Weekly Market Recap
1/5/2018 4:39:48 PM
Frigid weather is causing some logistics problems as rivers and lakes are freezing over. Rail and barge freight rates have gone up as more disruptions occur. Next week’s WASDE report is highly anticipated. We should see changes on both the supply and demand side of the balance sheets. We also get the quarterly grain stocks report at the same time. Combining to report releases at one time increases the possibility for a volatile trading session.
Dryness in Argentina remains a concern and corn planting is still slow going. Weekly US ethanol production dropped off sharply this week. It was the biggest week to week drop in all the data I have going back to September 2010. Ethanol stocks increased for the 1st time in 4 weeks. Corn exports sales were the lowest of the year. This week’s total of just over 100,000 tons was just 10% of the average export pace.
The wheat markets are trending higher this week as concerns about winterkill damage increases. Temperatures were very cold across Kansas and the dormant wheat has no snow cover for added protection. Winter wheat ratings were released for selective states and conditions dropped very sharply. Good to excellent ratings in Kansas dropped from 51% to 37%. Export sales for wheat were the lowest of the year.
Argentina has started to reduce taxes on soybeans and products. The reduction will be ½ of a percent each month for the next 2 years. Estimates for the Brazilian soybean crop continue to grow. Many analysts feel the crop will come very close to last year’s record. Soybean export sales were terrible this week posting the lowest total of the year. There were no flash export announcements this week. South American beans are becoming more competitive and we are close to losing the lion’s share of business.
Cash trading kicked in on Friday $1 lower at $122. Expectations were for cattle to trade up a bit higher. This caused the futures market to trade limit down on Friday. Margins have improved this week going from $20 to $40.
Front month WTI settled at $61.44, up $1.38 for the week. Yesterday’s settlement of $62.01 was the highest in 3-years. The RSI reads close to 70, suggesting an overbought market. AAA’s daily fuel gauge report shows the average price of regular gasoline at $2.486, up from $2.462 last week and compared to $2.359 a year ago.
Major stock markets around the world are starting off the new year strong. Japan’s Nikkei hit a 26 year high this week. In the US the Dow rose above 25,000 for the first time ever.