Government Shutdown: At the time of this writing Congress shot down both the bloated Continuing Resolution that was discussed Tuesday and Wednesday as well as a more streamlined offering that was in the works Thursday. There is no talk of an alternative at this time. We assume a government shutdown will start at midnight. That most recent two shutdowns of interest are 12/22/18 - 01/25/19 (35 days) and 10/01/13 - 10/17/13 (16 days). For grains this means no weekly export sales reports on Thursday. After the shutdown the Foreign Agricultural Service will likely issue one big number for the whole period combined. We likely won't see the January 2 soybean crush or corn for ethanol reports or the January 10 monthly supply/demand, Annual Production Summary/quarterly Grain Stocks/annual Winter Wheat Seedings. This would be delayed until after a shutdown ends.

Overnight Export Sales: Including today's report of 150,000 tonnes of US corn to Columbian buyers, we have 459,000 tonnes on the books. This applies to next Thursday's weekly report. We should exceed the five year average of 827,535 tonnes for total sales normally seen for that report.

Argentine Planting: The Buenos Aires Grains Exchange estimates 65.8% of planned corn acres have been planted so far. The trade has very light concern for this crop.

Thursday's Weak Weekly Export Report: Corn export sales totaled 1,174,565 tonnes. The remainder of the year can slip to -3% from average and meet USDA's goal. This week was a disappointment at -22%. We now have three of four recent weeks that have failed to meet this requirement. While we did agree with the general need for higher exports on the recent monthly supply/demand report, USDA's +150 million adjustment may have been a bit much.

Wednesday's Positive Ethanol: USDA currently sees the year's corn for ethanol usage at 5.550 billion bushels, +0.4% from last year. Today's weekly ethanol production numbers, 1.103 million barrels for last week's activity, were +3.0% from last year. The year to date pace since September 1 is +3.7%. We're still waiting for more reliable efficiency data for the first quarter. We'll get the confirmed monthly November usage data on January 2. For now, we'll assume a worst case scenario that this year's corn crop produces +2% more ethanol per bushel than last year. That would bring our goal for ethanol production to +2.4%. At this point we remain ahead of USDA's newly raised goal. Separate from a discussion on exports or feed/residual the US corn balance sheet would continue to tighten.

Basis At The Seasonal Peak: Corn basis has advanced $0.29 per bushel since the worst point of the year at harvest to 12/13. In heavy supply years right now is typically the year's peak in basis. Marketing of cash corn is done with a focus on futures prices (high or low vs. implied economic value), storage spreads between futures contracts and basis. For the storage payment right now there is only a 6 3/4 cent premium from March to May futures. That is a return of only a little more than 3 1/4 cents per month. Between assumed interest cost, electricity and bin payment the market is no longer paying to store cash corn. For basis, we are now at the likely peak. These indicators would all point to the idea of selling cash corn now. If you wanted to speculate on higher futures prices ahead you could re-own on paper, either futures or call options.

USDA US Supply/Demand: US ending stocks were lowered from 1.938 billion bushels last month to now 1.738. This is the sixth month of lowered stock numbers in a row. For a report that is normally a sleeper, this 200 million bushel change was extreme. It was the largest drop of any December report since 1980 at least. Our pricing models suggest a 1.9 ending stock would imply 475 futures, 1.8 at 500 and 1.7 at 525. In our view economic value for futures is now over 500. Though there is a need for some type of trade risk discount we would suggest only a 40 cent discount is needed. Corn futures may be able to push to 460.

Tariff Talk: President Trump announced on social media that on his January 20 inauguration he would, “… sign necessary documents to charge Mexico and Canada a 25% tariff on all products coming into the United States.” He noted this would remain in place until the two countries clamp down on hard drugs entering the US as well as illegal immigration. He also separately noted the US will be charging China an additional 10% tariff, above any additional tariffs, on all of their many products coming into the US.

US Corn Imports: A minimal 28 million bushels of corn was imported into the US last year. 51% of that low amount came from Canada, 4% from Mexico and zero from China.

US Corn Exports: At this time there are no retaliatory tariffs to discuss. We export about 20% of our production, 2.292 billion bushels last year. 5% went to Canada, 40% to Mexico and 5% to China.

US Corn Yields After a November Decline: USDA lowered US corn yields on the recent November crop report, 183.8 bpa to now 183.1. Of the past 25 years they lowered yields in November 11 times. Of those 11 years, there were reductions again in January 7 times. The average of those January declines was -1.3%. A 180.75 yield would lower production another 193 million bushels. In most years with lowered November yields, another cut was seen in January.

Brazilian rains since September are -15% from average. Two week rains ahead are more than adequate, 4.3 - 7.1 inches. The average for those two weeks is 2.8. Yield determination, when weather really matters, for the small 1st crop is in January. Planting for the big 2nd crop starts in January.

Argentine rains since September are -5% from normal in corn areas. The next two week rains ahead had dried out a little, only 0.2 - 1.2 inch. The norm for these two weeks in the corn area is 2.0. Yield determination is in January and February.

Pricing: According to our pricing models a 1.9 billion stock equals 475, 1.8 equals 500 and 1.7 returns 525 for futures. For the weeks ahead, until trade policy is clarified, expect an artificial discount to economic value. How much of a discount is the main question.

Chart: March corn is in a moderate uptrend. So far, this market has not come near support levels on the chart. The major support for this uptrend is 426 1/2. Also supportive, there is unfinished business left at higher prices. Back at the 12/11 of 448 ¼ is an unfilled intraday gap. One thing bulls do have to monitor is how well this market trades past that point. We have two general rejections of higher trade on this chart, the 452 ¼ high from 10/2 and the 451 ¼ high from 12/11…Rich Nelson