Market Update; Tuesday, February 26th, 2019
Lack of export confirmation and month end positioning weighs on commodities.
Trade is on the defense today. Much of what we are seeing is little other than positioning ahead of first notice day for the March contracts on Thursday. A lack of confirmation on recent export news is also weighing on futures today. So far losses are being held in check by a lack of active selling and limited country movement. We are also starting to see more interest placed on spring weather outlooks and how plantings could easily be delayed across much of the Corn Belt.
Corn futures were pressured by heavy losses in the wheat complex yesterday, and today it is losses in soybeans that are applying the pressure. Corn is also being pressured by the rapid soybean harvest in Brazil and how it will likely lead to elevated Safrinha acres, especially with the favorable weather in the country. Updated data that shows ethanol demand on corn is over-estimated by roughly 130 million bu is also weighing on the complex. A private analyst came out this morning and pegged new crop acres at 91.4 million, but this is highly suspect given current weather and the likelihood of a late planting season.
Soybeans are giving back everything they picked up yesterday in a technical correction. Soybeans are also losing the support from the Chinese import news and no clarity can be established on the facts. Even if all of these soybean bookings take place in old crop months, it will do little to reduce our ending stocks. It is also likely that any business we picked up when China backed away from the US will be lost. It is not hard to imagine a situation where our demand drops because of this. With poor crush margins and falling demand China may only be buying soybeans for storage, which is not long-standing demand.
The wheat market is trying to stabilize today but is struggling from a lack of fresh news. Demand is the greatest negative factor for US wheat as the global market keeps backing down, which means the US needs to follow suit if there is any hope of making export sales. One benefit for wheat is the price spread between that grain and corn is in to 90 cents. This could lead to elevated wheat feeding, mainly in the global market. In the US feeders tend to stick with corn regardless of the spread.
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