Market Update; Wednesday, February 27th, 2019
Position squaring puts trade on both sides of unchanged to start the day.
Corn, soybeans, and wheat were on the positive side to start today as we had a correction from recent losses in each complex. Early week selling has subsided and now we are seeing some month-end buying. While early, we are also seeing trade start to monitor spring weather outlooks. It is far too soon to cause panic in the market, but with a shift from old crop to new crop fundamentals, weather will become more of a factor. While it seems distant, in as little as 4 to 6 weeks planting usually starts in the Midwest. A lack of follow through buying has limited upside potential.
Corn futures are taking support from light speculative buying this morning as thoughts recent selling has been over-done are surfacing. Corn is also benefitting from hopes China will reduce its import tariff on US ethanol from 70% to just 15%. News that South Africa will produce a smaller corn crop than a year ago is also beneficial for the complex. Corn gains are being limited by near perfect growing conditions in South America.
Soybeans are taking support from ongoing export hopes, although these are not as bullish as earlier in the week. It is likely that the vast majority of China’s purchases will be for new crop delivery. Soybeans are also being hindered by a large 250 million bu of unshipped sales on the books. It is not out of the question that these could be shifted to South America as an origination point given current basis values. Soybeans are being held in check by data showing world production this year will outpace production by 11.6 million metric tons, reversing a trend of declining stocks in recent years.
Wheat values are mostly along for the ride today with little real interest being shown by buyers or sellers. Fund selling from earlier in the week has subsided which is allowing futures to stabilize. A rebound in global wheat values is also supporting today’s wheat trade. The fact that world wheat demand was down 2.5% in 2018 is keeping a lid on the complex. This is the first decline in global wheat demand in the past six 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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