- Chicago futures are higher at midday as funds continue to close out their net short positions in corn/soybeans ahead of the Jan 10 USDA crop report and the Jan 15 signing of the US/China Phase One trade pact. S American weather and crop discussions have not had much impact on Chicago price in recent weeks, but that could change following the mid-January Trump Phase One Trade Pact signing.
- We would note that China has yet to confirm the Trump Presidential signing (from their side) on Jan15 or the timing of the arrival of Liu He, China’s Vice President in charge of the trade negotiations to Washington DC. The Phase One Deal appears to be completed, but China is not bragging about the outcome
- Traders report that new money was put to work shortly after today’s opening with large volume noted on the buy side. We suspect that additional inflows will be seen in coming days which will be price supportive. Any market correction should be shallow/short lived until later in the month.
- Chicago brokers estimate that funds have bought 5,000 contracts of wheat, 6,200 contracts of corn, and 2,000 contracts of soybeans. In soy products, funds have bought 5,300 contracts of soyoil while being flat in soymeal.
- FAS will release their weekly export sales report on Friday morning at 7:30 am CST. We look for weekly export sales of; 300-375,000 mt of US wheat, 650-850,000 mt of corn and 600-700,000 mt of US soybeans. The Christmas Holiday likely reduced sales for the week. Traders will not pay too much attention to the weak totals. However, note that Argentine corn is cheaper than the US Gulf beyond February while Brazilian soybeans are 20 cents cheaper/bu than the US Gulf beyond mid-February. The point is that the widow for US corn or soybean export demand is rapidly closing.
- The Baltic Ocean Freight index posted its largest one-day loss in nearly 6 years to start 2020. The Index is now at it’s lowest in 7 months and posted a large 10.5% decline today. The dry bulk index has fallen 61% since posting a top in September of at 2,518.00. The decline in freight bemoans the slowing demand for grain charters, something that we have remarked upon recent times. Research argues that world grain buyers front loaded their demand from August through October, and their demand is now in retreat.
- Chicago soybean/soy product deliveries against January futures have been large with today’s total of; 1,485 contracts of meal, 597 soybeans and 605 contracts of soyoil tendered. No strong stoppers have emerged suggesting cash abundance.
- The midday GFS weather forecast is slightly drier for S Brazil and slightly wetter for Central and Northern Brazil over the next 10 days. There is no evidence of any extreme heat, in fact, below normal temperatures are expected over the next 2 weeks across much of Argentina and the southern third of Brazil. Better rains are indicated for Argentina in the 10-15 day period which should maintain favourable growing conditions. S American crops are in good to excellent condition which should translate into above trend line yields should favourable weather persist for another six weeks.
- Research back in mid-December indicated that Chicago corn, soy and wheat markets would likely “melt up” to a first half January high. Our upside targets have been reached in March soybeans at $9.60-9.75, March Chicago wheat at $5.60 with corn just a few cents from our $3.95-4.05 (March futures) target. Our view now is that the upside is becoming limited. A sideways trade is forecast for next week as traders position for the Jan 10 USDA report and Trump Jan 15 trade signing.