- Chicago has lacked volume as traders try to understand the demand risk of China’s coronavirus against its pledge to open its markets and secure US ag goods as early as next week.
- Macro financial markets have recovered from overnight selling as the depth and length of China’s coronavirus outbreak is debated. WHO stated that cases outside of China have not been rising while the Trump Administration suggests that their confidence in China’s reporting of cases/deaths is low.
- World Central Banks could embark on another spree of lowering interest rates to battle slowing SE Asian economic growth. This is underpinning world equity valuations. The hope is that coronavirus will be like SARs with a peak in cases due either in late winter or early spring.
- Chicago traders estimate that funds have sold; 3,000 contracts of wheat/corn (each) while buying 4,500 contracts of soybeans. In soy products, funds have bought 2,200 contracts of soymeal while being flat in soyoil.
- US weekly export sales for the week ending February 6 were; 23.6 million bu of wheat, 38.1 million bu of corn and 23.7 million bu of soybeans. The wheat and corn sales were better than expected and supportive.
- Crop year sales to date stand at; 805 million bu of wheat (up 147 million or 22%), 935 million bu of corn (down 336 million or 26%), and soybeans at 1,211 million bu (up 95 million or 8.5%). Research argues that WASDE could reduce US corn exports by another 25-50 million bu in the April report.
- US merchandisers report that getting Midwest farmers to part with stored cash trade is difficult, unless the corn has a quality issue. Basis levels are firming on the lack of cash movement from the farmer for both corn and soybeans. We note that farmer confidence in their future is at a recent 5 year high based on the US/China Phase One agreement. It is likely that farmers are waiting for China purchases to make additional cash sales.
- CIF Gulf soybean bids are walking upwards in recent days which has some speculating that China is lurking with new purchases for March. Brazil has sold a record number of soybean cargoes for March to world importers, which could force demand back to the US as the Brazilian harvest garners speed.
- The midday GFS weather forecast is slightly drier in Argentina in the 10-day forecast, which looks to persist into the closing days of February. Above normal rain looks to drop across Central and Northern Brazil which will cause some harvest delays but maintain favourable soil moisture. Soil moisture will be abundant for newly planted safrinha corn, but whether the crop can be completely planted prior to March 10 will be important. Rainfall returns to Argentina next Monday-Tuesday. S American crop potential is likely to be record large.
- Traders are trying to position for the opening of China’s ag markets next week by being long of soybeans/pork/beef. China is expected to open their markets by issuing duty free import licenses or reducing tariffs. China has dire foodstuff shortages amid the coronavirus. China needs food not feed. S American crops are record large and the US will return prevent plant acres back into production. The world is oversupplied with grain/soybeans.