Weekly Market Update – January 18, 2019

I am beginning to feel like a broken record as there is nothing new to speak of this week other than a little wider trading range than we have become accustomed to. The government shutdown now sets the record for longest lapse in modern history and has no end in sight. We debate the usefulness of USDA reports every year, especially when we get a bearish surprise but I already miss them. Their regular scheduled occurrences keep the surprises from getting too large. We may argue with them, but they are a common place that we all start tweaking our numbers from.

The market did trade a bigger range this week than what we got used to. Early in the week, we dropped beans and everything else followed on second hand quotes from a trade representative that trade negotiations were not progressing as well. Later in the week we gained it all back on rumored wheat sales to Egypt by Cargill and also rumored Chinese purchases of corn and soybeans. Equities also rallied strongly on other rumors of progress with the Chinese. We have spent more than three weeks now trading on not much more than rumors and speculation about how the trade talks are going.

Corn showed very good chart support this week as we bounced off the lows close to 3.70 back into 380s. Corn had the best fundamentals going into the trade dispute so it should hold on the best. South America planted little corn compared to beans to take advantage of the trade war. The small South American corn crop could get smaller. Get orders working on both old (upper 380’s to 400 depending on cash flow needs) and new crop (412 December). Chinese purchases will tighten the balance sheet even further!

The weather in South America has not improved. Still too dry in Brazil and too wet in Argentina. The weather has kept us supported while we wade through the rumors of the trade talks but see very little actual progress. Had we not gotten the weather threats, the market could not be nearly this patient. We still think around 950 is probably the upside when (if) we do get a deal and the market will likely not stay there long. Get orders working 915-920 range to start scaling into sales. We see limited long term upside and significant downside risk. New crop orders at around $10. We do not see what would push us there, but if we get there we need to get something done.

Wheat is probably missing USDA reports the most. US wheat should be very competitive in the world market now that Russian exports are starting to slow. With challenging weather this fall, wheat seedings should be down significantly from last year. Wheat seems poised to get a surprise from somewhere. If you have wheat hedges with profit, lift them! 

Cotton did not get beat up nearly as bad this week as the other commodities and has been able to rally to new highs for 2019 closing today at 74.37. The 74 cent level has been pretty significantly resistant. Hopefully this rally represents significant buying of US cotton overseas, but we do not know because we do not have exports being reported…Scale in old crop sales here if you need cash flow. Remain patient on new crop to above 80.