Market Update; Wednesday, February 13th, 2019
Market consolidation is keeping futures in a tight range to start the day.
Trade was mixed in the overnight session as values consolidated following yesterday’s rally in corn and soybeans. Much of yesterday’s strength came from export hopes on a resolution between the US and China. While nothing is for sure, there are indications the US will not raise tariffs on Chinese goods on March 1st. These sparked rumors of Chinese buying in corn and soybeans both late yesterday. We are also starting to see more estimates on new crop acres in the US ahead of the Ag Outlook Forum on February 21st and 22nd. This will give us our first look at new crop balance sheets.
The corn complex is starting to focus more on new crop acres and how plantings may fall short of needs. Even with unchanged acres and yields new crop balance sheets will tighten next year given current demand. The US needs roughly 4 million more acres if yield does not change just to keep reserves at a comfortable level. Even with corn offers from the US being higher than all other sources we still see demand, which is a good sign. That said, the corn crop in South America looks very good, which could temper our future demand.
Soybeans were the defined leader in the market yesterday as active short covering took place. This was in part from a potential resolution to the US/Chinese trade issues, but also from ongoing reductions to the Brazilian crop. Trade is also starting to pay more attention to Argentine weather as forecasts are calling for drier conditions in that country. This is the same time a year ago when drought developed in Argentina and heavy crop loss took place. Soybean advances are being held in check by technical resistance, which is preventing futures from posting gains in the early going of the day session.
The wheat market is in limbo right now as traders search for fresh news to work with. The global wheat supply is large and more than enough to satisfy demand. We have seen elevated wheat trade in the past week though, which shows buyers are interested in covering needs. Trade is also focusing on US weather as a return to cold temperature in the Plains will likely bring production loss. Early Texas ratings show the wheat crop is either very good or very poor in that state.
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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