Market Update; Tuesday, February 19th, 2019
Markets trade lower as fresh news and trade deal developemnts unfold.
Trade has started the week on the negative side with little real interest being shown in the market. Trade is more interested in what we may see for developments with talks between the US and China this week as the two sides continue negotiations. While we kept getting told this will end well, trade is not as positive. We are also closely monitoring the Ag Outlook Forum that takes place this week on Thursday and Friday. This will give us our first “official” indication of new crop balance sheets. Late last week economists projected net farm income for 2019 at $77.6 billion, an $8.4 billion increase from a year ago.
Corn is on the negative side today, but is actually posting less of a loss than the other commodities. Doubt over the expected increase to corn acres next year is supporting the complex, especially with economists predicting elevated corn demand on a global scale. Ethanol margins have moved back into positive territory for the time being which is also supporting the complex. Pressure is coming from greatly improved weather for South America and a tight cash market as non-stop snows are preventing movement in the Midwest.
Soybean futures are under pressure as we see a continuation of last week’s losses. Soybeans dropped 7 cents last week mostly from improved weather conditions in South America. China bought a reported 30 Brazilian and 5 Argentine soybean vessels last week showing they are not willing to shift as much interest to the US as hoped. Market bulls are trying to build on data that shows US crush is up 6% this year over last, but in reality, this only adds 49 million bu of demand. This is hardly enough to make a sizable cut into soybean reserves. Soybeans are finding light support from additional reductions to the Brazilian crop.
The greatest declines in the market are being posted in the wheat complex. Wheat is struggling from little other than a simple lack of demand. Even though the US is competitively priced in the global market, buyers are passing on offers due to elevated freight charges. Reports that many regions of the world have excellent wheat crops are adding to the weakness. Trade is ignoring reports out of Australia that the wheat crop there will be the smallest in the past 11 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 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
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