Special Market Update

The grain market remains rangebound with no data to trade as a result of the government shutdown. It’s been over 3 weeks since we have seen export sales or the commitment of traders report which publishes the managed money positions. More importantly, we have not seen the January WASDE which is the most important crop report of the year. Until we see the government open again, our markets are essentially flying blind and should remain in a sideways pattern.

The trade war story with China has been supportive as a result of some generally positive statements coming from both sides. However, the market wants to see actual specifics when it comes to demand. The Chinese will be in Washington at the end of this month and if we don’t see actual tonnages announced, we could break out to the downside as the market runs out of patience.

The corn market has found some support on ideas that the Chinese may book a package of corn which has the potential to have a positive price impact on the US balance sheet. There are also expectations that the final yield will slip from last year’s crop. Without one of those events occurring, corn also has the potential to breakout to the downside with some headwinds in ethanol profitability along with more export competition around the world. The Safrinha corn crop in Brazil has the potential to be bigger than last year assuming normal weather. That corn will compete with the US later in the year.

Soybeans have seen some steady price improvement as a result of dry weather concerns in NE Brazil. The extended forecast is hinting at a pattern change which should pressure beans even more without some positive trade news. From a fundamental historical perspective, soybeans are extremely overvalued and have significant downside potential.