- There is strong talk in the cash market that China is buying US soybeans this morning, with many now expecting that FAS will announce as much as 2 million mt of new US sales in coming days. The buying is mostly for the next 60 days out of the PNW which is raising cash basis. Chicago has followed the rumours as values push to new rally highs. Cash traders argue that China has additional demand to work, but it’s uncertain as to how much buying will be completed today. We note that most cash traders still expect a total of 5-8 million mt to be filled with some of that demand coming in new crop. We do not expect that China will take that slug up front. Corn and wheat are following the soybean gains with world wheat prices well up from the last GASC tender.
- Egypt’s Egypt secured 180,000 mt of Romanian and Russian origin wheat for early Feb arrival. They paid an average price of $242/mt. This compares to Egypt’s tender last week executed at $237/mt and is the highest fob price paid since 2015. Egypt still needs to source its late winter/early spring needs, and based on seasonal trends Egypt is likely to pay upwards of $245-255/mt moving forward. No US wheat was offered this morning, but most important is that fair value in the world wheat cash market is rising. Finding high quality Russian is getting more difficult. EU milling wheat futures in Paris look to settle €1.50-1.75/MT ($.05/bu) higher. We mentioned earlier in the week that calendar spreads are tightening in Europe like they are in the US.
- US ethanol production last week totaled 308 million gallons, down 7 million on the prior week and down 4% from the same week in 2017. Midwest production margins remain negative. Ethanol stocks last Friday totaled 961 million gallons, down slightly on the week but 2% higher than last. The US ethanol market is well supplied. The only positive is the recent boost in Brazilian cash prices and strong export demand to date. We do mention that crude stocks are now declining seasonally, and with stocks matching last year a range of $50-60/barrel, basis spot WTI, is most probable.
- The midday S American weather forecast is unchanged at midday and viewed as mixed to supportive. Dryness will be ongoing in Central Brazil into Dec 26, and perhaps longer based on this week’s EU long term guidance. Excessive rain will be featured across Northeast Argentina throughout the next 10 days, with accumulation there expected upwards of 5-7”. Coverage won’t include Argentina’s primary ag belt, but some 20-25% of corn/soy production will be affected. Large S American grains crops are demanded. The return of normal rain will be desired in Brazil no later than late Dec/early Jan.
- China looks to have kept its promise to buy US soybeans. It is still unknown whether sizeable quantities of corn/wheat will be secured, but it remains that market risk leans a bit positive until more is known about US-China dialogue during the 90-day truce. Egypt’s tender results confirm a tightening world wheat market.