- It has been a mixed morning in Chicago as trader’s debate whether China offered to lower tariffs on soybeans, sorghum or DDGs. The news media exclaimed that China may will be willing to lower ag tariffs based on President Trump’s ZTE conciliatory offer due to US/China jobs on Monday. However, confirmation from the Chinese is lacking, and it becomes less clear if China ever promised to not apply a 25% tariff US soybean if the US takes a hardline stance on trade this week. It is the details that matters in trade negotiations and the Chinese have been the best as getting terms that are favorable to their position. We expect that the US/China media reports will cause market jolts in each direction this week. Trying to predict or trade the trade zigs and zags each day is nearly impossible. Today the market is down amid a lack of China confirmation, but traders will look to comments coming from Washington talks to gauge price. The Chinese trade talks are important since they determine whether 2018/19 US soybean stocks are 300-400 million bu if they succeed, and 800-900 million bu if they fail. That impact on Chicago soybeans is sizeable and would have an impact on the price of grain. You can’t have a bull corn market without soybeans.
- Chicago brokers reflect that sold 6,500 contracts of soybeans, bought 2,000 contracts of Chicago wheat and 1,500 contracts of corn. In soy products, funds have sold 4,500 contracts of soymeal and bought 1,000 contracts of soyoil.
- Egypt’s GASC purchased just 60,000 mt (one cargo) of Ukraine wheat in an overnight tender. The wheat was purchased at $219.90/mt basis FOB with a freight cost of $15.05. The wheat was for June 15-25 shipment. Just four offers were made to GASC which surprised world wheat traders with the country harvesting its own large wheat crop. Russian new crop supplies are at least 4-6 weeks away.
- Informa revised their estimates of 2018 US crop plantings this morning, pegging US corn seeding at 89.0 million acres (up 950,000 acres), soybeans at 89.4 million acres (up 430,000 acres), and spring wheat seedings at 12.4 million acres (down 200,000 acres). Additionally, US cotton acres were pegged at 14.0 million acres (up 520,000 acres). The trade was surprised by larger US corn seeding. We estimate 2018 US corn seedings at 88.5 million acres (up 500,000 acres).
- The midday GFS N American weather pattern forecast remained wet and warm through the Plains and the southern 2/3’s of the Central US for the next two weeks. The GFS forecast is farther south with rain compared to the overnight EU model solution with heavier rain amounts across MO, IL, KY and TN. Some needed drying looks to occur across the Northern Lake States which should help in getting seed in the ground. Midwest/Plains storm systems will be frequent in the next ten days. Temperatures look to warm to the 70’s and 80’s which will help firm soils. The warm/wet weather looks to produce a favorable start of the 2018 growing season with high corn crop condition ratings expected in early June. If there is a concern, its S MN, WI and MI and how fast crops can get seeded there.
- It continues to be all about US/China trade headlines with news that the US hardline negotiating stance with China is unchanged. This pressured Chicago soybeans with July back down testing $10.00 support. S American soymeal premiums are also sagging, which along with funds being heavily long is pressuring Chicago meal. Finally, we note that the ten-year note (US Government Treasury Note) is trading above 3% and likely on its way to 3.5% which is rallying the US$. The Argentine Peso traded down to 25:1 this morning too.