- Chicago futures are mixed at midday in thinning volume. Long soybean/short corn spreads are being unwound which is rallying corn and pressuring soy futures. Chicago corn open interest has increased sharply in the past few trading session with a gain of over 21,147 contracts recorded on Friday. We note that much of the increase has occurred in July-December corn futures which argues that someone is pricing back end demand. This would counter the idea of soybean/corn spread liquidation. Moreover, March corn is leading the rally on spreads and it is taking aim at $3.92-3.95 resistance. A record large 2020 Brazilian crop looms with harvest reaching 2% through Friday.
- We look for a mixed/firm close in Chicago as few sellers will want to take on the risk of being overly short ahead of the US/China Phase One Trade Deal signing on Wednesday. The US has stated it will remove China from the list of being a currency manipulator ahead of the Phase One Deal. We continue to hear talk of China making goodwill US ag purchases following the signing of the Phase One Deal. US meats, grains and soybeans are likely to be included.
- US export inspections for the week ending January 9 were; 18.1 million bu of corn, 41.7 million bu of soybeans, and 17.4 million bu of wheat. Soybeans inspections were better than analysts expected with China shipping out 15.2 million bu.
- Crop Year to date US export inspections are; 356.7 million bu of corn (down 410 million or 53%), 843.5 million bu of US soybeans (up 167 million or 25%), with wheat at 565.7 million bu (up 70 million or 14%). The US corn export and sales pace argues for another 75-125 million bu cut in the US 2019/20 corn export forecast. Our forecast assumes that China secures 2-2.5 million mt of old crop US corn.
- Chicago brokers estimate that funds have bought 6,000 contracts of corn, while selling 2,000 contracts of wheat and 3,200 contracts of soybeans. In soy products, funds are flat of soymeal while selling 4,600 contracts of soyoil.
- New crop Brazilian winter corn price bids reached 40 Reals/bag for July-August delivery, a record. The incentive for Brazilian farmers to plant record acres of winter corn are extremely high following first crop soybeans.
- The GFS weather forecast is consistent with the overnight forecast solution with below normal rains to fall across Southern Argentina. Otherwise, the outlook shows near to above normal rainfall for the remainder of S America and crop prospects remain bright. There is no indication of any excessive or lasting heat that would pose a yield risk. The chances for improved Southern Argentine rain should return in late January as the jet stream migrates northward. The midday S American weather forecast leans crop positive.
- The marketplace is doubting that China will show up with new ag purchases following the Phase One signed agreement this Wednesday. Traders are doubtful that China will make any large US grain or soybean purchases nearby. And the lingering bearish supply effect of the January USDA Crop report is being felt with a record large Brazilian soy crop looming. Large soy supplies abound. However, the lack of volume argues that the Chicago break won’t be able to garner much downside momentum.