- Chicago futures are weaker at midday, with corn and wheat futures extending overnight losses. Phase One’s seeming confirmation that China will buy US ag products according to needs and market conditions has been the focal point of the market today. This at the least places more pressure on actual confirmed demand from China beginning in mid-February. The market won’t likely receive any more details regarding Phase One following the release of the text on Wednesday afternoon. We would note that Chinese demand for US goods will operate outside of traditional Chinese import protocols.
- The Chinese government is fully expected to issue tariff waivers on needed products, especially meats, which will reduce the burden of higher costs and makes current import margin analysis difficult. Yet, it remains that global grain supplies will be more than adequate longer term amid profitability in Brazil and the Black Sea. Bull markets need constant fuel.
- US export sales through the week ending Jan 9 were higher than the previous week across the board. Corn sales totalled 31 million bu, vs. just 6 million the prior week. Wheat sales totalled 24 million bu, vs. a meagre 3 million the prior week. Bean sales were 23 million bu, vs. 13 million, and weekly meal sales totalled 375,000 tons, the largest of the crop year so far.
- For their respective crop years to date, the US has sold 760 million bu of corn, down 40% from last year, 1,120 million bu of soybeans, unchanged from this week a year ago, and 720 million bu of wheat, up 9%. We have no major disagreement with USDA wheat and soy export forecasts, but corn exports are still viewed as 50-75 million bu too high, even with modest Chinese purchases in 2019/20.
- Needed rain is falling across Eastern Australia, with additional totals of 1-2″ to impact the eastern sections of NSW and Queensland. Longer term climate forecasts suggest Australian drought continues into spring, but recent and coming precipitation will rebuild following devastating fires.
- NOAA’s Feb-Apr climate forecast was updated this morning. Near normal temperatures and precipitation are forecast into the middle of spring across the primary Corn Belt. A wet/cool pattern may linger across the far Northern Plains. NOAA cites current warmth across the equatorial Pacific. However, a full-blown El Niño is unlikely in the coming months. Neutral ENSO is projected through the early part of the US growing season.
- The midday GFS weather forecast has again added to precipitation totals in Central Brazil through the next 10 days but is otherwise unchanged. Pockets of dryness in Mato Grosso, Goias and Minas Gerais will be eliminated by late January. A drier climate develops in Central Argentina and Southern Brazil. This is not yet a concern, but regular Argentine rains will be needed no later than early February.
- March corn has fallen below all major moving averages. A close below $5.55, March Chicago wheat, accelerates fund liquidation. We holds a neutral bias into late winter.