- It is a different day and a different market. Chicago futures are bouncing with corn, soybeans and wheat futures higher at midday. The increased US export competitiveness in world grain trade has offered support along with end user buying for Q1. US President Trump stated that he is very happy with the state of US/China trade negotiations but will add tariffs if the talks fail. We note that each day the US/China trade talks wax and wane and today appears to be a step forward. The headline reading algos take President Trump’s comment as a buy in the grain and soy markets, at least for today.
- Chicago brokers estimate that funds have bought 4,700 contracts of corn, 2,300 contracts of wheat, and 2,900 contracts of soybeans. In soy products, funds have bought 3,200 contracts of soyoil along with 700 contracts of soymeal. The oil/meal spread continues to perform as tropical oil values rise.
- Bloomberg news is reporting that the $1.00 biodiesel credit is being worked by House Democrats, which would be phased over the next 5 years. The House Tax Writing Committee is proposing the $1.00 credit return in 2020 and run through 2021, and then be phased down to $0.75/gallon in 2022, $0.50 in 2023, and $0.25 in 2024, before it is eliminated. This sunset provision is offered to aid biodiesel producers that are struggling with today’s low margins.
- No mention is offered if the tax credit would go backwards (retroactive) to production since 2017. Chicago soyoil market has rallied on the news with December reaching above $0.31.
- More than 3,000 Canadian National Rail workers are on strike today, which has shut down Canada’s biggest rail line. The Union announced the strike overnight which has some US traders wondering if US wheat will be sought once spot Canadian export supplies are exhausted. The CN acts to serve much of Canadian ag industry and the length of the strike will be closely monitored.
- US farmers are struggling to harvest corn with wet conditions keeping the harvest slow. We calculate that more than 3 billion bu of US corn will be in the fields at the end of the week. The corn is slow to dry down and is increasingly becoming suspect to winter weather conditions. US farmers are struggling to harvest corn with much of the crop wet from the N Plains into the Upper Lake States. We note that NASS conducts its December 1 Stocks report right after the US Thanksgiving Day holiday, and field of standing corn will be difficult to measure.
- The midday GFS is slightly drier from the overnight run for S Brazil. No rain shortages are foreseen for N or C Brazil, it is the south where dryness could become a regional issue. The good news is that any real heat is absent or confined to just a few days. For the vast majority of the S American corn/soy crops, soil moisture is favourable. The upcoming Argentine rains are needed and should aid newly seeded corn/soy crops. Our worry for S American weather is in retreat into mid-December. Northern Brazilian soybean blooming starts in mid December.
- Brexit and the US/China Phase One Trade negotiations will be closely monitored by ag traders following the US Thanksgiving Holiday. Both political events should be resolved in December, they will direct ag values into yearend. US farmers should be closely watching cash basis levels with a top due in coming weeks. US corn demand should improve heading into 2020, but the rise will not be enough to counter export losses to date. December options expire on Friday.