Market Update; Tuesday, February 12th, 2019
Corn, soybeans rally on demand hopes while technicals pressure the wheat complex.
Corn and soybeans are on the positive side to start the day session while wheat remains in negative territory. Trade is more confident that a deal will be reached between the US and China prior to the March 1st deadline for tariffs to increase from 10 to 25%. Hopes are this will elevate demand for US commodities in the global market. More interest is on the financial markets today as the IMF has stated they are concerned over the stability of the global economy, particularly China. It is not out of the question this could hinder commodity demand regardless of tariffs being enacted or not.
The corn market is shrugging off higher world production figures this morning and is instead focusing on what could take place in domestic balance sheets. Trade is less confident we will see a major shift from soybeans to corn this coming production season. The fact is that if we do not see a bump in corn plantings and yield is no greater than this year, the US could end up in a rationing situation. Advances in corn are being limited by CONAB data that bumped Brazil’s crop size. Near perfect weather in Brazil for the Safrinha crop could cause additional increases. The US is also 20 cents above the global market on corn which will start to temper our demand.
Soybeans are posting solid gains this morning on hopes of elevated Chinese business and trade resolution. This has already sparked rumors of business being done between the two countries. Trade is keeping a close eye on Chinese crush margins though, as values are at record low levels. The firm CONAB reduced its soybean projection for Brazil this morning to 115.3 million metric tons. While this is above most private estimates, it is below the 117 mmt projection the USDA just released. Right now, the Brazilian soybean crop is being projected as the smallest in the past three years. At the same time, world consumption keeps growing. Soybean futures are being capped by the fact the US is the highest priced source for product in the global market.
Wheat futures are lagging today with the entire complex under pressure. This is from a few different factors with the primary one being a break down in technical support on the global level. News that Russia will not limit wheat exports is also weighing heavily on futures. Russia has announced it will instead set up a union to monitor wheat exports and trade. Losses in wheat are being held in check by weather concerns across the US and Australia where production losses are likely taking place.
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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