Market Update; Thursday, January 24th, 2019
Markets become lethargic on a lack of fresh news.
Trade was on the weaker side overnight as buying interest simply did not surface. The lack of fresh fundamental news is the primary reason for this. Trade is also becoming less optimistic on talks between the US and China on a fix to our export deadlock. Support is coming from ongoing weather concerns in South America, mainly drought in Brazil and excessive rainfall in Argentina.
Corn futures are maintaining the sideways pattern they established in December. Since then corn futures have traded in a 10 cent range. Conflicting fundamentals and technical indicators are the primary reasons for this sideways trade. Traders are becoming more concerned with long-range corn demand outlooks as consumption is forecast to decrease given hog disease in Asia and poor ethanol production in the US. We are seeing doubt on the Brazilian Safrinha crop as drought may hinder plantings and production both, which is helping put a floor under the market.
While drought is affecting the Brazilian crops, excessive rainfall is impacting Argentine soybean production. Privates have lowered US soybean acres for next year, but this is being heavily doubted. The current corn/soybean price ratio is 2.4:1. This means it takes 2.4 bushels of corn to equal the value of 1 bushel of soybeans. At this spread, farmers will not shift acres away from soybeans. In fact, this ratio is historically associated with elevated soybean plantings.
Wheat futures are trying to maintain their recent rally, but have started to struggle. We continue to hear rumors of Russian interest in US wheat, but so far, nothing has been confirmed. The US is very competitive in the global market on wheat which should benefit our exports, but we have yet to see this make a difference.
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