Weekly market review
Trade news continues to dominate the headlines, as both corn and soybean markets struggle to find direction. Markets were on edge to start the week after it was announced that tariffs would be renewed on steel and aluminum coming out of Argentina and Brazil.
The president cited “massive devaluation” of their currencies as the reason for the tariffs. President Trump also stated that it may be favorable to wait until after the election to complete a trade deal with China. This news added to the uncertainty in the soybean market which has fallen nearly a dollar in the last six weeks. In that same time frame, the funds have flipped from a long position of over 60 thousand contracts to a short position of over 60 thousand contracts. Later in the week Bloomberg reported that the U.S. and China were closing in on a deal, and hinted that it could get done ahead of the December 15th deadline at which point new tariffs would come into effect.
Markets have become increasingly numb to all the trade rumors, and the lack of proof that progress is being made on the phase-one trade deal has all but extinguished the momentum that was driving the market prior to the slide we have seen over the last six weeks. The White House has maintained their optimism that a deal will get done. Soybeans continue to find new lows as we work toward the end of the year, despite good export numbers over recent weeks. The expectation in the market is that, while export numbers have been good recently, there will be a sharp decline as South American crops begin to hit the market. This idea has been fueled by the fact that Chinese buyers have begun contracting new-crop Brazilian soybeans for February delivery.
South American crops have taken center stage in the market as harvest slowly wraps up here. Brazil crops have received adequate amounts of rain up to this point, and look to be on pace for a good crop. Argentina crops have drawn the attention of the market as conditions have become increasingly dry and the extended forecast shows no significant rains coming in the next couple of weeks. These conditions will continue to be monitored closely, as both corn and soybean markets search for some positive news.
Demand within the corn market has been tough to find so far this year. Over recent weeks exports have improved, but are still lagging behind what the USDA has projected for the marketing year.
Ethanol demand has increased recently as well, but margins have narrowed by 9 cents week to week. Margins are currently sitting around 17 cents, these levels are fairly comfortable for producers, but if they continue to tighten we could see a decrease in ethanol demand.
There has been lots of talk about the amount of corn still remaining in the field across the norther portions of the Corn Belt. An estimated 700 million bushels of corn is still standing in the Dakotas after the area received some heavy snowfall recently. The trade has been slow to acknowledge this as a production issue, with the assumption that these crops will be retrieved in the spring. There is potential for some quality issues if those crops do remain in the field until spring time, so the market will continue to monitor the situation.
For more information, you may contact Regan Coyle at (515)-200-5123, or e-mail at firstname.lastname@example.org. The opinions and views expressed in this commentary are solely those of Regan Coyle. 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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