- Chicago values are mixed at midday with corn futures higher while soybeans/wheat sag in moderate trading volume. A fund put on a package of long corn and short soybean spreads on right after the 8:30 am CST reopen that pushed March corn futures above its 20-day moving average. This sparked some additional short covering in corn before soybeans sank to new lows on US/China trade pessimism.
- Traders are doubtful that the US/China can reach the finish line on trade talks before December15 and are bracing for new tariffs on $157 billion of US goods. China has utilised most of their 10 million mt of duty-free US soybean import licenses. New soybean sales are now stalled with Brazilian fob offers cheaper beyond mid-February. Chicago has a heavy feel and a mixed close is expected.
- Fund managers are now deciding on whether to go short soybeans. The grains should be supported on tight-fisted US farmer holding and firm domestic cash markets. However, end users will not chase Chicago grain rallies which caps gains.
- Chicago brokers estimate that funds have bought 3,600 contracts of corn and 1,200 contracts of wheat. Funds are sellers of 3,100 contracts of soybeans, 3,900 contracts of soyoil and 1,200 contracts of soymeal.
- US weekly export inspections for the week ending November 28 were; 16.9 million bu of corn, 56.9 million bu of soybeans and just 9.0 million bu of US wheat. The wheat and corn sales were under trade expectations and disappointing. China shipped out 32.8 million bu of US soybeans last week accounting for 58% of the total.
- For their respective crop years to date, the US has exported 238 million bu of corn (down 322 million or 57% from last year), 585.7 million bu of soybeans (up 99 million or 20%) with wheat exports at 463.5 million bu (up 74.7 million or 19%). The difference in US soybean exports to date this year vs last is all about US/China trade and the politics of China’s pledge to first secure 5 million mt (late summer) and then 10 million mt in October. This demand was not evident in 2018, but modelling does not call for USDA/WASDE to raise their 2019/20 US soybean export forecast in December. US 2019/20 corn exports will be lowered by at least another 50 million bu, potentially as much as 100 million.
- US President Trump indicated that he is going to place steel/aluminium tariffs on Brazil/Argentina as both countries have presided over massive currency devaluations, which is not good for US farmers. The Brazilian Central Bank will allow its lending rate to fall to 4.5% later this month vs 14% last year, which is the reason for the Brazilian Real devaluation. The Trump imposition of Brazil/Argentine tariffs on a country’s manufactured product is a first, a warning sign, to other countries that have allowed their currencies to decline to boost their raw material competitive advantage.
- US President Trump indicated that China wants a US trade deal, but that the US Hong Kong Democracy Bill doesn’t make it better, but we will have to see what happens. The US/China are talking, but whether a deal can be struck will likely have to wait until the last minute on December 14 when new tariffs are threatened.
- The Brazilian weather forecast is favourable with moderate to heavy rainfall. And the midday model offers improved rain for Argentina in the 10-15 day period that would stave off any real crop concern. Confidence in the extended outlook is not high, but the forecast is wetter than what was offered overnight.
- Either a US/China Phase One Deal or a S American weather problem is needed to sustain a lasting Chicago recovery. Otherwise, it appears that Friday’s rally was nothing more than a short covering bounce. We should all monitor the 10-15 day Argentine forecast for verification. We anticipate the Argentine President will raise taxes on corn, wheat and soybeans by the end of the week. This news should be taken as supportive to Chicago prices. Argentine farmers continue to aggressively sell both old and new crop before the tax increase.