Grains were mixed compared to 3 weeks ago and all markets remain within their recent ranges. Corn has become the weakest performer lately, however, on demand considerations.

 

Thirteen US ethanol plants have shut down in the past year due to poor margins. US corn exports remain slow and are down 53 percent from last year at this time. The USDA may reduce their export estimate of 1.85 bln bu. in their January 10 report.

 

This could be offset somewhat by the signing of Phase 1 of the China trade deal on January 15. So far, few details have been released. Trump is demanding more ag imports by China, which would include more corn and ethanol.

 

The USDA report in January is one of the most important every year. Final production numbers for the 2019 crop will be released, as well as grain stocks as of December 1, and winter wheat acres planted. Big moves often accompany this report.

 

Fund buying has been the main reason for the price improvement since early December. This was almost all short covering. Their buying is giving producers a better opportunity to lock in some half-decent prices for both old and new crop.

 

The biggest news this past week was the killing of a key military leader in Iran by US forces. Grains did not react.  Some think it is negative for grains, as the Mideast has become a source of demand, especially for wheat. They may shun US supplies now.

 

Another effect the killing could have is to strengthen the US dollar. As uncertainty increases, some dollars will seek the safe haven of that currency. This tends to have a negative effect on commodities in general.

 

It hasn’t hindered gold or crude oil prices, however. Gold is also a safe haven and hit a new seven-year high. Crude oil also spiked to its best level since last May. Stock markets eased only marginally.

 

Livestock markets were flat over the past week. US pork exports to China in November set a new high, 30 percent higher than the previous monthly record hit last July. One would think the extra demand should have been more price friendly.

 

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Hensall Co-op
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January 28, 2020
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