Market Update; Tuesday, January 22nd, 2019
Void of fresh news leaves markets rangebound.
Trade remains rangebound as we see little fresh news that would warrant establishing new positions. This is especially the case on corn where values have traded sideways since September 28th. Little progress has been officially reported on Chinese trade talks, although we are hearing rumblings this morning that China is showing interest in US wheat. No end is in sight to the government shut-down, which is starting to become more of a worry to many market participants. Weak outside markets are not offering any support today either.
Corn values were weaker much of the overnight session but are showing some strength in the early minutes of the day session. Corn is taking its support from wheat and the rumors of exports to China in that complex. Slow harvest in Brazil due to recent rains is also supporting corn. Corn is also finding light support from market economics that do not indicate a shifting of acres from soybeans. The current corn/soybeans price ratio is 2.4:1, which would actually indicate more soybean acres.
Soybeans are under pressure this morning and starting to weigh on corn. Soybeans taking pressure from a rapid harvest in Brazil, as the country is at 6%. Yields are questionable, but not to a point that is threatening. One forecaster lowered Brazil soybean production to 115 million metric tons yesterday, but this seems like a stretch at this time. Bottom line is even if soy production in the country would drop that low, it would still be adequate to cover needs given current world reserves. Trade also cognizant of the declining Chinese demand in soybeans due to ASF. It is quite possible these two could simply off-set each other, leaving ending stocks unchanged. No confirmed news on exports also weighing on soybean futures.
Wheat is separating itself from the other commodities this morning and posting moderate advances. Wheat is taking support from the rumors of Chinese demand, although these have yet to be confirmed. Over-sold indicators are supporting wheat more than anything else. Wheat has been undervalued for an extended period of time and a recovery is not that surprising. The US is also the lowest priced source of wheat in the global market, which will allow values to rally and still be competitive.
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