Market Update; Monday, February 11th, 2019
The lack of a bullish story and technical pressure are giving us weaker futures to start the week.
Trade started out the week on the defense with a lack of buying interest in the market. The lack of a bullish surprise in last Friday’s WASDE report is also weighing on today’s trade. Ending stocks on the domestic side were mostly as expected, and on the global side, a reduction to soybean reserves was the only major change. Now that this report is out of the way, trade will shift its attention to spring plantings and prospective acres. More immediately we will focus on the possibility of another government shut-down this week and preparations for the next round of trade talks between the US and China.
Corn carryout was left mostly unchanged last Friday at 1.735 billion bu by the USDA. We did see a smaller production forecast, but reduced demand was enough to negate this. The USDA also increased the size of the Argentine crop. A break-down in the technical picture is weighing on corn this morning, as are building concerns over the quality of the US crop. Reports of elevated toxin levels are starting to impact our export outlook, and may cut into sales if the Argentine crop is as large as some believe. Losses in corn are being partially off-set by a firm cash market.
Soybeans are also weaker to start the week, although decline are being held in check. The USDA did lower Brazilian production as expected last week, although not to the extent that private analysts have. Privates are down around the 112 to 113 mmt level on the crop compared to the USDA’s 117 mmt. The real question in soybeans is what a reduction to the South American crop means for next year’s balance sheets. The Brazilian firm CONAB will update their crop estimates tomorrow morning. Interesting to see the USDA decreased Chinese soybean demand for this year. The last time this was done the following year a considerable increase to Chinese demand was made.
Not to be left out, wheat is also on the negative side this morning. The USDA bumped up the ending stocks on wheat last Friday which was not that surprising. Prospective plantings were lowered, but this is raising some questions. There is a lot of talk in the Dakota’s of fields that have had a soybean rotation on them will go back to wheat. There are also concerns over the US not being competitive in the global wheat market. While face value of wheat is par with other suppliers, once freight is factored in, the US quickly falls behind. This means the US has to be well below other sources just to get a second look when it comes to 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