Market Update; Wednesday, February 6th, 2019
Commodities are narrowly mixed as positioning increases ahead of USDA balance sheets.
Trade has started today’s session in the same manner it did yesterday’s; narrowly mixed and favoring the down-side. Little attention is being given to overnight soybean sales as trade is almost at the point of expecting these to take place. Futures remain stuck in the technical sideways pattern that has been established and seems content to hold this. It is interesting to see Goldman Sachs announcing they will be reducing their commodity trading volumes due to poor returns. Cash values are starting to firm as country movement thins.
Corn values are again under pressure today as we see a lack of buying interest ahead of Friday’s USDA data release. The Goldman Roll starts tomorrow which is also limiting interest today. Most talk in the corn complex is on ethanol where production demand is down 2.2% from the 1st quarter a year ago. On top of this, the US has ethanol imports headed this way from Brazil. Average trade estimate is for a production number of 14.5 billion bu on Friday and a carryout number of 1.7 billion bu.
Despite overnight sales soybeans are favoring the negative side again today. These sales are being termed as “known” by trade and mostly expected. Trade is also aware of the fact that China needs to buy a significant volume of soybeans to really impact balance sheets. Trade guess is for a 4.6 billion bu crop in tomorrow’s balance sheets and a carryover of 926 million bu. Any decrease to carryout will have to come from yield as demand has not been that stellar. More attention may be on the Brazilian crop where estimates are for 117 million metric tons, although some are all the way down to 112 mmt. Interesting to hear that the quality of the Brazilian soybeans is better than expected.
Wheat is actually holding to the upside today. As with the other commodities, the wheat complex has very little fresh news to work with today. Wheat is taking support from an expected decrease to winter plantings of 1.3%. Wheat is also taking support from reports out of Texas that the crop is rated well below last years.
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
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