- Chicago soybean futures started the week 14-15 cents higher on continued fund short covering. Monthly NOPA data was disappointing relative to expectations, but the market focus this week is on funds unwinding their large net short position.
- Weekly soybean export inspections were lower for the third consecutive week, but with expectations at 46 million bu. Cumulative inspections for the year now total 685 million bu, up 23% from a year ago but still below average. The lack of significant Chinese business is still noticeable on the chart for the first quarter. However, 55% of last week’s inspections total was headed to China. The trade is hopeful that the Phase One agreement will allow for a much stronger export rate in the last half of the year.
- January soybeans closed above all major moving averages on Monday, and we expect fund short-covering to support Chicago prices into early 2020.
- Chicago corn futures ended 5-7 cents higher as the market further digests the US and China’s completion of a Phase One agreement. Detail remain lacking, and may never be fully available, but the market’s chore in the near term is to pare down substantially funds’ sizeable net short corn position.
- Managed funds last Tuesday were short 115,000 contracts. It is estimated that funds Friday evening were short a net 106,000. Correlation lacks precision, but work does suggest that the covering of 80-100,000 short contracts is worth $0.15-0.20/bu in March Chicago corn by early Jan. This places initial resistance at $3.95-4.00.
- Argentine weather is improving and spot corn is fairly valued at $3.75-4.00 until much more is known about China’s spending on us ag goods in 2020.
- US wheat futures rallied 11-17 cents, finding new highs for the move. It feels odd that US wheat is leading the post-Phase One deal ag rally, but we would mention there is concern over crop development across the Black Sea, lack of snow cover, and across the US Plains, where a pattern of dryness may stay intact into late January.
- The RMA continues to add data to its winter wheat insurance enrolment series. As of today, winter wheat acres enrolled sits at 8.9 million acres, down 0.9 million from last year. This data won’t be overly accurate until early Jan, but already it is probable that total US winter wheat acres fall by 500-900,000 acres in 2020. This exacerbates nearby concerns over N Hemisphere production potential.
- However, note that US Gulf wheat is again priced well above competing origins. World cash prices are stronger this evening but have met the initial upside target of $214-216/mt, basis spot EU/Black Sea.