- Chicago ag futures are mixed at midday with the summer row crops being weaker while the wheat market has been firm. The volume of trade has been modest, and few traders want to take on any risk heading into a long US weekend. We look for a mixed close with corn sagging on talk that China has secured another 500,000 mt of Ukraine corn. World grain values keep slipping which is not bullish for Chicago. The best chance for any Chicago rally rests on the shoulders of China under the Phase One agreement. Otherwise, the world is awash with grain with S American export offers to become more aggressive.
- Chicago brokers estimate that funds have sold 3,000 corn and 2,300 contracts of soybeans, while buying 1,900 contracts of Chicago wheat. In soy products, funds have sold 2,400 contracts of soymeal while being flat in soyoil. Funds bought 1,900 contracts of soyoil early and sold most of it back out.
- Cash traders report that China has booked another 500,000 mt of Ukraine corn in the past few days. China was rumoured to be seeking Ukraine corn last week which is being added in the 500,000 mt total. All combined, China in the crop year to date has booked an estimated 1.8 million mt of Ukraine corn, which we assume is under TRQ import licenses. The surprise has been that even as China has taken the Ukraine corn, fob export offers continue to decline with March ending slightly below $180/mt.
- Russian fob wheat prices continue to weaken with fob offers at $220/mt for March. The Russian fob wheat market peaked at $230-232/mt in January and has been softening ever since. And the market has taken out back month premiums in fob offers so a nearly flat market structure exists. The spread between French and Russian fob wheat is now only $5/mt Russian premium. We expect that the narrowing spread is going to send additional demand to Russian wheat in coming weeks.
- China placed a priority on medical and foodstuff vessel offloading compared to soybeans, corn or wheat. It is meats/vegoils that China demands nearby amid its worsening coronavirus outbreak. Food imports will take precedence in coming months. This has produced selling in the Chicago grain/soybean markets.
- USDA’s updated Baseline Report showed 2020 US corn seeding at 94.5 million acres, soybeans at 84.0 million, and US all wheat seedings at 45.0 million. USDA forecast 2020/21 US corn end stocks at a hefty 2,754 million bu, US soybean end stocks at 518 million bu with US 2020/12 wheat at 950 million bu. Assuming US corn trend yield of 178.5 bushels/acre in corn and 50.5 bushels/acre in soybeans, US 2020/21 farmgate prices average $3.40 for corn, $8.85 for soybeans and $4.80/bu for wheat. There surely was no bullishness in the updated USDA Baseline, even with the US/China Trade Deal.
- The midday GFS weather forecast is close to the overnight forecast solution for the next 10-days. Above normal rain looks to drop across Central and Northern Brazil which will cause some harvest delays but maintain favourable soil moisture for winter corn. Rain returns to Argentina next Monday-Tuesday. S American crop potential is likely to be record large.
- The only way that Chicago will rally is with actual China demand. Otherwise, record large S American crop harvests and the return of 19 million plus US Prevent Plant acres into production sends a rather bleak long-term outlook. Firm Midwest cash basis bids offers support on breaks.