Closing Comments; Friday, July 12th, 2019

Trade was higher to finish out the week as technical buying continued in the market. This was especially the case on corn where overhead resistance was taken out and buy stops were triggered. The fact that not many traders believe the acreage number on corn from yesterday’s WASDE report is also supporting the complex. An overnight sale of 104,100 metric tons of corn to Panama was beneficial as well. Soybeans posted solid advances today, although technical resistance limited daily gains. Chinese import data was also a hindrance for the soy complex. Wheat was in a consolidation mode today following yesterday’s advances. Most attention was on weather today though, with extreme heat forecast for much of the US for the next week to ten days.

One of the most talked about numbers from yesterday’s WASDE report was corn acreage. The USDA now pegs this year’s corn plantings at 91.7 million acres and harvested acres at 83.6 million acres. According to many private analysts these numbers are both too high. It is believed that the USDA will adjust all acres in the August balance sheets, and trade is expecting more accurate data then.

Export data out of China shows just how far their soybean imports have been reduced this year due to African Swine Fever and the US trade war. China’s June soybean imports were down 11.5% from May as the country’s hog herd was reduced. June 2019 soybean imports were also down 25% from June of 2018. For the calendar year China has imported 6.61 million metric ton fewer soybeans than a year ago. This brings into question the entire soybean demand figures being issued by the USDA.

Not only are we seeing doubt on soybean demand, but on corn as well. The United States is seeing less than hoped for corn demand as buyers are opting for cheaper offerings in the global market. The main competition is coming from Argentina and the Black Sea. There is also uncertainty on domestic corn demand as more ethanol plants are reported to be slowing operations. Heavier use of wheat as a feed grain is also competing with corn in the domestic market.

Weather remains a primary topic in today’s trade. We have started to see a shift in attitude though, with regions of the Corn Belt that were previously flooded now claiming they could use precipitation. This is especially the case in the east where unseasonably warm temperature have sped up soil moisture losses. There are also some concerns over the impact heat may have on corn pollination as that stage of development gets underway.

Technical buying helped support today’s trade. The December corn contract cleared significant resistance at $4.48, setting up a potential test of the contract high at $4.73. November soybeans also traded above firm resistance at the 200-day moving average of $9.24. To some this was taken as a sign the minor correction soybeans have been in is over. September wheat in Chicago had a good technical day yesterday but was limited by resistance at $5.26 today.

Livestock futures were mixed today, with live cattle and hogs posting advances while feeders were pressured by elevated feed grain futures. Simple buying interest was the primary source of support for cattle and hogs. Cattle took additional support from prospects for less beef production this year than expected. Pork supplies are expected to grow though, with production forecast to increase 360 million pounds from initial estimates in 2019 and to be 185 million pounds higher in 2020.

This commentary is the sole opinion of Karl Setzer, Commodity Market Risk Analyst for AgriVisor. This is intended for informational purposes only and not to be used for specific trading recommendations. The information used to generate this commentary is gathered from a variety of sources believed to be accurate. If you have any questions or would like additional market information, feel free to send an e-mail to ksetzer@agrivisor.com. You may also follow Karl on twitter; @ksetzergrains




 

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