- Mixed is the Chicago market at midday with corn and soybeans trading either side of unchanged, while wheat futures hold in the red due to near average US winter wheat crop ratings. Market volume is tailing off with all having adjusted their positions following the USDA Stocks and Seeding Report as of Friday. The tone of the midday market is pensive with traders understanding that the US/world has an overabundance of grain/soy. However, a US/China trade agreement would alter prevailing world trade flows and the US demand profile. A US/China trade deal would be bullish for US corn, soybean and wheat price direction for at least the next 2-3 years as a new demand driver emerges. DC sources suggest that the US/China trade deal will be done as an executive order rather than a trade treaty that would need US Congressional approval. This may also limit or curtail any WTO challenge to a bilateral pact. The Chicago marketplace is having trouble deciding whether it should focus on the abundance of supply nearby (Brazilian and Argentine corn and soy crops are growing in size) or the ongoing political saga of US/ China trade and whether a deal will be accomplished and signed. US farmers ahead of spring planting show no willingness to part with any stored or new crop grain, but their patience is thinning as flooding and political trade uncertainty are taking a toll. This week’s US/China trade meetings are highly important, and the hope of farmers is that President Trump can keep his pledge to return farm profitability, cut the US trade deficit with China and protect IP. The US will have a full contingent at the talks starting tomorrow morning, and traders will be watching for any hint of progress.
- Russia has now exported 31.5 million mt of wheat through the end of March. This is a 1% gain vs. last year. The big difference is that there is not one new wheat vessel loading at a Russian port this week. We fear that due to exceptionally strong domestic prices that Russian wheat exports will be down 50-70% from last year in coming months leading up until their new crop harvest. This means that the final 2018/19 Russian wheat export pace could end up at 34-35 million mt, not the 37 million that the USDA and others are suggesting.
- US soil moisture at the end of March is one of the wettest on record and with additional rains forthcoming, seeding spring crops on a timely basis is going to be trying. NE and IA will likely never fully dry out by July amid their acute wetness.
- Chicago brokers report that funds have sold 1,500 contracts of wheat and 2,500 contracts of corn, while buying 2,100 contracts of soybeans and 1,900 contracts of soyoil. Funds are flat in soymeal.
- The midday GFS weather forecast is wetter across IA, NE and MO with heavy rainfall of 2-3.5″ expected over the next 10 days. And the forecast offers similar rains for the Delta and much of the Gulf Coast States. The heavy rains will maintain saturated soils and keep flooding concern in the forefront of the media. This is an active and wet weather pattern into the middle of April with above normal rainfall trends. Temperatures will be variable with warmth noted next week to be followed by cooler temperatures during the 11-15 day period.
- Chicago volume of trade is poor with few wanting to add to their market risk ahead of the start of US/China negotiations. Wheat is down on renewed fund selling, but any break is unlikely to be sustained amid funds that are already holding a large net short position. We look for a mixed close with crude oil and other macro markets punching higher.