- It has been a dismal morning of trade volume with few wanting to take any new positions ahead of the USDA December Crop Report tomorrow and the ongoing uncertainty of when or if the Chinese will make cash purchases of US commodities. The US stock market is under additional pressure with the Algo traders keeping pressure on stock valuations amid the bearish position of the charts. Chicago opened lower but was unable to sustain the decline as traders debate the timing of China purchases. Algo trading is likely to push soybeans and grains to new high if Chinese cash demand is confirmed.
- Chicago brokers report that funds have sold 3,000 contracts of wheat, 1,600 contracts of soybeans, and 500 contracts of soymeal. Funds have bought 4,000 contracts of corn and 1,200 contracts of soyoil. FAS reported that Mexico purchased 1.645 million mt of US corn in a large daily sale. We have heard that it is a large Mexican corn syrup producer that likes to lock in their cost close to the end of each year. The purchase is split between 1,104,900 mt in old and 541,020 mt in the new crop corn year. FAS also reported that 125,000 mt of US soybeans were sold to an unknown destination. The US soybean sales pace has picked up considerably following the US/China trade truce in Argentina. The USDA reported that for the week ending December 6, the US exported 34.9 million bu of corn, 15.4 million bu of wheat, and 33.9 million bu of soybeans. The US corn export pace remains on pace to reach the USDA’s forecast while wheat and soybeans are lagging. EU wheat exports were revised upwards by 600,000 mt which is more in line with recent shipment data. Traders expect that additional upside adjustments will be made in coming weeks which takes EU wheat total exports near 6.8 million mt. World wheat demand is equal to last year. The EU wheat export pace argues that their domestic wheat supplies are tightening, and that demand shifts to the Americas are underway. Russian wheat offers are becoming scarce for LH January
- We understand that China has allowed a US soybean vessel to unload today which may signal a thawing in the US/China trade dispute. Chinese sources remain upbeat on their pending Government purchase of US ag and energy.
- The midday S American weather forecast remains consistent with recent model runs with below to much below normal rainfall for N Brazil and soaking/flooding rains for portions of Argentina. The model is still working out the exact details of where heavy rains should be focused in Argentina with the EU model farther south. Temperatures look to average near to above normal with highs ranging from the mid 80’s to the mid 90’s while cloud cover keeps Argentina cooler than normal. The drier than normal weather across Brazil is favourable if the rains return during the last 10 days of Dec.
- Will China keep its promise and secure large amounts of US ag goods. We doubt that the US/China can start their trade talks unless China keeps its promise on US goods. Whether China secures US grain is being debated, and our current guess is that Chicago values won’t be able to sustain a decline until China has bought US ag goods.