January 2019 Markets Update
We are pleased to provide the following commodities update for January, 2019
With the US government shutdown, there are no USDA crop reports. Therefore, we will focus on 2 things:
South American Crop:
- Analysts are reducing their forecasts due to weather in Brazil
Potential US/China Trade Deal:
- Any deal to remove Chinese tariffs on US soybeans will be bullish to price.
Market Prices Have Rebounded Upwardly Lately
- As mentioned above, South American crop prospects have been downgraded and news of a potential US/China trade deal have caused prices to rise.
- Crude oil has been on the rise to start 2019; this increases demand of alternative fuels (biodiesel from soybean oil)
- Although South American crop has been downgraded, it should be a sizeable crop.
What Does This Mean?
- Outlook is muddied
- So much will depend on whether or not the US and China can make a trade deal
- Timing of trade deal will impact planting intentions in the spring
- Sugar prices have been on a modest rise to start 2019.
- Forecast in Brazil has been downgraded due to weather.
- Production in general has been slowed due to the recent historical pricing lows.
- Crude oil prices have been rising; creates incentive to shift sugar to ethanol production.
- Although supply forecasts have been downgraded, we are still going to see a supply surplus this year. We are not likely to see $0.10/lb sugar anytime soon. The recommendations is to buy in the low $0.12/lb range.