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Karl Setzer Grain Commentary

Closing Comments; Friday, May 25th, 2018

Trade was on the positive side today as pre-weekend short covering provided support. Soybeans took additional support from overnight sales to China and reports that Argentina may produce a smaller crop next year if tax rates are no longer adjusted downward. The building drought in the Southwestern U.S. also provided market support as it will not only impact crop production, but possibly livestock feeding as well. Advances were capped by a lack of follow-through buying and building concerns over the state of the U.S. economy.

Demand for U.S. ethanol in the world market has risen considerably in recent months. The latest monthly reports show that in March the United States exported 195.2 million gallons of ethanol. The main buyer was Brazil who accounted for 45% of the exports. Even China has stepped in and bought U.S. ethanol recently, which has been a great benefit for industry margins.

The question surrounding this elevated ethanol demand is how long it will last. Brazil is already forecasting it will produce more ethanol domestically next year due to economics in the sugar market. The same is true in China where the government continues to sell corn out of reserves. It is not out of the question that both of these countries could shift from being ethanol importers to exporters in the near future.

Trade is closely monitoring global buying habits, and nothing that several buyers have purchased less than usual from the United States. The most talked about of these is China, but there are others as well. One getting more attention is Japan, with April purchases from the U.S. down 4.6% on corn and 2% on soybeans from a year ago. Japan’s April imports were down on a whole though, which is actually better than simply walking away from the United States as a source.

July corn futures finished today’s session 1 cents higher at $4.06, July soybeans gained 5 cents at $10.41 , and July wheat in Chicago was 12 cents higher at $5.43.

For more information, you may contact Karl Setzer at 1-800-383-0003, or e-mail at 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.

Market Commentary provided by:

Karl Setzer, CTA
Grain Solutions Team Leader
MaxYield Cooperative
West Bend, IA 50597

Phone: 515-887-7211