Market Perspectives – February 21, 2019

Chicago Board of Trade Market News

Outlook: March corn futures are up ¾ cents (0.2 percent) from last Thursday as the market continues to move sideways. The weather remains favorable for Brazil’s 2nd crop corn, keeping some pressure on prices. Yet U.S. corn demand remains strong, which is helping prices find a floor. Recent positive geopolitical/trade news put a bid under the market early today and could be important in dictating market direction moving forward.

In its annual Ag Outlook Forum, the USDA’s first forecast for the year pegged the U.S. corn crop at 92 million acres, slightly higher than the average trade guess but under some private estimates of 93 million acres. If realized, the USDA’s latest estimate would represent a 3.3 percent increase in acreage versus 2018. The agency said the U.S. average corn price would reach a new five-year high in 2019 as well. More details about the USDA’s first look at the 2019/20 crop year will be released Friday.

USDA’s weekly Export Sales report is delayed until tomorrow. The latest Export Inspections report, released 2/18, showed a bullish 942 KMT were shipped, a volume equal to that of the same week in 2018. Year-to-date shipments are up 45 percent vs. USDA’s projection of a modest decrease in corn exports. The rapid pace of U.S. corn exports, recently buoyed by South Korean purchases, is keeping corn demand in a bullish posture.

Cash prices remain firm across the Midwest nearing eight-month highs, with poor weather hampering grain movement amid strong end-user purchases. Basis levels firmed significantly on the CBOT’s Tuesday dip and are expected to remain so with transportation issues dogging grain movement. Shuttle rates to the PNW are strong at 130 cents over March futures while the secondary market for rail cars has jumped sharply higher. These higher rates are not only impacting shipments to the PNW but also to the Gulf as well.

From a technical standpoint, March corn fell below key indicators but broke back above those on Thursday’s trade news. This action could be indicative that the move lower was a bull trap and that prices have upward potential going forward. The seasonal trend is higher and commercial buying has been active on breaks. The CFTC data is still delayed from the government shutdown, leaving the market largely uninformed as to managed money’s position in the market. For now, the trend in corn seems destined to continue sideways.