- The midday Chicago grain trade is weaker as funds return to sell soybeans and corn. The wheat market appears to be sinking in sympathy. The USDA December report did not offer any bullish inspiration and Chicago values are softening on the fear that US President Trump will either apply a new round of tariffs or continue negotiations to reach a new pact. The big surprise for Chicago would be if the US/China were able to reach a Phase One Deal.
- The morning volume of Chicago trade has improved from yesterday’s horrible level (third lowest of the year on a USDA report day) as March corn futures have slid below the November lows. The market feel is bearish, but corn is reaching back into an area of fundamental support at $3.65-3.70. End users will likely take forward coverage beyond Q1 into this support. Soybeans and wheat may have additional downside on fund sales and a lack of importer demand.
- Chicago brokers estimate that funds have sold 9,000 contracts of corn, 3,000 contracts of wheat, and 4,800 contracts of soybeans. In soy products, funds have sold 2,300 contracts of soymeal and 2,400 contracts of soyoil.
- FAS announced the sale of 585,000 mt of soybeans to China and 140,000 mt to an unknown buyer (likely China) for the 2019/20 crop year. Today’s total sales amount to 725,000 mt. We understand that China offered new duty-free import licenses to Chinese crushers for upwards of 2.0 million mt of US soybeans. Monday was an active sales day with as many as 1.0 million mt of US soybeans being sold. It is believed that some 300-500,000 mt of US soybeans could still be sold to China, but that it is uncertain since US soybean cargoes sold to Chinese crushers in late October/November (either afloat or being loaded) did not receive duty free import licenses. These cargoes either at port or on the way, which could be used against the 2 million mt that China pledged to secure on Friday.
- Showers are occurring across portions of La Pampa and Buenos Aires. The rain was unexpected and not fo recast by the models. The showers have not been very heavy, but any rain is helpful and the green blobs on the radar is helping spark some of the fund selling this morning.
- US ethanol production ramped up 315 million gallons last week vs 312 million last week and 308 million last year. This is the second week of the 2019/20 crop year that US ethanol production has exceeded a year ago. The data was supportive of corn. The US Central Bank will end their last policy meeting of 2019 this afternoon. The odds-on bet is that the Fed will be on hold with interest rates.
- The US Central Bank looks to be on hold throughout much of 2020 with US inflation rates gradually increasing with time.
- The midday GFS weather forecast is slightly wetter in Southern Argentina while staying dry across NE Brazil over the next 10 days. A high-pressure ridge over NE Brazil which could produce some needed rain for Argentina as tropical moisture is pushed southward. A cold front will pull through Argentina late this weekend which will be closely watched. Much of the Brazilian crop areas will be well watered (except NE Brazil). No lasting heat is expected beyond the next 24 hours
- Chicago markets fall much easier than they rally. The drop today ran into air pockets with fund selling pushing corn below the November lows. End users will secure forward coverage on a scale down basis. We now see less downside risk in corn vs soy or wheat, but there is no incentive for new risk taking ahead of China trade deadlines and uncertain S American weather.