- Red with a little bit of green in corn/oats has been the morning in Chicago. The soybean market has paced the decline with wheat in tow. The entire Chicago market has a heavy feel as traders fret about the coming US/China trade talks amid liquidation into December’s first notice day next week.
- There has also been talk that the Pakistan ag ministry has asked the Government for export subsidies to help them export wheat. The request is for $105/mt, which no one seems to know whether it will be approved. However, the market is taking it as bearish as it would potentially be another source of wheat. We note that the Pakistan Ag Ministry request is for 3 million mt of wheat at $105/mt subsidy. The USDA has Pakistan exporting 1.0 million mt with ending stocks at just over 4.0 million of wheat in 2018/19. If the Pakistan Government did just 2 million of export subsidies, it would cut their end stocks to just 3.0 million mt, the lowest stock total since 2013. At this point it is just an ag ministry request and no one seems to know if the Government even has the funds available. Also, Pakistan is a WTO member which could make large subsidised volumes complicated
- US export inspections for the week ending November 15th were; 31.4 million bu of corn, 18.7 million bu of wheat, and 38.8 million bu of soybeans. For their respective crop years to date, the US has shipped out 470 million bu of corn (up 80% on last year and well above USDA’s forecast for a 1% increase), 405 million bu of soybeans (which is down 43% and below the USDA annual forecast for a 11% reduction), US wheat exports stand at 360 million bu (down 18% and well below the USDA’s 14% increase). The corn export total was supportive with wheat/soybeans slightly bearish.
- US ag groups are publicly speaking out against the Brexit plan announced by Prime Minister May as it would assure that the UK keeps restrictive EU farm policy, which the Trump Administration was expecting them to do away with to enter into a new US/UK Free Trade Agreement. All eyes are on the UK and whether Prime Minister May can secure enough votes in Parliament for approval.
- The midday GFS S American weather forecast is wetter in Northern Brazil where upwards of 4-8”” of rain will fall over the next 10 days. Coverage will include much of Mato Grosso and Goias. The GFS has extended the pattern of excessive rainfall into the 11-15 day period. The S American jet stream does move northward next week. This will trigger a needed drier pattern in Southern Brazil and Argentina. This is too much rain even for tropical areas of Brazil. The concern for crops will be an ongoing wet weather flow for December that limits sunshine and raises disease concern for reproducing soybeans. Argentine weather has improved with a drier overall upper air flow.
- It is all about politics and the Trump/Xi meeting heading into the end of November. We understand the bearish US soybean balance sheet, but it only takes talk of a trade deal to produce a sharp rally. We expect that China will agree again to secure an additional $30-35 billion of US ag goods annually, just like they did in May. This would produce a lasting bullish structural change for US agriculture. It is therefore hard to be a bear or bull amid the US/China politics.