- Mixed/low volume has been the Chicago price action with few traders wanting to take on more risk amid uncertain US/China trade. Summer row crops are weaker amid large S American supplies and their discount in world fob markets to US values. The discount of Argentine fob corn and Brazilian fob soybeans to Gulf values is capping Chicago rallies. As stated, the volume of trade is miserable, and the activity of funds has been able to push values around rather easily. Funds continue to pile into a larger net short position as they protect their gains heading into the close of the month and quarter. We look for a mixed to lower close with poor US export sales expected on Thursday.
- Traders estimate that funds have sold 1,600 contracts of wheat, 3,700 contracts of corn, and 2,600 contracts of soybeans. In products, funds have sold 2,200 contracts of soymeal while being flat in soyoil.
- Last May and June, Chicago did not react to threats of US tariffs on China until they were documented and applied. Then, Chicago prices fell precipitously as the impact of tariffs were documented. The learning point is that the markets do not feel comfortable forecasting (adding discount/premium in price) until a political event can be widely known or assured. The same phenomena will occur with the coming final US/China trade negotiations, Chicago will rally or fall sharply when an announcement of a signing or a breakdown in the talks. A US/China trade deal is a binary event. Our hope in a deal is tied to US President Trump needing a ”trade victory” before the US 2020 election and USTR turn to focus on the EU and Japan trade.
- June hogs have rallied to new highs this morning as the market continues to hear rumours of new Chinese need/demand for US and world pork. Chinese importers appear to be securing US pork in anticipating of tariff reductions. Tariff reductions on either the US or Chinese side are likely a sticking point in negotiations with the Trump Administration showing that after the agreement of USMCAs, steel/aluminum tariffs linger months after. China wants to be sure that if it has a trade deal with the US, that tariffs on Chinese goods end. As the old saying goes, tariffs are easy to apply but difficult to take down. USMCA approval remains on hold on the broken promises on US steel/aluminum tariffs.
- The weekly US ethanol grind was 295 million bu of corn vs 295.5 million in the week prior, but below 306 million bu last year. US ethanol stocks grew to 1.026 billion gallons, up 3% on last year and up 29 million gallons from last year.
- The midday GFS weather forecast is slightly drier in the next seven days with weekend rains being trimmed to 0.1-.6″ with the next system not expected until the last half of next week with totals then of 0.5-2.00″. The snowmelt (to come) is estimated to hold 4-10.00” of water and the flooding over the next two weeks will worsen. The key for spring planting will be weather over the first three weeks of April and whether warm/dry weather can evolve or more of the same cold/wet stuff delays corn seeding.
- Pres Trump has said that the US will not end its tariffs on China unless they comply with the proposed agreement. This is the reason why China is pushing back and delaying the deal. We guess that one way for China to comply is to secure a massive amount of US goods at the start of the agreement. Trump said that a US/China deal is coming around nicely. The politics of US/China frustrates traders.