- Chicago grain markets are mixed at mid session with soybeans firm, while the grains sag with corn giving back all of Friday’s gain. The large fund short in soybeans is spurring the bounce along with rumours that 2-3 cargoes of US soybeans sold to China in a new crop position.
- The China sale is modest but combined with the near record short position in soybeans by funds, it has spurred short covering ahead of Tuesday’s USDA February crop report. Chicago bulls remain hopeful that China issues duty free import licenses around Feb 1. Hints of demand for US sorghum and the morning US soybean sale to China have rekindled hope regarding Phase One Deal compliance. We look for a mixed close and choppiness into the February USDA report. The bulls have a window from now into the USDA Outlook Meeting to make a stand.
- Chicago brokers estimate that funds have sold 3,500 contracts of wheat, 2,100 contracts of soyoil and 2,600 contracts of corn. Funds have bought 5,400 contracts of soybeans and 4,400 contracts of soymeal. We are not seeing any meal/oil spread unwinding, just outright short covering in soymeal futures.
- Algeria is rumoured to have bought 500,000 mt of French wheat at a CIF price that was like their last tender. The FOB price of French wheat was up, but the freight costs were down which allowed for Algeria to pay a landed price that was like their last tender of January 20. Algeria has now covered their wheat import needs into spring.
- US weekly export inspections for the week ending February 6 were; 30.3 million bu of corn, 19.2 million bu of US wheat, and 22.2 million bu of soybeans. Wheat exports were on the high end of expectations while US soybean shipments were disappointing.
- For their respective crop year’s to date, the US has exported 425 million bu of corn (down 463 million or 51%), 1,000 million bu of soybeans (up 165 million or 20%) and 631 million bu of wheat (up 66 million or 8%). We expect that WASDE will trim its US corn export estimate on Tuesday. There is no way of knowing how much if any US corn that China will secure in an old crop position.
- The Brazilian Real is priced at 4.31:1 US$ and the Argentine Peso at 61:1 as key ag export currencies continue their decline.
- The Brazilian Central Bank lowered their borrowing rate to a record low 4.25% last week with Argentina negotiating with the IMF this week over debt payments. We expect the Real, Peso, Ruble and Ukraine Hryvnia will all stay depressed adding to the profitability of non-US farmers. Brazil has dropped its Central Bank lending rate by nearly 9% over the past year, a big deal!
- The midday GFS weather forecast is wetter for Argentina with similar rains for Brazil. Temperatures are a few degrees cooler for Argentina than the overnight run. We see no crop problems for either Argentina or Brazil. The initial crop harvest is well underway across much of Brazil and winter corn is being seeded normally. The recent and upcoming rains are raising Argentine corn/soy yield potential.
- China’s inflation rate soared to 20.6% in January with pork prices up 116%. Amid coronavirus, China must do something to pressure domestic meat and consumer prices. USDA’s February WASDE report aside, traders are hopeful that China could soon issue duty free import licenses.