News

October 12, 2018

 

 

NATIONAL CORN RECAP

BULLISH Pricing Indicators:

  • On Tuesday President Trump announced a plan to allow for sale higher concentrations of ethanol (E15) in gasoline year-round. Previously the sale of E15 had been largely banned during the summer driving season. In theory this could create additional corn-ethanol demand longer-term. Currently U.S. corn-ethanol demand accounts for more than 37% of total U.S. corn demand (5.650 billion bushels). However there are several obstacles in the near-term regarding any immediate expansion in U.S. ethanol consumption including infrastructure restraints, presumed litigation from the refining industry, as well as, a necessary price incentive for consumers to shift to buying higher ethanol blends. That said several corn traders have already taken the stance that this announcement will not have any positive impact on U.S. corn-ethanol demand for 2018/19 of substance.
  • Thursday the USDA released its October 2018 WASDE report, which featured a mildly surprising and unexpected cut to the 2018/19 U.S. corn yield. The USDA lowered the national corn yield to 180.7 bpa, down 0.6 bpa from September and 1.1 below the average trade guess of 181.8 bpa. Total U.S. corn production fell to 14.778 billion bushels versus 14.827 billion in September and the average trade guess of 14.827 billion.

 BEARISH Pricing Indicators:

  • Despite the USDA’s U.S. corn yield cut in the October WASDE report, 2018/19 U.S. corn ending stocks still increased 39 million bushels month-on-month to 1.813 billion bushels. Larger U.S. corn carryin stocks of 2.140 billion bushels largely attributed to the upward carryout adjustment. Ending stocks have continued to trend higher, now up nearly 130 million bushels since August even with consistent increases to U.S. corn export demand.

SHORT-TERM PRICE OUTLOOK:  CZ18 needs to close over the 100-Day Moving Average ($3.736) on Monday to sustain the current uptrend.

NATIONAL SOYBEANS RECAP

BULLISH Pricing Indicators:

  • Since January China has imported 70 MMT of all origin soybeans, down just 2% from the previous year. Therefore China’s demand for soybeans remains exceptionally strong. 2018/19 Chinese soybean imports were forecasted at 94 MMT in the October 2018 WASDE report, accounting for 61% of total world soybean imports. Therefore non-China soybean imports totaled 60.3 MMT. Brazil and Argentina soybean exports were estimated at 83 MMT. U.S. soybean exports were estimated at 56.1 MMT. Those 3 countries represent 90% of total world soybean exports. The point is even if China buys every bushel of available Brazil and Argentina soybean exports…they’d still need to buy some U.S. soybeans…and then the U.S. would largely be required to satisfy the remaining 60+ MMT of soybean import demand required from the rest of the world. The market knows this…

BEARISH Pricing Indicators:

  • This week notable Crop Scout Michael Cordonnier issued a 2018/19 Brazil soybean production estimate of 120.7 MMT (versus 119.5 MMT a year ago). He has a neutral to slightly higher production bias moving forward due to an accelerated early planting pace in Brazil, as well as, strong domestic prices above $10 per bushel. Internal forecasts suggest that Brazil’s planted soybean acreage could increase by 3 to 5% for 2018/19. China’s near insatiable appetite for Brazilian soybeans (and desire to avoid buying U.S. soybeans) is facilitating the expansion in acreage and firm undertone to prices.
  • In Thursday’s October 2018 WASDE report the USDA increased the 2018/19 U.S. soybean yield +0.3 bpa to 53.1 bpa. Additionally 2018/19 U.S. soybean carryin stocks improved to 438 million bushels, +43 million versus September. The net result was 2018/19 U.S. soybean ending stocks increasing to 885 million bushels, up 40 million bushels month-on-month. And finally, the USDA chose to leave 2018/19 U.S. soybean exports unchanged at 2.060 billion bushels despite current soybean export sales running 18% behind a year ago with shipments down 25%. The actual pace of 2018/19 soybean export sales suggests an export figure well below 2.000 billion bushels.
  •  2018/19 WORLD soybean ending stocks increased to 110.04 MMT in the October 2018 WASDE report, up 1.78 MMT from September and 13.3 MMT higher (+488 million bushels) than the previous record.

SHORT-TERM PRICE OUTLOOK:  SX18 fought back on Friday to close just marginally lower on the week. Next topside target is $8.80 (61.8% Fibonacci).

DECEMBER 2018 CORN FUTURES

CZ8 TECHNICAL ANALYSIS CZ8 FUTURES DATE
Friday Close $3.7375 10/12/2018
Previous Friday Close $3.6825 10/5/2018
  Current Contract Low $3.425 9/18/2018
     
  KEY RESISTANCE CZ8 FUTURES  

100-Day Moving Average

$3.736  
8/17/2018 Day High $3.825  
     
  KEY SUPPORT CZ8 FUTURES  
50-Day Moving Average $3.657  
35-Day Moving Average $3.611
 

NOVEMBER 2018 SOYBEAN FUTURES


 
SX8 TECHNICAL ANALYSIS SX8 FUTURES DATE
Friday Close $8.675 10/12/2018
Previous Friday Close $8.690 10/5/2018
Current Contract Low $8.1225 9/18/2018
     
  KEY RESISTANCE SX8 FUTURES  
61.8% Fibonacci $8.801  
100-Day Moving Average $8.905  
     
  KEY SUPPORT SX8 FUTURES  
50-Day Moving Average $8.581  
35-Day Moving Average $8.462  


Written and produced by Marcus Ludtke of Commodity Marketing Company.

The information contained herein, or as an attachment, is gathered from sources we believe to be reliable, but cannot be guaranteed and should not be relied upon as such. Opinions expressed are subject to change without notice. Trading in commodity futures or options involves substantial risk of loss. Past results are not indicative of future results.