Market Update; Friday, February 22nd, 2019
Outlook Forum Data, World Production Estimates, Export Sales, and trade developments combine to drive today's trade.
The market continues to focus on trade developments and Ag Outlook Forum data for price discovery. Futures shot higher yesterday on news China was willing to issue Memorandum of Understanding certificates on $30 billion of Ag products. While this seems positive, a MOU is not the same as a purchase; it merely shows a buyer is considering a purchase. News this morning that March 1st tariffs may be placed on Chinese products even with talks taking place is tempering market support. Economists are predicting a 6% reduction to US Ag exports this year due to the Chinese conflict.
Corn futures are taking light support from the news China is interested in our offerings. This support is waning though, as interest in buying is not the same as making a purchase. Yesterday the International Grains Council increased world corn production by a huge 33 million metric tons to a large 1.109 billion metric tons. At the same time, the Outlook Forum released data that corn plantings will increase 2.5 million acres this year. This morning the forum put out balance sheets on new crop indicating a 1.65 billion bu carryout this coming year, which equates to a stocks to use of 11% and a cash value of $3.65. The ”export sales dump” this morning showed 239 million bu of sales over the past six weeks which was at the top of estimates, but below the volume sold over the same period a year ago.
Soybean values have been on both sides today with no clear direction being shown. Analysts are predicting a sizable decrease to soy plantings next year which gave the market its strength yesterday, as did the ongoing rumors of China showing interest in our export offerings. The IGC decreased the world soybean crop by 5 mmt to a 363 mmt total, which was also supportive. Concerns are building over the spread of ASF which is capping advances. The Outlook Forum pegged new crop soybean carryout at 845 million bu which is still a 19.8% stocks to use. This puts the average cash value on soybeans at $8.80. Economists claim that given this data, new crop soybeans are currently over-valued by $1.60. Export sales over the past six weeks totaled 240 million bu which was at the low end of expectations but twice the volume from a year ago.
As it has been most of the week, the wheat complex is simply treading water this morning. The IGC pegged the world wheat crop at 735 mmt for this year, down 2 mmt from their previous estimate. Ag Outlook data indicates a 944 mbu wheat carryout this coming year. This figures out to a 44.8% stocks to use and an average cash value of $5.20. Wheat sales over the past six weeks totaled 131 million bu which topped trade expectations and was two times the amounts sold over the same period last year. Near perfect growing conditions in South America for wheat is weighing on the market, as is the simple fact world wheat stocks are more than ample.
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