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Weekly market review

By Staff | Jan 4, 2019

As expected, neither Republicans nor Democrats could reach an agreement leading to a partial government shutdown last Friday. The Senate voted down the latest spending bill that passed the House, which contained funding for the border wall. It is unknown how long this shutdown will last, as both sides seem unwilling to waiver. Services affected are the USDA website, weekly export sales reports, FSA offices will be closed after the first week of the shutdown, and payments will be issued once locations open back up once an agreement can be reached. The USDA would see 61 percent of it’s employees that would be exempted from the shutdown. There are a few reporting services that will not be affected from the shutdown such as weekly grain export inspections, and livestock price reporting.

Despite strong export loading inspections for corn, both corn and soybeans fell to one-month lows this week. Export destinations for corn came in higher than the week previous at 39.2 million bushels. The range of trade estimates was from the low side of 31 million bushels to 43 million bushels. Soybeans had another poor showing well outside the range of trade estimates. Last week’s inspections have soybeans at 23.9 million bushels with the trade estimate range from 29 to 44 million bushels. Last week’s poor showing in soybeans further highlights how far behind we are compared to the USDA’s forecast, as they have now crossed below the 100-day moving average. This also came after a five percent gain on the Dow Jones, the ninth largest one-day stock market move since the turn of the century on Jan 1, 2000. Export inspections will continue to go on despite the government shutdown, but export sales numbers will not be published until the normal day-to-day operation resumes.

News of more ethanol closures continue to circulate newswires. Some analysts believe the USDA will reduce ethanol demand in future reports. Others aren’t of the same opinion as the USDA made a 50 million bu. reduction in December and weekly EIA data has yet to show much for lower production. It is well known that margins are under pressure, it has been estimated that most plants have been operating in the red for the past 13 weeks.

Not only will market future values be affected by less ethanol demand but also basis values in many areas. A recent study by the firm Advance Trading Inc. stated that for every 100 million gallon ethanol plant that stops production, it is nearly equal to two unit trains of corn per week that is not being consumed in the regional supply line.

The Ukraine Ag Ministry recently updated their 2018 production estimates. Their figure is estimated at 35.5 MMT, which is million higher than the USDA. It is estimated that 90 percent of the crop is in good condition. Logistics have been reported to be a major problem.

Spring planting intentions are beginning to get some attention as analysts are looking at potential outcomes. Soybeans are the least attractive as it stands now with burdensome supplies. Current ending stocks on corn leads to thoughts of price potential, but if four million acres would switch from soybeans to corn, the oversupply issue will hamper both commodities. Moving acres from soybeans could potentially lower the soybean carryout to around 500 million, which is still more than adequate.

China continues to battle the African swine fever virus as it was found in some protein powders made using pork blood this week. There have been more than ninety cases of the highly contagious disease reported since August. Even with the disease continuing to spread, scientists in China have reported they have developed genetically modified pigs that are immune to the classical swine fever virus. Scientists have ran a trial on 55-day old pigs, and the genetically modified pigs saw some symptoms, but it was far less severe and non-fatal compared to the non-genetically modified pigs.

Weather models in South America show rain for the drier areas of Brazil in the forecast. This along with a lack of any fresh Chinese grain purchases also is pressuring the grain markets.

For more information, you may contact Kristi Guse at (712)-260-6486, or e-mail at kguse@maxyieldgrain.com. The opinions and views expressed in this commentary are solely those of Kristi Guse. Data used in writing this commentary obtained from various sources believed to be accurate. This commentary is intended for informational purposes only and is not intended for developing specific commodity trading strategies. Any and all risk involved with commodity trading should be determined before establishing a futures position. Please visit our Risk Disclosure Page for more information on commodity trading.

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