- Chicago futures are lower at midday on profit taking and a WTO ruling in favour of China on US tariffs. Profit taking on recent longs has been featured with funds holding a net long soybean position that forecast over 190,000 contracts. Wheat futures started the Chicago decline with corn following. The Midwest corn harvest is starting, and traders are expecting yield reports by the weekend. So far, the initial yields are reported to be solid, but it is too early to draw any yield trend conclusion. We look for a lower Chicago close with corn yield results and future Chinese soybean demand determining whether a seasonal high has formed.
- Chicago traders estimate that funds have sold 3,900 contracts of wheat, 6,400 contracts of corn and 5,000 contracts of soybeans. In soy products, funds have sold 3,400 contracts of soymeal and 1,200 contracts of soyoil.
- China petitioned the WTO to rule against $200 billion of US tariffs in 2018. The WTO ruled in favour of China today, the first loss for the Trump Administration. The ruling in theory allows China to impose countervailing duties on US goods. The US can appeal the decision, but the WTO appeals court is no longer functioning as the US has refused to allow new members on the court. This creates some difficulty for the US in trying to find a way forward.
- The WTO ruled that the US violated longstanding international trade rules because they only applied the rules to products from China and that Washington had not substantially backed up its claims of unfair Chinese practices. The WTO did agree with the US’s claim of China’s theft of intellectual property but provided no remedy.
- The markets are awaiting China’s response to the ruling and how it might impact US/China trade relations. Because of the Phase One Deal, the ruling might not have any impact at all, but that decision depends on China. FAS reported that China purchased another 132,000 mt of US soybeans with another 132,000 mt going to an unknown buyer. And 120,000 mt of US corn was sold to an unknown buyer.
- The NOPA August soybean crush rate fell to a 9-month low of 165.0 million bu. This was the smallest US soybean crush rate since November. The trade was expecting a NOPA crush of 169-170 million bu. US soyoil stocks also fell to 1,519 billion pounds, down 100 million pounds from July. Such stocks resulted from the lower US soybean crush rate. The NOPA report was deemed as slightly bearish which helped push Chicago soybean futures to new lows. US August soymeal exports were 754,634 tons, slightly above trade expectations and deemed supportive. US soybean crushers are awaiting the new Midwest soybean supply later this month.
- The midday weather forecast is almost unchanged from the overnight run. Hurricane Sally is slightly further east and impacting MS/AL with a turn into GA this weekend. The GFS forecast allows light shower activity to return to IL, IN and Ml Sep 23-24, but amounts will be less than 0.25″. There is no evidence of a cold weather threat and the dry/warm days should help corn dry down and for soybeans to fill.
- It is difficult to be overly bullish following an unseasonal late summer rally with commercial sources expecting China purchases of US soybeans to slow by the end of September. The next major statistical report will be the NASS Sept 1 stocks estimates on the 30th. Final 2019/20 US September stocks for US corn/soybeans always holds surprises. To maintain spot Chicago soybean futures above $10.00 requires additional Chinese demand. S American farmers are looking to plant fence row to fence row amid record farm profitability. Research looks for Chicago choppiness in coming days with a deeper correction as the Central US harvest gains speed during October. Strong debate persists over China corn demand from the world in 2020/21 and the years to come.