- Fresh fund selling, and a lack of a US offer in the GASC tender pressured Chicago wheat to fresh lows. March KC wheat tested the July of 2018 low at $4.4975 while Chicago wheat futures target the September low of $4.73. The technical breakdown in wheat has produced a landslide of fund selling which has pushed values to their lowest levels in months. Soybeans and corn have followed the wheat losses with corn finding support amid the building snow-pile across the Midwest along with corn seeding delays in the Gulf States amid saturated soils. Moreover, traders are talking about (but not knowing what it means) President Trump’s comment on US corn sales to China. US farmers are one of the largest supporters of President Trump and they hope that he keeps good on his campaign promise of his working for their future. We look for a late day short covering bounce with Chicago markets oversold and wheat now back to major support.
- Chicago brokers estimate that funds have sold 4,000 contracts of wheat, 6,000 contracts of corn, and 3,500 contracts of soybeans. In soy products, funds have sold 2,600 contracts of soymeal and 1,200 contracts of soyoil. There were big gains in Chicago open interest in Tuesday’s decline with corn up 17,128 contracts, soybeans up 6,283 contracts, and wheat up 8,342 contracts. The funds piled into a larger net short Chicago position.
- Egypt’s GASC did not receive any offers for US wheat in its latest tender for early April. GASC booked 360,000 mt of wheat including 180,000 mt of French wheat and a cargo each of Russian, Romanian, and Ukraine. Prices ranged from $249.45 to $250.90/mt basis C&F, down some $10-12/mt from their last tender.
- North African wheat areas are holding in an arid trend as the reproductive period lies ahead. The two-week forecast offers limited rain for North African wheat. Rains fell in late 2018 and the opening days of 2019, but since then weather conditions have been extremely dry which is threatening the crop. March and April weather are key in determining the North African wheat crop.
- US President Trump’s comment on China buying US corn has acted to underpin Chicago corn values. This is the second time that the president has mentioned US corn to China in a trade briefing in several weeks. We speculate that if the Mar 2 deadline is pushed back to accommodate additional negotiation, the US may ask China to secure US corn like China pledged back on Dec 1 for soybeans.
- The midday S American GFS weather forecast is drier across Argentina (different from the overnight run which was slightly wetter) as the forecast models struggle with a complicated pattern shift. A cold frontal passage does not produce much rain on the weekend with cool/dry weather following. Brazil continues to see normal rainfall amounts with three frontal passes producing 0.75-4.50” over the next 10 days. The dry weather could have an adverse impact on the Argentine soy crop if it persists through March. The outlook for Argentine corn is a record.
- US/China trade negotiations are ongoing, and the trade awaits a new progress report. The hope is that enough progress can be scored for a Trump/Xi Summit in March. If the negotiations are pushed beyond March 2, China may have to secure additional US ag goods (like happened in December) in a good faith effort. The US/China trade talks would have to end in defeat to justify a further fall in Chicago values. The market risk is to the upside amid the arrival of a new Northern Hemisphere growing season. Our bet is that seasonal lows are forming in the grains. US soy futures are range bound.