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InFocus

Market Perspective - October 2018

Corn

Corn Field Bull points 

• U.S. exports expected to be very strong.
• Lower global wheat stocks could open more feeding capacity to corn.
• Funds have started to cover shorts, which has helped push prices above $3.70 resistance in CZ8.
• Potential increased demand with year round E15 blending.

Bear points 

• Domestic stocks are still adequate and plenty of stocks around.
• Harvest movement and hedge pressure still to come.
• Trade talks in beans remain unconstructive and could continue to hold corn back.
• Brazilian planting off to a record pace.  

Corn InFocus Chart

Soybeans

Soybeans Bull points 

• Funds have started to cover some of their short.
• Wet weather has slowed harvest in many areas and is causing some sprouting and pods to open.
• Record crush margins will keep processors running at capacity.
• New U.S., Mexico, and Canada trade deal reached.
• U.S. will continue to fill the rest of the world’s export demand in China’s absence. 

Bear points 

• USDA soybean yield at 53.1 bpa. Current 18/19 carryout is 885 million bushels.
• No progress between the U.S. / China trade war. Some think they could meet at the G20 Summit at the end of November.
• South America is expected to plant record acres of soybeans.
• Harvest could draw out for several weeks, given how wet some areas are. 

Soybeans InFocus Chart

Transportation Update

Trucking: The trucking industry remains at full utilization where it has been since August 2017.  Due to seasonality, a slight decrease in utilization may occur, however the industry will remain above 95% which is considered an extremely tight market.  A tight labor market and very strong economy remain the key factors.  

  Active Truck Utilization

Rail:  Rail service has stabilized, but remains below historical averages.  Railroads continue to do “less with less” and are handling similar volumes to 2014 but with 16% fewer train & engineering employees.  Railroads are increasing scrutiny on the number of private cars being held on railroad owned track.  This is leading to potential embargoes and increased demurrage.  

Mitigating Actions: 
- Continue to avoid short lead orders and minimize order changes
- Timely unloading of trucks
- Disciplined approach to rail pipelines to avoid a surplus of cars held on railroad track


Stay flexible

 

Source: http://www.usda.gov/oce/commodity/wasde/latest.pd7