Market Update; Thursday, February 21st, 2019
Outlook Forum Data and Chinese trade developments drive commodity futures.
Moderate advances are being posted in the market this morning as we see a technical recovery following recent losses. There are two main areas of focus this morning; the USDA Ag Outlook Forum and Chinese trade developments. Chinese officials have reportedly announced they will increase commodity import spending by $30 billion this year. This would include corn and ethanol, which is supporting those markets. Early advances are being held in check by a lack of confirmation on these rumors. Weaker outside markets are also limiting interest in the commodities this morning.
The Ag Outlook Forum is claiming US farmers will seed 92 million acres of corn this year, a 2.5 million acre increase from a year ago. This seems a little overzealous, as market economics do not support an increase in corn plantings of any degree. These acres are not based off any type of survey, which adds to their uncertainty. China is reportedly interested in US corn which is giving the complex support. Advances are being capped by the start of the Brazilian export program and news Ukraine is sitting on a large volume of corn for export. The combination of these could temper the elevated demand we have seen for our corn in the global market.
The Outlook Forum is pegging US soybean acres at 85 million this coming year, over 3 million fewer than last year’s plantings. As with corn this number is highly suspect as economics do not point towards a decrease in soybean seedings. In fact, one can easily make the case for an increase in soybean plantings this coming year. Soybean values are taking support from short covering, as fundamentally, the complex is lacking anything that would warrant higher values. The greatest concern with soybeans is what the spreading of ASF will do to demand. Russia is starting to sell soybeans into China which is also concerning. Interesting to see data that suggests even if China would start to book US soybeans again, the damage that has already been done will impact the market for the next 7 to 8 years.
Wheat futures are basically along for the ride this morning as the complex is void of fresh news. The US continues to lack any sizable exports as buyers keep shopping elsewhere for needs. US wheat acreage for this coming year is pegged at 47 million, basically unchanged from this year. Wheat is taking underlying support from projected losses to the Australian crop, which will limit their export potential.
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 gathered 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