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Weekly Grain Market Recap 1/8-1/12

Jan 12, 2018

The big story this week came on Friday as the USDA released their 2017 crop production summary report along with the Q4 grain stocks and 2018 winter wheat plantings.

The corn market shrugged off yet another increase to yield in production in the 2017 crop and now sets its sights on the March acreage intentions report. The USDA now has the 2017 U.S. corn crop yielding an average of 176.6 bushels/acre. Total production was subsequently increased, and the surplus of corn in the U.S. just continues to grow. However, the market only finished 2 cents lower. The question now is, what other bearish news is left and when will we finally decide that this is the worst and have the market turn higher?

The soybean market was the biggest winner in Friday's report. National average yield was trimmed from 49.5 to 49.1 in the 2017 crop. The total U.S. carryout was increased however as export expectations were lowered based on the poor performance to date. Ultimately, the market rallied double digits as it was not expecting a production decrease and shrugged off the export decrease as something that was largely expected. The other story in the soybean market continues to be South America's expanding crop. Conab, the Brazilian ag agency, now estimates the total size of the crop over 110 million metric tons. That number continues to grow and grow as the weather has been nearly perfect. 

The wheat market suffered the biggest loss as planted acres of winter wheat in 2018 nearly matched the 2017 number. The trade was expecting to see planted acres down 1 million, but instead acres were nearly identical to last years 32 million number. Why are we planting nearly the same amount of acres even though wheat growing is still largely unprofitable at current price levels for many producers across the country? The answer is really two fold. First, more than a few wheat acres were probably bought back in July of 2017 when the market rallied over $1 in two weeks. The second is that wheat is largely a rotational crop in most areas and acres are not decided based on price.

---- Disclaimer: The data and comments above are provided for information purposes only and are not intended to be used for specific trading strategies. Although all information is believed to be reliable, we cannot guarantee its accuracy or completeness. Commodity trading involves risks, and you should fully understand those risks before trading.


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