Weekly market review
Markets began last week on edge, after news of a missile strike being carried out in Iran, killing a high ranking military leader for Iran. Later in the week Iran fired more than a dozen missiles at U.S. bases in Iraq as a form of retaliation. Since the latest round of missile strikes, both leaders have made comments to the media stating they would like to avoid a war. The escalated tensions provided some resistance to the market, with the funds selling some of their position in order to move to more stable markets. The reaction was short lived and the market turned its attention from reactions to trading more on fundamentals. Recently the fundamental news surrounding both the corn and soybean market has been fairly positive, but both markets continue to look for strong news to continue to provide support. Technical support has started to turn south recently with the March corn contract trading below the 50 day moving average again.
Through the early part of the week, the trade saw lighter than normal volume. With light fundamental news the majority of the trade was focused on the funds squaring up positons ahead of the USDA’s final Supply and Demand report for the 2019 crop. The expectation leading into the report was that the USDA would lower the yield from the 167 bu. per acre that was used on the November report. There was also an expectation ahead of the report that the projected export number would need to be adjusted lower with exports lagging well behind the pace need to meet the November projection. One of the things to note with this report will be the bushels that are still standing in the field in the Dakotas and Minnesota. They are marked as on farm storage, and there will continue to be conversation around these bushels as we head into spring. There is a chance the USDA will survey farmers in these areas again, but we will have to wait and see if that is the case.
Chinese officials are expected to meet with U.S. officials at the White House on January 15th to sign the first phase of the trade agreement between the two countries. It was reported earlier this week that China will be removing anti-dumping duties on U.S. dried distillers, in an effort to reduce barriers on DDG products imported in from the U.S. These regulations were originally put in place to protect China’s initiative to grow their domestic ethanol industry. It was announced earlier this week that Chinese officials have abandoned the initiative to have a 10 percent mandate by 2020. The big question still remaining in the market is whether China still intends to reduce pollution by increasing ethanol usage, if that is the case we could see a sizeable uptick in ethanol and DDG exports.
The soybean market has received some major support from soy oil markets over the last several weeks. Soy oil markets have rallied significantly since September when vegetable oil supplies began to tighten. The shortage has driven soy oil to score new contract highs just after the New Year. This has provided some much needed support with South American crops under little pressure so far this growing season. There is a growing expectation that the Brazilian soybean crop could come in at record production levels this year. If that is the case we could see exports struggle domestically, with a large crop in South America being the more attractive option to a majority of importers.
For more information, you may contact Regan Coyle at (515)-200-5123, or e-mail at email@example.com. 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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