establishing a futures position.

Morning Comments; Wednesday, January 3rd, 2018

Trade is starting to pay closer attention to the lack of precipitation across the Corn Belt in recent weeks. Since the end of harvest very little precipitation has been received. As a result, we are already starting to see drought conditions expand. While this is far too early to impact production, trade will keep an eye on it as the spring planting season approaches.

A more immediate reaction to dry conditions is how it is impacting commodity movement on U.S. waterways. Water levels have dropped to a point where barge draft is again being reduced. In turn we are seeing higher rail bids, which can be more favorable for the interior market. The total impact of this will be more limited than it was in summer months though, as barge movement is much lighter in the winter to begin with.

Concerns are building in the market over possible changes to the North American Free Trade Agreement, or the possibility that it may be dissolved altogether. This would jeopardize an incredible amount of U.S. agricultural exports. Canada is the U.S.’s second largest export buyer with receipts of $21.2 billion forecast for this year. Mexico is the 3rd largest with $19.2 billion in trade. Even if just a portion of these sales are lost it would greatly impact the entire Ag market.

Market Movers: Fund Activity, Global Production Estimates

For more information, you may contact Karl Setzer at 1-800-383-0003, or e-mail at ksetzer@maxyieldgrain.com.The opinions and views expressed in this commentary are solely those of Karl Setzer. Data used in writing this commentary obtained from various sources believed to be accurate. This commentary is intended for informational purposes only and is not intended for developing specific commodity trading strategies. Any and all risk involved with commodity trading should be determined before establishing a futures position.

Closing Comments; Tuesday, January 2nd, 2018

Trade started out the new year with short covering across the board in commodities. This was more so the case in soybeans as that complex ended 2017 with the most short positions in history for that time. Once again this buying in the soy complex stalled at mid-session and all gains were given back. All contracts benefitted from a firm cash market today but were pressured by a lack of buying and sparse fresh news.

Export loadings for the week ending December 28th came in about as expected. Corn loadings for the week totaled 23.5 million bu, soybeans reached 41.9 million bu, and wheat was 10.1 million bu. Of these volumes only soybeans were high enough to top the amount needed on a weekly basis. Cumulative loadings continue to trail last year which is overshadowing the weekly numbers.

Officials in Brazil are expecting a sizable increase in that country’s ethanol consumption. Hopes are that within the next ten years Brazil will double its ethanol consumption. Thoughts are this will benefit the United States as it will open the door for elevated exports. This demand is desperately needed by an industry that is already out-producing consumption.

Trade is also receiving supportive news from potential feed demand expansion. The U.S. cattle and hog herds have been expanding a reported 2% each year recently. This rate is expected to increase as breeding herds expand as well. By doing so this will consume much of the excess grain the U.S. is not exporting.

March corn futures finished today’s session 2 cents higher at $3.53 , March soybeans gained 3 cents to close at $9.64 , and March wheat in Chicago was 6 cents higher at $4.33 .

For more information, you may contact Karl Setzer at 1-800-383-0003, or e-mail at ksetzer@maxyieldgrain.com.The opinions and views expressed in this commentary are solely those of Karl Setzer. Data used in writing this commentary obtained from various sources believed to be accurate. This commentary is intended for informational purposes only and is not intended for developing specific commodity trading strategies. Any and all risk involved with commodity trading should be determined before establishing a futures position.

Early Market Update; Tuesday, January 2nd, 2018

Corn, soybeans, and wheat are all starting out the new year on the positive side as we see light buying in each complex. This is most evident in soybeans and wheat to start the day, with the most interest to start the year on soybeans. One reason for this is that the short position in soybeans to start the year is record sized for this time frame. This is mostly from the large global supplies of soybeans and how the odds of depleting these are the lowest we have seen in many years. Soybeans have also been pressured by the fact that even with reductions to the Argentine crops, total South American production will probably top that of a year ago. Weekend weather was mixed for Argentina though, with rain events higher than expected for most of the country. Long range outlooks are dry but very cold. While these cold temperatures will prevent moisture loss they could easily slow plant development. Rapid corn planting has taken place in Argentina with the improved soil conditions, which shows how comfortable farmers are with soil moisture. The financial market continues to post advances which is limiting buying interest in commodities this morning. Sparse fresh news to start the new year is also keeping advances in check. The market ended 2017 with a trend of selling early gains in the day session, particularly in soybeans, and it will be interesting to see if this carries over into the new year. The cash market is firm this morning as country movement has ground to a halt across much of the interior market. Many buyers have been expecting to see elevated selling once the calendar rolled into the new year. What they were not expecting was bitter cold temperatures to settle in. This has forced many buyers to post immediate ship bids in an effort to secure needed bushels. Even with this incentive most producers are unwilling or unable to move inventory. Nearly all movement at this time will come from the commercial side, and this will demand a higher basis than what many buyers are posting. The real question is how much a processor can afford to push their bid, especially ethanol manufacturers.

Headlines

  • US ethanol production 6% ahead of last year
  • Drought area in US larger than year ago
  • Nov Ag price index +4.2% from Oct
  • US dollar lowest value since August
  • Rapid corn planting in Argentina
  • Cold weather halts country movement
  • Dry but cold weather for Argentina
  • Funds short 204,000 corn, 81,000 soy and 149,000 wheat conts

Bull Side

  • Ethanol demand rising
  • Weaker dollar
  • Country movement

Bear Side

  • Outside mkts
  • Negative ethanol margins
  • Argentine weather

For more information, you may contact Karl Setzer at 1-800-383-0003, or e-mail at ksetzer@maxyieldgrain.com.The opinions and views expressed in this commentary are solely those of Karl Setzer. Data used in writing this commentary obtained from various sources believed to be accurate. This commentary is intended for informational purposes only and is not intended for developing specific commodity trading strategies. Any and all risk involved with commodity trading should be determined before establishing a futures position.

Morning Comments; Tuesday, January 2nd, 2018

The year 2017 is going to go down as having one of the tightest trading ranges on corn and soybeans in history. December corn traded in an 81 cent range all year, the tightest range in the past thirteen years. The same was true on soybeans where the range was $1.40 for the year. Historically, corn trades in a $2.00 range during a calendar year, and soybeans range from $2.00 to $3.00 from low to high.

All eyes are on the fund crowd now that we have started a new calendar year. Not only is today the start of a new year, but a new quarter as well. There are several thoughts this could elevate fund activity in the market, and hopes are this will bring about fresh buying interest. This is more likely in the grain complex where funds are holding sizable short positions.

U.S. corn is starting out the year with the most competitive values in the global market. Typically this would bring the United States a considerable portion of the world corn trade, and it will undoubtedly do some of that again this year. One difference this year is how much corn is already booked to cover needs. Some buyers claim they have usage covered through the end of February, which is when the United States is again seeing price pressure from other sources.

Market Movers: Fund Activity, Outside Markets

For more information, you may contact Karl Setzer at 1-800-383-0003, or e-mail at ksetzer@maxyieldgrain.com.The opinions and views expressed in this commentary are solely those of Karl Setzer. Data used in writing this commentary obtained from various sources believed to be accurate. This commentary is intended for informational purposes only and is not intended for developing specific commodity trading strategies. Any and all risk involved with commodity trading should be determined before establishing a futures position.

Closing Comments; Friday, December 29th, 2017

Nearly all of today’s session focused on final year end position squaring, which generated two-sided trade. This was most evident in the soy complex where early losses caused short covering to develop in the complex. Light deliveries against the January contract and ongoing debate over South American production added to the choppy trade in soybeans today. All contracts were pressured by low volume and light fresh news, while supported by slow country movement and a lack of hedge pressure.

Export sales for the week ending December 21st were all above the volumes needed to reach U.S.D.A. projections for the marketing year. Corn sales totaled 48.9 million bu, soybeans reached 35.8 million bu, and wheat bookings totaled 17.6 million bu. These volumes were also within trade expectations for the week. Of these volumes soybeans was the only one concerning as we had heavy cancellations of previous sales take place.

The United States continues to see strong competition in the global market from South American corn. In the month of December Brazil has exported 120 million bu of corn and has vessels waiting to load another 85 million bu according to data from Advance Trading. This is three times the volume of exports the country made at this time a year ago. Argentina currently has 36 million bu of vessel capacity waiting to load compared to just 4 million bu a year ago.

At the present time U.S. corn exports for the marketing year stand at 624 million bu. While this is in fact 19% under the volume that was sold a year ago, it’s the 3rd largest volume sold on this date in the past 10 years. This is mostly from elevated business with Mexico where sales are up 13% on the year.

March corn finished today’s session 1 cents lower at $3.50 , March soybeans were 5 cents higher at $9.61 , and March wheat in Chicago was down cents at $4.27.

For more information, you may contact Karl Setzer at 1-800-383-0003, or e-mail at ksetzer@maxyieldgrain.com.The opinions and views expressed in this commentary are solely those of Karl Setzer. Data used in writing this commentary obtained from various sources believed to be accurate. This commentary is intended for informational purposes only and is not intended for developing specific commodity trading strategies. Any and all risk involved with commodity trading should be determined before establishing a futures position.

Yearly Market Review; Friday, December 29th, 2017

2017; A Year Of Unexpecteds

To say the calendar year 2017 was full of unexpected turns in the markets may be the greatest understatement ever.

The years started out with all eyes on the financial markets to see what would happening following the election and placement of the new administration. Financial markets reacted approvingly, which may have been more of a coincidence than anything, but it still brought fresh investors to the marketplace. This sudden increase in the financial market actually hindered commodity trade as less interest was shown on those contracts. This was apparent all year, as any dip in the financials lent support to commodities.

The first story worth watching of the year was the South American harvest. Production numbers out of South America came in better than expected. This was credited to a near perfect growing season and improved farming practices. Farmers in South America have upped their use of inputs, mainly fertilizer, which has also been a great benefit for production.

The crop that received the most attention in South America was the Brazilian Safrinha crop. This is the winter crop that is grown in Brazil, and in many cases, is where Brazil’s exports come from. Given the record yields this crop produced, the United States was faced with prolonged export competition all year.

Chinese trade developments also were quick to impact the U.S. market last year. This started with China banning imports of distiller grains from the United States over the possibility of unapproved GMO content in them. While this may have been part of the reason China wanted to back away from U.S. DDGs, elevated domestic ethanol production was likely more of a factor. Chinese officials wanted to use their own DDGs rather than make imports, and the decision to ban them from the U.S. was an easy remedy to the situation.

Global trade on a whole was a factor for the market all year, primarily what changes were expected to take place to world trade agreements. The one that received the most attention was NAFTA, the North American Free Trade Agreement. There are thoughts that the United States will withdraw from this agreement and it will severely limit our exports. This is not out of the question, as Mexico and Canada are two of the top three trade partners the United States has.

The greatest surprise for the market in the past year came from the U.S. production season. Spring planting started out cool and wet in many regions of the Corn Belt. In fact, some regions of the Eastern Corn Belt had to reseed their crops two and three times due to excessive rainfall. This immediately generated talk of low yields and loss production.

Once the crops were in the ground, the weather talk only intensified. The focus shifted to the Upper Plains where severe drought was reported. This was focused on the Dakotas where yield loss of up to 50% was predicted.

As the growing season progressed, some analysts started to change their opinion on the crops. Field reports started to indicate that the crops were actually developing nicely, especially in fringe regions. This was verified by crop tours that found better stands than nearly all of trade was expecting. As a result, some analysts started to raise their yield expectations, and generated some disbelief in the market.

This uncertainty increased right up to the start of the harvest season. Initial yield reports came in much better than expected, with several cases of the Deep South reporting record production. The initial reaction to this was “just wait until harvest moves north, those yields will decline.” The reality is that they did not drop off, especially on corn. Many regions of the Corn Belt reported corn yields that were very close to last year’s, if not larger. As harvest wound down it was apparent that trade greatly underestimated the size of this year’s crop, on both corn and soybeans.

One positive side of these high yields is that with the market already being depressed, production numbers did not pressure values. In fact, in some cases, the high yields actually generated more income than what farmers were receiving a year ago on a per acre revenue case.

Questions are now being asked on what 2018 will bring the markets. One thing that will be likely is a slow reaction to adverse weather given this year’s yields. Any changes to trade policies and the financial markets will also be key to how the commodity market acts. At this point, it is not out of the question that 2018 could bring us a market very similar to 2017; sideways and lethargic activity all year.

Karl Setzer is a Commodity Trading Advisor/Market Analyst at MaxYield Cooperative. His syndicated commentary and market analysis is available daily on radio, in newsprint and on the Internet at www.MaxYieldCooperative.com. The opinions and views in this commentary are solely those of Karl Setzer. Data used for this commentary obtained from various sources believed to be accurate. This commentary is intended for informational purposes only and is not intended for developing specific commodity trading strategies. Any and all risk involved with commodity trading should be determined before establishing a futures position.

Early Market Update; Friday, December 29th, 2017

Not a lot on the screen to get excited about today as trade winds down for the year. This really is not that surprising as trade has been thin for the past two weeks, which is normal at this stage of the year. Export sales were released this morning and not enough to get much of a reaction in the market. Corn sales were above expectations while wheat and soybeans were within trade estimate ranges. The soybean number is getting some reaction as the total was well below the volume of sales we have grown accustomed to. One reason for this is the holiday season, but another is the concern over making sales to China with new quality regulations. Interesting to note, however, that of the 35 million bu sold last week 34 million bu were to China. We did see cancellations of 12 mbu on soybeans that is getting trade interest. This could easily be sales shifting from the US to South America ahead of the harvest season down there. The United States does not have much for unshipped sales on the books though, so cancellations should be limited this year. Weather still looks favorable for SAM for the next week which is adding to market pressure today. Bottom line is there is not a lot to push trade higher today. All eyes are now on what could happen we trade starts out next year. Several analysts are expecting to see fund short covering and buying when 2018 starts out. Just as many think we could see additional selling. Funds are holding a record short position in corn though, so any additional pressure might be limited. How we finish today is totally dependent upon fund attitude. No changes to the cash market today to speak of. Nearly all attention is on what will take place early next year. We are seeing some immediate ship bids being posted, but weather in the Midwest is not conducive to heavy movement regardless of the bids being offered. Basis values could get quite interesting in the very near future.

Headlines

  • Feed grain usage expected to increase 2% in 2018
  • Brazil Dec corn loadings 3x last year
  • Japan expected to import US ethanol in January
  • US corn sales 19% behind year ago
  • US corn sales still 3rd highest in past 10 years
  • Corn basis steady this week, soybean basis improves 2 cents
  • US ethanol stocks +18% from year ago
  • Funds have sold soybeans in 9 of past 10 sessions
  • Funds short 209,000 corn, 75,000 soybean and 158,000 wheat contracts

Bull Side

  • Export sales in line with historical averages
  • Ukraine lowers production estimates
  • Grain exports on the week

Bear Side

  • Thin volume
  • No fresh news
  • Soybean sales drop

For more information, you may contact Karl Setzer at 1-800-383-0003, or e-mail at ksetzer@maxyieldgrain.com.The opinions and views expressed in this commentary are solely those of Karl Setzer. Data used in writing this commentary obtained from various sources believed to be accurate. This commentary is intended for informational purposes only and is not intended for developing specific commodity trading strategies. Any and all risk involved with commodity trading should be determined before establishing a futures position.

Morning Comments; Friday, December 29th, 2017

Even with questionable South American weather, an issue that is limiting soybean strength is the slow demand we are seeing in the global market. In the month of October the United States only exported 345 million bu of soybeans, the least amount for the month in the past three years. This comes at a time when the United States is normally the world’s leading soybean supplier. This has generated ideas that yearly soybean demand may be over-estimated at the present time.

What is a greater factor than anything else in the market right now is fund positioning. Not only have funds been positioning themselves for the end of the year, but for what they will do to start the new year as well. It is thought that funds will be sellers in early 2018 in the commodities, which many are associating with lower values. While this is possible, the rate at which funds sell will greatly affect how far values may decline.

Trade continues to search for clarification surrounding the announcement of Chinese import quality testing. According to the Reuters news service, roughly 50% of U.S. soybean exports to China would not meet new guidelines of only containing 1% foreign material. The cost associated with making sure all soybeans destined to China contain just 1% FM is estimated at 15 cents per bushel. Analysts agree that China is making these changes in an attempt to buy high quality soybeans at a discount rate.

Market Movers: Month, Quarter, and Year End Positioning, and Export Sales

For more information, you may contact Karl Setzer at 1-800-383-0003, or e-mail at ksetzer@maxyieldgrain.com.The opinions and views expressed in this commentary are solely those of Karl Setzer. Data used in writing this commentary obtained from various sources believed to be accurate. This commentary is intended for informational purposes only and is not intended for developing specific commodity trading strategies. Any and all risk involved with commodity trading should be determined before establishing a futures position.

Closing Comments; Thursday, December 28th, 2017

Much of today’s trade centered on consolidation and final year-end positioning. More traders are shoring up their positions and moving to the sidelines ahead of year-end, creating thin trade as they do. This allows the market to be more easily manipulated, which was apparent in the soy complex today. A lack of trade interest weighed on the entire market, but even a slightly improved weather forecast for Argentina caused soybeans to drop harder than it likely would have if trade volume had been higher.

Ethanol manufacturing for the week ending December 22nd increased from the previous week. An average of 1.09 million barrels of ethanol were manufactured each day of the week, 13,000 more than the week before. Ethanol stocks decreased on the week by a total of 289,000 barrels though as China starts to scale back its export program. U.S. ethanol reserves are still a high 22.03 million barrels.

Ethanol profitability has been an issue in the market for the past several weeks, and now this has expanded to a global scale. Brazilian officials have announced plants in that country are going to be idled until margins improve. This could end up being a great benefit for the United States, as it could lead to elevated exports. Exports have been the greatest source of revenue for ethanol manufacturers and the primary reason stocks have not continued to build.

Trade is starting to put more emphasis on possible new crop acres in the United States this coming year. For several weeks we have heard several opinions over which crop makes the most economical sense to plant. It appears as though this spread is starting to lean more towards soybeans, especially on acres that have not had fertilizer applied this fall. Nitrogen values are on the rise across much of the Corn Belt, pushing corn’s cost of production well above that of soybeans.

March corn futures finished today’s session 1 cents lower at $3.52, January soybeans were down 9 cents at $9.45 , and March wheat in Chicago was cent lower at $4.27 .

For more information, you may contact Karl Setzer at 1-800-383-0003, or e-mail at ksetzer@maxyieldgrain.com.The opinions and views expressed in this commentary are solely those of Karl Setzer. Data used in writing this commentary obtained from various sources believed to be accurate. This commentary is intended for informational purposes only and is not intended for developing specific commodity trading strategies. Any and all risk involved with commodity trading should be determined before establishing a futures position.

Early Market Update; Thursday, December 28th, 2017

Trade is on the negative side this morning with little interest being shown in the futures market on a whole. Much of what we are seeing is simple consolidation ahead of the long weekend. Trade volume has been light all week, and is becoming more thin as final month, quarter, and year end positioning wraps up. The market is taking an additional hit from a shift in South American weather forecasts to a wetter pattern for Argentina. While not all regions of Argentina will receive precipitation, enough will that ideas of additional yield loss taking place have been limited. We are also seeing larger yield estimates coming out of Brazil which will greatly reduce any production loss in Argentina from affecting total balance sheets. In fact, given some of the yield projections coming out of Brazil, we could see a higher than expected total production figure for South America even if we see a slightly smaller crop in Argentina. Harvest will be underway in Brazil within the next few weeks which may shed some light on this debate. There is very little fresh news for trade to sort through this morning. Expect to see fund balancing and positioning to dominate trade both today and tomorrow. No changes to the cash market today. While we are hearing of and seeing some local pushes for immediate ship bushels, the vast majority of buyers are waiting to see what happens in early January before extending bids.

Headlines

  • China halts ethanol exports
  • Trade still concerned with Chinese soy grading changes
  • Rail movement of grain -2.4% this year
  • US soy protein this year the lowest since 2008
  • US corn loadings just 20% of expectations, normal is 28%
  • Black Sea corn exports to decline 10% this year
  • Global corn/soy mkts are weaker
  • FND on Jan soybeans tomorrow
  • Funds short 205,000 corn, 67,000 soy and 159,000 wheat contracts

Bull Side

  • Weather slows Midwest movement
  • Technicals
  • Labor Issues in Argentina

Bear Side

  • SAM weather
  • Financial mkts
  • Chinese soy import concerns

For more information, you may contact Karl Setzer at 1-800-383-0003, or e-mail at ksetzer@maxyieldgrain.com.The opinions and views expressed in this commentary are solely those of Karl Setzer. Data used in writing this commentary obtained from various sources believed to be accurate. This commentary is intended for informational purposes only and is not intended for developing specific commodity trading strategies. Any and all risk involved with commodity trading should be determined before establishing a futures position.

Morning Comments; Thursday, December 28th, 2017

We have seen record production in the ethanol industry recently, but the market is still struggling. It was thought the industry would benefit from cheaper corn values, but the deterioration we have seen to ethanol values has been even greater. This has pushed ethanol margins into negative territory in many regions. Right now, the most profitable aspect of ethanol manufacturing are ethanol exports and DDGs.

Even with record production figures, the United States continues to import ethanol, which is being heavily questioned. The answer to this activity is that under the current Renewable Fuel Standard, ethanol from Brazil can be classified as an advanced bio-fuel. This helps satisfy the volumes of that fuel that is required for blending. At the same time, the United States exports a large volume of ethanol to Brazil, making the imports more of a swap than a purchase.

Not only is trade monitoring ethanol trade, but that of dried distiller grains as well. Year to date DDG exports to China are a mere 15% of a year ago, and just 5% of the year before that. This is mainly from the absence of buying due to safety certificate concerns. This feed grain has now started to back-up in the domestic market, and pressure soy meal usage.

Market Movers: Fund Activity, Technical Indicators

For more information, you may contact Karl Setzer at 1-800-383-0003, or e-mail at ksetzer@maxyieldgrain.com.The opinions and views expressed in this commentary are solely those of Karl Setzer. Data used in writing this commentary obtained from various sources believed to be accurate. This commentary is intended for informational purposes only and is not intended for developing specific commodity trading strategies. Any and all risk involved with commodity trading should be determined before establishing a futures position.

Closing Comments; Wednesday, December 27th, 2017

Consolidation built in the market today with more traders simply shoring up positions and exiting the complex for the year. This is really not that surprising and will likely become even more evident over the next two sessions. Forecasts again flipped to a wetter outlook for Argentina, which applied pressure to the soy complex today. We did see light support from a weaker financial market, but this was off-set by a lack of desire to establish new positions at this stage of the year.

We are starting to see a trend develop in Chinese soybean buying. Chinese buyers are only showing interest in soybeans when futures drop below the $10.00 per bushel mark. This is because that is the values that works best into Chinese crush margins. This is one of the greatest factors that is preventing a futures rally in soybeans at this time.

Trade is also paying close attention to Chinese corn demand and buying habits. Right now corn can be imported into China at a $1.50 discount to using domestic corn. This imported corn would also be higher in quality than most domestic stocks. Corn processors are hesitant to make purchases though, as they are uncertain if the corn will be held up in ports due to safety certificate issues. As a result, many are simply paying the elevated price for domestic corn or using alternative grains such as sorghum when available.

Ukrainian officials have revised their corn production and export forecasts. It is now believed the Ukraine corn crop will total 25 million metric tons this year, down from last year’s 26.2 million metric tons. In turn the country is only forecast to export 19.5 million metric tons of corn this year, down from last year’s 21.2 million tons of exports. While just a minimal amount, this does open the door for additional U.S. exports.

March corn futures finished today’s session 1 cent higher at $3.53 , January soybeans were 3 cents lower at $9.55 , and March wheat in Chicago gained 5 cents to close at $4.28.

For more information, you may contact Karl Setzer at 1-800-383-0003, or e-mail at ksetzer@maxyieldgrain.com.The opinions and views expressed in this commentary are solely those of Karl Setzer. Data used in writing this commentary obtained from various sources believed to be accurate. This commentary is intended for informational purposes only and is not intended for developing specific commodity trading strategies. Any and all risk involved with commodity trading should be determined before establishing a futures position.

Early Market Update; Wednesday, December 27th, 2017

Trade is mixed this morning as we see elevated consolidation in the market. This is mostly positioning ahead of month, quarter, and year end. Volume is thinning, especially in the corn complex. This really is not that surprising given the time of year we are at. We are seeing a little more activity in the soy complex, but that is not saying much given the lethargic corn trade. Outside markets are mixed this morning and that is spilling over into commodities. Bottom line is that there really isn’t enough fresh news to sway market opinion. Soybeans took support in yesterday’s session from drier forecasts for Argentina, but this is no longer fresh news. Elevated production estimates for Brazil are negating any concern over Argentine losses. Bottom line is there is much less concern over Argentine production loss than there was just a few shorts weeks ago. Even if we do not see changes to SAM production in the January balance sheets, trade is expecting to see them by the end of the harvest season in those countries. There are also more thoughts that we will see elevated double cropping in South America from the more favorable weather we have seen in Brazil. We are seeing a shift in market opinion that the large crops are needed though, which is limiting losses. Expect today’s market action to repeat itself tomorrow, and probably again on Friday. The cash market is unchanged today as we see some localized pushes for immediate ship bushels, but the majority of buyers in the cash market have needs covered for the next few weeks. Nearly all buyers are waiting to see what takes place in the country market in early January before extending their current bids.

Headlines

  • Brazil to idle ethanol plants due to poor margins
  • Argentina not offering soybeans for export until April
  • US on track for record yearly bio-diesel production
  • Nitrogen values creeping higher
  • Ukraine lowers corn crop/corn exports
  • Funds short 208,000 corn, 61,000 soybeans, and 162,000 wheat contracts

Bull Side

  • Less Ukraine corn production
  • Chinese soybean demand
  • Dry soils expand in Argentina

Bear Side

  • Sparse buying interest
  • Yearly exports
  • Weak global oilseed mkt

For more information, you may contact Karl Setzer at 1-800-383-0003, or e-mail at ksetzer@maxyieldgrain.com.The opinions and views expressed in this commentary are solely those of Karl Setzer. Data used in writing this commentary obtained from various sources believed to be accurate. This commentary is intended for informational purposes only and is not intended for developing specific commodity trading strategies. Any and all risk involved with commodity trading should be determined before establishing a futures position.

Morning Comments; Wednesday, December 27th, 2017

We have seen a shift in buyer attitude that is impacting U.S. exports, mainly on soybeans. Buyers have started to show more interest in timely delivery than in price in recent years. This is starting to become more of a factor now though, as exporters in other countries, mainly South America, have made considerable upgrades to their export facilities. In many cases this has been more of a factor in sales than price has been.

There is another factors that is impacting global soybean trade, and one that could for the next several months. Last year’s soybean crop appears to be lower in quality than in previous years, specifically on protein. As a result, buyers have shown more interest in higher quality soybeans out of South America, along with alternative protein feeds. This means the United States may actually need to offer soybeans at a discount to South America to remain competitive.

There is a strong tendency for corn and soybeans to rally between the Christmas and New Year holidays. In the past 12 years, corn has rallied 8 times and been down 4 over this span. Soybeans have been higher 7 times and lower 5. Given the fact funds are holding large short positions in both commodities, it would not be surprising to see buying and higher values this year.

Market Movers: Fund Activity, Technical Indicators

For more information, you may contact Karl Setzer at 1-800-383-0003, or e-mail at ksetzer@maxyieldgrain.com.The opinions and views expressed in this commentary are solely those of Karl Setzer. Data used in writing this commentary obtained from various sources believed to be accurate. This commentary is intended for informational purposes only and is not intended for developing specific commodity trading strategies. Any and all risk involved with commodity trading should be determined before establishing a futures position.

Closing Comments; Tuesday, December 26th, 2017

Trade was in a typical holiday mode today with limited interest being shown in either buying or selling. This is not uncommon for this time of year, as most interest is on year-end positioning. We did see more strength in the soy complex than the grains today which is not surprising given the fact funds have established a larger than expected short position in that complex in the past week. Soybeans also benefitted from long-range weather models that indicate a return to much drier than normal conditions in Argentina.

Export loadings for the week ending December 21st were mixed. Corn shipments totaled 24 million bu, soybeans came in at 47.1 million bu, and wheat reached 18.1 million bu. Soybean and wheat loadings fell within trade estimates, while corn loadings were just under expectations. Given the holiday shortened weeks, low export numbers until mid-January would not be surprising.

Chinese soybean imports continue to increase. During the month of November China imported 8.68 million metric tons of soybeans, an increase of 11% from the same month a year ago. For the year Chinese soybean imports are up 15%. While positive news, November soybean imports from the United States were down 17% as more bushels were sourced from Brazil. Yearly Chinese soybean imports from the United States are up 2%.

The big changes from a year ago on Chinese imports is in corn. Chinese corn imports in November were down 31% from the same month in 2016, and yearly demand is down 21%. This shift in demand is from China using more domestic corn, mainly in ethanol manufacturing. This is being reflected in China importing 91% less ethanol and 96% fewer DDGs this year than last.

March corn futures finished today’s session cent higher at $3.52 , January soybeans rallied 9 cents to close at $9.59 , and March wheat in Chicago was 2 cents lower at $4.22 .

For more information, you may contact Karl Setzer at 1-800-383-0003, or e-mail at ksetzer@maxyieldgrain.com.The opinions and views expressed in this commentary are solely those of Karl Setzer. Data used in writing this commentary obtained from various sources believed to be accurate. This commentary is intended for informational purposes only and is not intended for developing specific commodity trading strategies. Any and all risk involved with commodity trading should be determined before establishing a futures position.

Early Market Update; Tuesday, December 26th, 2017

Trade has returned from the Christmas break with light short covering as the main objective. This is mainly in the soy complex where funds were holding a larger short position than trade had thought. The question now is if this is actually going to last or if it is simply a repeat of last week’s pattern of starting higher and then back-peddling as the session progresses. One difference for this week in the market is a strong tendency for futures to work higher between Christmas and New Year’s. In the past 12 years corn has risen 8 times and soybeans have been up 7 times between the two holidays. Soybeans are also taking some support from Argentine weather that is not as favorable in extended outlooks. While much of the country did receive rains over the weekend, long-range models indicate warmer, drier conditions will return. The commodities did take early support from a softer financial market, but we are seeing those markets start to increase in value. This is taking some of the interest away from commodities. All in all, things are very quiet for the market today. To see limited fresh news all week would not come as a surprise. This does not mean we will not see volatile markets, as low trade volume means the market can be easily manipulated with over-extended moves in either direction. The cash market has started out the week steady with buyers still banking on heavier movement in early January. While possible, this is not a given. In fact, many producers across the interior market claim they will not be willing sellers until the market rebounds. While this may support basis, it could easily be more beneficial to commercial terminals than to producers. Much tighter processing margins will limit how far a buyer is willing to push for inventory as well.

Headlines

  • No vote on bio-diesel tax credit this year
  • Concerns building that NAFTA will fail
  • EU importing more corn than a year ago
  • Buyers taking sorghum over corn
  • US soybeans $3/mt under SAM
  • COF 108% of year ago, placements 114%
  • Chinese ethanol imports -91% from year ago
  • Last week; corn +4 cents, soybeans -20
  • Funds short 210,000 corn, 67,000 soybean, and 160,000 wheat conts

Bull Side

  • US values under world mkt
  • Argentina not offering soybeans for export
  • Corn technicals

Bear Side

  • Funds have been sellers in soy complex
  • Cumulative exports
  • Processor margins

For more information, you may contact Karl Setzer at 1-800-383-0003, or e-mail at ksetzer@maxyieldgrain.com.The opinions and views expressed in this commentary are solely those of Karl Setzer. Data used in writing this commentary obtained from various sources believed to be accurate. This commentary is intended for informational purposes only and is not intended for developing specific commodity trading strategies. Any and all risk involved with commodity trading should be determined before establishing a futures position.

Morning Comments; Tuesday, December 26th, 2017

Trade is already starting to look at new crop production figures in the United States, with heavy emphasis on corn. Reports from around the Corn Belt indicate U.S. farmers will seed more corn acres than initially thought as input values have started to recede and break-evens are improving on that crop. This shift in economics is giving corn a $70.00 per acre better return than a year ago, while soybean returns have only improved by $20.00 per acre. If anything, this will likely prevent acres from shifting from corn to soybean production.

The real unknown in the corn complex is what will take place in global balance sheets. The world market is expected to have corn carryover of 227 million metric tons this year. Next year this is forecast to decline to roughly 205 million metric tons as we see less production in South America. While this is a sizable decrease, it is not enough to warrant rationing of supplies.

A large amount of fund positioning will take place during this week’s trade. This is because this week brings us month, quarter, and calendar year end in the markets. Volume tends to be low during this week as many traders have exited the market and will not return until the new year. This combination can easily generate volatile trade.

Market Movers: Fund Activity, Global Weather

For more information, you may contact Karl Setzer at 1-800-383-0003, or e-mail at ksetzer@maxyieldgrain.com.The opinions and views expressed in this commentary are solely those of Karl Setzer. Data used in writing this commentary obtained from various sources believed to be accurate. This commentary is intended for informational purposes only and is not intended for developing specific commodity trading strategies. Any and all risk involved with commodity trading should be determined before establishing a futures position.

Weekly Market Review; Friday, December 22nd, 2017

Acreage Talk Increases

The annual new crop acreage debate is starting to become a main topic of the market. The current price ratio between new crop corn and soybeans is 2.6:1, meaning it takes roughly 2.6 bushels of corn to equal the value of one bushel of soybeans. Historically this would push acres towards soybean production. Reports from the Corn Belt do not indicate this is happening though, as fall applied inputs appear to be favoring corn production.

Private analysts across the United States appear to be expecting more corn plantings as well. Several analysts who have released acreage estimates have shifted more acres into their corn number. In some cases this has been almost 1 million acres. While there is plenty of time and factors that will affect plantings, this is the time of year when many farmers start locking in their new crop inputs.

One of the largest disputes in the global market remains Brazilian soybean production. Analysts in the country have been increasing their yield estimates due to improved weather conditions. Many now have the crop closer to last year’s levels than initially thought. Some are even forecasting a trend yield on soybeans, which would put the crop above last year at 115 million metric tons.

The question is what this size of production will have on exports. Brazil produced a record soybean crop last year which is allowing them to still make export sales. If Brazil’s soybean crop is even close to the same size as last year we will see prolonged soybean exports next year as well. This has greatly removed any urgency to pre-book soybeans in the global market.

Even though harvest has yet to start we are seeing an increase in vessel capacity at South American ports. It is being reported that 88 million bu of vessel capacity is now sitting just outside of Brazil. This is up from 74 million bu of capacity a week ago, and well above the 34 million bu from the week before that. The build in vessels shows us how ready the global market is for South American grain to enter the pipeline.

Trade is showing more concern with U.S. export sales on a whole. Current indicators point towards an 80 million bu smaller corn export program than the U.S.D.A. is predicting. The real concern is on soybeans where bookings indicate a 350 million bu smaller demand base that what is in current balance sheets. Needless to say this would greatly impact world stocks to use figures.

The U.S. soybean market remains in a tight spot when it comes to an ability to rally. Traditionally soybean values have had to remain competitive with South America in the global market. Now U.S. soybeans are being pressured by a record canola crop in Canada that will undoubtedly elevate their exports as well. In addition to this, soybeans need to remain competitive with a growing distiller grain supply in the domestic market.

Concerns are building over future profitability in the ethanol industry. Ethanol production this year is up 4.1% from a year ago. At the same time, ethanol stocks have risen a large 17% as demand is not keeping up with manufacturing. Building pressure in the global market from Chinese offerings is the primary reason for the slow-down in sales. The ethanol market will now need to erode to a point where demand builds, putting pressure on profits as it does.

We are seeing other outlooks made for ethanol that are a little concerning for the industry as well. Industry officials believe U.S. gasoline demand will remain unchanged in 2018 from this year, which also means domestic ethanol demand will likely hold steady. The United States has been relying on the export market to keep stocks from hitting a burdensome level, but we are now seeing elevated competition from China in the global market, bringing future exports into question.

At the same time, there are several analysts who believe ethanol production will increase this year, adding to an already large reserve.

Chinese officials have announced new import regulation for soybeans that will undoubtedly impact global trade. Starting January 1st, Chinese import authorities will only take soybeans if they contain 1% or less foreign material. Soybeans showing higher volumes of FM will not be rejected, but will be cleaned, which will add to the import cost. Exporters are now hesitant to sell any soybeans to China as they do not know how this process will unfold.

This is also a regulation that only applies to U.S. soybeans, not those from South America.

Karl Setzer is a Commodity Trading Advisor/Market Analyst at MaxYield Cooperative. His syndicated commentary and market analysis is available daily on radio, in newsprint and on the Internet at www.MaxYieldCooperative.com. The opinions and views in this commentary are solely those of Karl Setzer. Data used for this commentary obtained from various sources believed to be accurate. This commentary is intended for informational purposes only and is not intended for developing specific commodity trading strategies. Any and all risk involved with commodity trading should be determined before establishing a futures position.