- Chicago futures are largely unchanged from the overnight session though beans have extended their rally to the tune of 7-9 cents. Macro markets are lending a hand, with US factory growth in December 1.1% higher on the year, the biggest jump since February of 2017. The Dow is up 280 points. Crude is up $1.60 at $56.70 and gasoline and ethanol prices are following.
- European grain futures look to end up very slightly today, and near unchanged on the week. EU wheat futures have reacted modestly to rising potential export demand as Black Sea fob offers reach new seasonal highs this week. We have previously mentioned that Russian hi-pro wheat is now one of the most expensive origins in the world.
- Fresh news regarding US-China talks and the US Government shutdown is lacking. All indications point towards each side of the US government hardening their stances. The breaking point doesn’t likely come until core services, namely food aid programs, run out of funding. It has been reported that SNAP is only guaranteed through the end of February. This implies something needs to be done before then, but not until then.
- Record breaking heat has been recorded each day this week in key parts of Australia. Temperatures peaked at 117-119 in New South Wales, and highs at 107-110 have been widespread across the sorghum belt. This pattern will continue for another 10 days before some measure of moderation occurs. The Aussie feed market has very little room for future yield error. Four meaningful snow events offered to the US into Feb 2. The heaviest totals stay north of major livestock areas, but logistics will be an issue.
- Prices likely close mixed ahead of the weekend. It is tough to be overly bullish in the near term as politics remain front and center on whether corn, wheat and soybean stocks/use is rising or falling relative to expectations. Work suggests grain export demand is robust. Corn off the PNW is offered at or slightly below Argentine origin through March, which is noteworthy. However, final yields will stay unknown. It is equally tough to be bearish for the same reasons. We doubt funds move to push their net position too far in either direction over the next 1-2 weeks.
- The midday GFS S American weather forecast is drier in Brazil and wetter in Argentina than the morning run. The long-held pattern breaks down only briefly this weekend and parts of next week. Otherwise, expansive high pressure ridging continues to dominate S American weather over the next 12-14 days. Complete dryness returns to Central Brazil in the 10-16 day period. Heat will accompany ongoing soil moisture loss. It is possible another 3-8” falls across North/Northeast Argentina Jan 26-Feb 1.
- Known fundamentals support a strategy of buying grain futures on price breaks whilst political uncertainty keeps beans un-tradable, though robust Chinese demand is needed 2019 to sustain rallies.
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