- Additional sell stops have been hit and fund liquidation persists in Chicago. Markets are dep in the red, led by wheat with corn and beans in tow. It is tough to pinpoint exactly what has sparked today’s weakness, crude oil is up $.35/barrel with the Dow up 30 points, but even hogs are limit down.
- Plains HRW basis has been unchanged on the break, rather than improving, while official corn stocks in Ukraine at the end of Nov were reported to be up sharply on the prior year following record production. Otherwise, we would point out once again that that US prices are fundamentally cheap. Gulf HRW’s discount to Russian origin this evening will again widen out to $12-14/mt for spring delivery. EU wheat futures are down the equivalent of only $.05/bu.
- US Gulf ethanol has widened its discount to Brazilian origin to $.40/gal. This week’s rise in Brazilian ethanol is counter-seasonal. And US ethanol production and blending margins continue upward amid the ongoing recovery in crude and gasoline. But no doubt it is a risk-off day in Chicago. Weekly lows should be established by early Tuesday as market focus shifts to the coming USDA Outlook Conference numbers and FAS’s flood of export sales data, both of which will be released Friday. US and Chinese negotiators will continue trade talks in DC, with high-level meetings to begin later on Thursday. Close attention will be paid to whether the March 1 deadline on the tariff truce is extended.
- US export inspections through the week ending last Thursday include 37 million bu of corn (up 7 million from the previous week), 38 million bu of soybeans (down 1 million) and 13 million bu of wheat (down 7.5 million). Corn and wheat shipments were in line with expectations, with a wheat a bit lower. For their respective crop years to date, the US has shipped 952 million bu of corn (up 45% on the year), 870 million bu of soybeans (down 36%) and 579 million bu of wheat (down 10%).
- Bitter cold temperatures were present across much of the Plains and Western Midwest this morning. Light snow cover has expanded to reach into KS and TX/OK panhandles, though pockets of the Southern Plains remain unprotected. Similarly cold temperatures are forecast throughout the next ten days. Lows near zero will continue across the N Plains. And longer term guidance doesn’t hint at any pattern change until the middle part of March.
- The S American GFS weather forecast is a touch drier in Southern Brazil beyond this week, but otherwise S American weather will be largely benign into early March. Rain this week needs to fall as projected in Argentina (0.50-2.00”) in Buenos Aires and southern Cordoba, but widespread boosts in soil moisture will persist in Brazil. This pattern will continue into early safrinha corn growth stages. S American temperatures cool to levels below normal beyond Fri/Sat.
- The big unknown remains Chinese demand for US ag goods in 2019 and beyond. Risk premium in wheat futures has evaporated, while trend/above trend N Hemisphere yields are still needed to stabilise major exporter stocks. Outlook conference and export sales data on Friday should lean positive.