Headlines:                                                                                                     

  • Weekly Export sales, regularly scheduled for thursday will be delayed until Friday, due to the government shutdown
  • Corn overtakes sugar cane as ethanol feedstock in Brazil
    Brazil’s low season for cane crushing is proving particularly downbeat, with processing volumes reaching their lowest in a decade – leaving corn, unusually, as the country’s top ethanol feedstock. Cane processors in Brazil’s Centre South, responsible for some 90% of the country’s sugar and ethanol output, crushed just 166,420 metric tons of the crop in the first half of this month, industry group UNICA said. A sharp fall-off is typical at this time of year, when mills take outages for the Centre South rainy season, cutting crush volumes well below levels which reached just short of 50m metric tons in the second half of July. However, the decline this time has proved particularly steep this season, with UNICA noting that “this is the lowest volume for (the first half of January) within the last 10 years. “In the first 15 days of January 2017, processing amounted to 1.18m metric tons” – a volume seven times as much as mills handled in the same period this year.
  • Dollar’s fall to weakest since 2014 heaps pressure on coffee producers
    Weakness in the dollar, which on Wednesday hit its lowest since 2014, unearthed worries among Colombian coffee growers, who said it was adding to pressure on finances from weak prices and weather setbacks. Roberto Velez, head of Colombian coffee growers’ federation Fedcafé, cautioned that the strength of the country’s currency, the peso, had risen to the top of a list of concerns for the country’s producers. Mr. Velez said: “What worries me, what has growers sounding the alarm, is the strengthening of the peso,” which on Wednesday stood at 2,854 per $1 – up 4.5% against the greenback in 2018 so far. The level of “2,850 pesos to the dollar will begin to be a big problem”, Mr. Velez said, flagging the pressure on producer margins, as the stronger peso forces extra pressure on Colombian prices to maintain export competitiveness. The country exported more than 13m bags of coffee last year, equivalent to more than 90% of its output of 14.19m bags, on Fedcafé data. “Coffee growers are not making money, are almost losing money,” at current exchange rates, Mr. Velez added, hoping for a “return to levels of 3,000 pesos” seen in mid-December.

Summary:

The US dollar index was lower again today about a dollar and to 89.18. It has been moving in concert with projection that we published late last year. It reached its lowest levels since late December 2014. OPEC announced its intentions to tighten production weeks ago and the Crude Oil market has been trading in response to said announcement. In fall of 2017 we discussed that Crude Oil was perhaps in the final stages of its bear trend and we are seeing the said projection come to fruition. In light of the weaker US Dollar, short covering was very active in boosting commodity prices. Traders are eager to see if the US currency weakness will be enough to aid US export competitiveness. Corn Futures were up 5 to 5 ¼ cents. The prospect of US Producers planting less Corn acres this upcoming summer also made some rounds in the rumor mill lending support to the Corn trade. The weak dollar, weather forecasts in South America calling for heat and dryness in Argentina and short covering made for the perfect storm in Soybean trading today. The Soybean trade is close to resistance and may be due for a corrective pullback soon. The next pullback could very well be a reasonable entry opportunity for what could be a rally to 1100. Beans gained 3 ¾ to 4 cents when the day settled. Wheat was the biggest gainer on the day rising more than 10 cents across the board. Wheat traders are particularly hopeful that the USD weakness can revive the Wheat trade.