China, the world’s top wheat producer, has cut its minimum purchase price for the grain for 2018 to help whittle its mammoth stockpiles and adjust to the market, the first such move since the policy was launched over a decade ago. The government has cut the 2018 price to 2,300 yuan ($346) per ton, down 2.5 percent from this year, the National Development and Reform Commission said on its website.
The new price takes into account “grain production costs, market supply and demand, domestic and foreign market prices and industry development,” the state planner said.
Corn closed the week $.04 higher. Last week, private exporters announced sale of 238,000 mts of corn to Spain for the 2017/18 marketing year.
Weekly export sales of corn showed a total of 54.5 mb (1,385,100 mt) with 50.7 mb (1,288,300 mt) for the 2017-2018 marketing year. This put total marketing year sales at 638.4 mb, 30 percent less than the previous marketing year. In the weekly crop progress report, NASS reported US corn harvest is now 38 percent complete, below estimates of 44 percent and way behind the normal pace of 59 percent.
In the weekly EIA report, crude oil stocks increased by 0.9 versus 3.0 decline expected; gas stocks declined 5.5 versus 1.7 increase expected, distillates showed a decline of 5.2 vs unchanged expected and ethanol production averaged 1,039k bpd vs 1,019k the prior week.
The International Grains Council raised its forecast for the world corn crop in 2017/18 by 5.2 million metric tons to 1.034 billion metric tons on better prospects for the U.S. corn crop. Farmer selling will slow now that harvest is complete, basis levels will likely improve and the cash market should rally as it will be the only way to pry cash crop out of farmers hands with stronger basis levels throughout the winter.
There is a huge demand base for corn, currently estimated at 13.030 bb, is the largest on record. With the huge demand base and corn now locked away in farmer storage, the corn market will need to bid for acres this spring to rebuild the ending stocks at a more comfortable level.
Strategy and outlook
Producers should only make sales that address cash flow need during harvest and store balance of production,
Soybeans closed the week $.02 1/2 lower. Last week, private exporters reported sales of 238,000 mts of soybeans to China.
Weekly export sales of soybeans showed a total of 78.3 mb (2,130,300 mt), with nearly all for the 2017-2018 marketing year. This put total marketing year sales at 1.044 bb, 15 percent less than the previous marketing year.
Soybean harvest is 70 percent complete, above estimates of 64 percent and near the average of 73 percent.
Farmer selling will slow now that harvest is complete, basis levels will likely improve and the cash market should rally as it will be the only way to pry cash crop out of farmers hands with stronger basis levels throughout the winter.
Demand is outpacing last year’s record export pace, indicating this year’s export profile is front end loaded. The market will be anticipating a record soybean crop in South America and updates on this year’s production from South America will be a major driving force for prices throughout the winter. Weather during the South American growing season will be closely watched. Like corn, soybeans too should bid up for acres this spring.
This material has been prepared by a sales or trading employee or agent of Midwest Market Solutions and is, or is in the nature of, a solicitation. This material is not a research report prepared by Midwest Market Solution’s Research Department. The risk of loss in trading futures and/or options is substantial and each investor and/or trader must consider whether this is a suitable investment. Past performance, whether actual or indicated by simulated historical tests of strategies, is not indicative of future results. Trading advice is based on information taken from trades and statistical services and other sources that Midwest Market Solutions believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such.
Brian Hoops can be reached at (605) 660-1155.
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