3/4/19: Mark's "Market Talk" Blog

Bad week in the markets, AFS continues to spread, almost ideal South American weather

This past week corn broke out of its tight trading range and unfortunately it headed the wrong way as the May contract closed down 12 cents. It has been a long time since it moved this much in a week. It seems several factors entered into this move but the main one is the funds are getting short the commodity markets in a fast way. A few weeks ago they were long the corn market more than 50,000 contracts. This week they are estimated to be short more than 86,000. That’s a huge swing for this time of year. There are several reasons why this is happening. The weather in South America has been quiet. Their first harvest season is way ahead of schedule so the second crop corn is being planted into good soil conditions. Corn and ethanol have been mentioned in the Chinese talks, but to date there hasn’t been any sales yet. The US farmer still owns a large amount of corn and history tells us that markets normally struggle until the farmer gets sold down. On the bright side a rally now has more fuel if the trade is short to start with. Now that we are in March weather talk in this country will become more important. Looking outside today it’s difficult to think we will be in the field within a month. The forecast for the first half of March is wet and cold. At some point this should give the corn market some needed push. World corn carryout numbers are shrinking so any hiccup in our production expectation should bring some premium into this market. The bean market didn’t do any better than corn last week as May beans closed 13 cents lower. As we catch up on the USDA reports that were delayed during the government shutdown we are seeing bean exports were better than expected but still down compared to a year ago. We may have lost a lot of Chinese business but at least half of that loss is headed to other countries. May beans trading at 9.12 aren’t bullish or very profitable. However it could easily be a dollar less with all the negatives that are out there. This includes the large carryout, good SA weather, and the increase of African Swine Fever in China. As this disease spreads it is impacting a lot of hogs. There is no preventative vaccine and the only cure is to destroy the infected animals. Dead hogs don’t eat much bean meal. And in this case it doesn’t matter who the Chinese are buying meal from, they will need less. That’s why it is so important we develop other markets for the beans we produce in this country. Sometimes we question the check off money that is held out of our bean checks. This money is helping to develop these new markets so today it is more important than ever that the soybean boards have an income stream to work with. 

 

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