Morning Grain Market Research

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After the early morning swoon yesterday, corn bulls were able to find their footing once again and brought this market back into the plus column for the close. The gap in nearby futures was left untouched, and while we await the next weather update as well as the weekly export sales report, prices remain firm again this morning. Do keep in mind that we have reached into an overbought position and back up against ranges that have capped corn and to a lesser extent for months if not years and a weather market is only as good as the next forecast. While I do not believe there is much risk in seeing a major breakdown in the grain sector for some time, to extend significantly higher from here could be a challenge as well unless the managed funds have a real change of heart. Do take note that I am referencing only the grain markets here as the soy complex lives in a different realm.

While this comes as a shock to no one, pork imports into China during the month of April jumped 24% over March coming in at 136,517 MT. I believe this is the second highest number on record, trailing the 140,000 MT imported in September of 2016. For the first four months of this calendar year, their total pork imports are up 8.4%, and one can only imagine that will continue to grow throughout the year.

There is at least one major US company that appears to be trying to position itself to stay out of harms way during trade disputes, and that is Tyson. They have recently purchased chicken plants in Thailand, the Netherlands, and the UK and reportedly they are now in negotiations to make a multi-billion investment in the beef industry in Kazakhstan. If you glance at a world map, that nation borders China on the east and Russia to the north so would appear to be well positioned for export trade throughout that region. They have also been investing in agriculture as a whole and have an initiative to double beef and land production within a decade. Keep in mind as well, they are already an exporter of wheat, and with improved fertility and genetics are intent on boosting output. Small wonder Tyson is looking to invest there. It is interesting to note that just prior to the initial public offering, Tyson exited its investment in the vegetable based Beyond Meat company. By no means would this suggest that they do not think there is a future in alternative proteins as they still have investments in Memphis Meats and Future Meat Technologies but should have provided at least some capital for other ventures overseas.

Export sales have not given the grains anything to cheer about, but we did see a nice recovery in beans. Beginning at the bottom, for the week ending May 16thwe sold just 48,400 MT or 1.78 million bushels of wheat, setting a new marketing year low. We are winding down this crop year so it is not a major shock and new crop sales were okay at 344,900 MT or 12.68 million bushels. The top purchasers for new crop were Unknown destination with 196k MT, Japan at 62k and Mexico with 39.3k. Corn sale were down 20% from last week and the 4-week average coming through at 442,100 MT or 17.41 million bushels. Japan was the best buyer with 185.8k MT, followed by unknown destinations at 42.6 and then Colombia with 40.9k. Beans did post a nice rebound though with sales of 535,800 MT or 19.69 million bushels. The top number were with Unknown destinations taking 255.5k MT, followed by Indonesia with 78k and then a name that might surprise you, China with 71k. One final note on the sales, if you recall in the report a week ago, China surprised the pork trade by canceling 3,200 MT of previous purchases. Obviously, they have had a change of heart as the numbers issued this morning, we find them purchasing nearly 10-times that quantity or 31,400 MT.

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