Market Perspectives – February 14, 2019

Chicago Board of Trade Market News

Outlook: March corn futures are a half-cent higher than they were last Thursday after a somewhat volatile week of trading. USDA’s first WASDE of 2019 was largely neutral/bearish the corn markets but solid demand statistics buoyed the market early this week. Today’s selloff is rumored to have several causes, including smaller-than-expected export sales, geopolitical trade tensions, and fund selling. Despite the potential catalysts for today’s selloff, the fundamentals will determine the long-run price, and USDA provided excellent fundamental data last week.

The February WASDE saw comparatively few changes to the world balance sheet. USDA increased world corn 2018/19 beginning stocks 0.2 percent and reduced world consumption by 0.1 percent, leaving global ending stocks up 0.3 percent from the December report at 309.8 MMT, or down 9 percent from last year.

In the U.S., USDA lowered the U.S. average yield 0.175 MT/ha (2.5 bushels/ac) and reduced harvested area by 0.1 percent. Those two changes reduced 2018/19 U.S. production 1.4 percent, bringing the figure to 366.287 MMT (14.420 billion bushels). USDA also reduced 2018/19 feed and ethanol use projections, lowering domestic use 1.3 percent. With exports unchanged, USDA’s estimate for 2018/19 U.S. corn ending stocks fell 2.6 percent (1.168 MMT or 46 million bushels), leaving an ending stocks/use ratio of 11.7 percent.

Other notable changes in USDA’s February WASDE include the growth of Argentina’s corn crop expectations to 46 MMT as the result of excellent growing conditions in that country. Argentina’s exports were increased to 29 MMT due to the production change and the country’s current position as a competitive supplier to the world market. USDA left Brazil’s corn crop forecast unchanged from December and only made a minor downward revision to the country’s beginning stocks. USDA also reduced South Africa’s corn production prospects 4 percent and cut the country’s export figure 16 percent from the prior report.

USDA’s Export Sales report for the week ending 3 January 2019 featured gross sales of 528 KMT and exports of 665 KMT, both down from the prior week due to the U.S. New Year’s holiday. YTD corn exports remain 67 percent above last year, while YTD bookings (exports plus unshipped sales) are up 19 percent. Sorghum exports totaled 29.7 KMT for the week, a 168 percent weekly increase.

U.S. average cash corn prices are near $3.51/bushel this week, up 1 percent from the prior week and up 4 percent from last year. March futures remain locked in a sideways trend with resistance at $3.82 and support at $3.70. Managed money funds have been noted sellers on weakness in the corn and surrounding markets, but commercial buying has been equally notable when prices reach the lower end of their recent range. With the weather improving across South America and little fundamentally changing in the U.S., the market looks to continue this choppy, range bound trading for the foreseeable future.