Market Update; Thursday, January 17th, 2019
Technicals, Ongoing Trade Dispute Weigh on Market
Trade is mixed to start the day’s session with soybeans showing some strength and the grains being held in check. Soybeans are bouncing off technical support which is the primary source of support for the complex. Corn and wheat are being pressured by technicals today. Weak outside markets and no apparent end to the trade dispute between the US and China are weighing on all commodities. The next round of talks between the two countries will be on January 30th. Trade also gearing up for an extended government shut-down as no resolution appears to be coming there either.
Corn is struggling today from a simple lack of buying interest. The complex did find support yesterday when China announced it will be suspending corn auctions in 2019, but stopped well short of saying they would be making corn imports. This does however bring into question the volume of corn that is reportedly in China’s reserves. More importantly, trade is now questioning the quality of this corn. Some do not believe the corn China is holding is usable for any demand. If correct, this will greatly alter the global corn outlook. In the meantime, corn is taking support from another export sale to South Korea while being pressured by a larger crop forecast for Ukraine.
Soybeans are finding support from drier weather forecasts for Brazil. This is starting to have a two-sided impact on the market though. On one hand it could easily lower yields on later developing crops, although it will allow for a quick harvest for the soybeans that are now ready. All eyes are on long-range weather models to see if this changes before substantial yield loss can take place. The soy complex is also closely monitoring the ASF outbreak in China and what impact it may have on meal demand. Some regions of China are expecting to see hog reductions of nearly 30%. What is more concerning is that affected regions are letting hog facilities sit empty. This reduction in demand could easily off-set any decrease to South American soybean production.
Wheat values are on the weak side today as a lack of buying interest is pressuring the complex. While US wheat is competitively priced in the global market on its own, freight from the US to most destinations is elevating it to a cost that is above all others. Losses in wheat are being held in check by concerns over US winterkill and reports that Russia will slow its wheat exports.
This commentary is the sole opinion of Karl Setzer. This is intended for informational purposes only and not to be used for specific trading recommendations. The information used to generate this commentary is used from a variety of sources believed to be accurate. If you have any questions or would like additional market information, feel free to contact Karl Setzer at 517.541.1449, extension 411, or at ksetzer@citizenselevator.com