• Low volume and mixed is Chicago as the market follows existing technical trends. Corn continues to sag on fund selling while wheat is grabbing on tightening US supplies. The soybean market continues to be in a push and tug position awaiting China’s 10 million mt of new soy demand. USDA Sec Purdue has commented that additional (non soy) ag demand is expected to include US grains, but the timing of the buying is uncertain. Commercial sources advise that China is asking for US soybean/corn and DDG offers, but no new sales can be confirmed. Our view is that this is no place to be a seller of grains.

• Chicago brokers advise that funds have sold 2,500 contracts of corn, and 2,200 contracts of soybeans and being flat in soybeans. In soy products, funds have sold 1,400 contracts of soymeal while buying 900 contracts of soyoil. So far, this is the slowest day of the week in terms of Chicago volume.

• For the week ending February 21 the US sold; 17.5 million bu of US wheat, 48.8 million bu of US corn, and 80.7 million bu of US soybeans. The weekly soybean and corn sales were better than traders were predicting. For their respective crop years to date, the US has sold 807 million bu of wheat (up 12 million from last year or 2%), the US has sold 1,557 million bu of corn (up 22 million or 1% from last year), and 1,432 million bu of soybeans (down 239 million or 14% from last year). We note that if China secures half of its 10 million mt of soybean buying in an old crop position, it would add 183 million bu to the US sales pace and further narrow the difference. We see no reason to strongly argue with the USDA 2018/19 US soybean forecast of 1,900 million bu. We have no way of knowing how China will split their soybean demand between old and new crops.

• Pessimism surrounds the US/China trade deal following comments from USTR Head Lighthizer yesterday and the failure of the Trump/Kim talks overnight. However, we doubt that there is any relationship between the failure of the Vietnam Summit and China. Trump’s comment that China was a big help should ease the concern of a connection with Kim and a US/China trade deal. The US has won its WTO dispute with China on its lofty loan levels on wheat and rice to its domestic farmers. The win should help the US in pushing China to drop their loan rates and move to better opening their grain markets.

• The midday GFS S American weather forecast continues to show heavy rains across Northern Brazil into March 10. Totals look to range from 0.75-4. 50” with isolated heavier amounts. Rainfall totals are similar for Argentina and Southern Brazil. The ridge of high pressure that is expected to build eastward from the Atlantic during early March is slower. We do not see any S American crop concern with April the big month for Brazilian winter corn rainfall. Amid a building El Niño, our view is for drier conditions.

• The price bottoming process has commenced with corn futures seeing left over selling due to the end of the month. Corn has the best fundamentals at the Chicago, yet it is possible that May could test $3.70 support. The wheat market is trying to form a bottom on tight old crop world supplies and improved US export demand. Heading into a new N Hemisphere growing season, we are reluctant to turn bearish with WASDE forecasting 2019/20 stock falls in corn, soybeans and wheat.

• Mixed with reduced volume has been Chicago this morning. Corn and soybeans have traded both sides of unchanged while wheat futures are firmer. The selling pressure from funds is still lingering in corn, but the selling has subsided in wheat and soybeans. We look for a mixed close with hawkish comments for USTR Lighthizer capping an early Chicago rally effort. Research argues against making sales ahead of the start of a new N Hemisphere growing season and makes no sense at current levels heading into March.

• Chicago brokers indicate that funds have sold 4,500 contracts of corn, while buying 1,200 contracts of wheat and being flat in soybeans. In soy products, funds have bought 2,100 contracts of soymeal while selling 1,700 contracts of soyoil.

• As expected, hawkish comments from USTR Lighthizer occurred this morning in his testimony to the House Ways and Means Committee. The USTR head stated that it is too early to predict. the outcome of the US/China trade talks. However, significant progress has been scored. Moreover, China cannot “buy off” the US with massive amounts of US soybean purchases. Also, the Ambassador claimed that the Trade Agreement must be enforceable, as China has failed to keep prior promises. As you would expect, Lighthizer said that much has yet to be done, but in the end it is the President’s decision on what the US should accept. Finally, the Ambassador stated that this is a process and that the US and China will be engaged on more structural issues for years to come and that any agreement will be binding. Unfortunately, Lighthizer did not provide details of the 6 Memorandums of Understanding that were signed last week and the details that each contained. We have not changed our view that a trade deal is close, but President’s Trump/Xi will have the final say. There is cash talk that China has secured US DDGs overnight and demand for offers for US soybean and corn prices continue. China will secure the 10 million mt of US soybeans as a sign of good faith. Media reports from China hint that from their side, a deal is also at hand, without providing specifics.

• US export sales data will be released regularly on Thursday for the first time this year. Next week, the CFTC will catch up on their positioning reporting.

• The midday GFS S American weather forecast continues to show heavy rains across Northern Brazil for the next ten days. Totals look to range from 0.75-4.50″ with isolated heavier amounts. Rainfall totals were reduced for Argentina and Southern Brazil. The ridge of high pressure that is expected to build eastward from the Atlantic next week is farther south on the midday run. Our confidence in this solution is low and confirming model runs are required.

• The bottoming price process has commenced with corn futures seeing some left over fund and cash related selling due to the end of the month. Corn has the best fundamentals in Chicago. Our view is that a US/China deal  gets done in March. USTR Lighthizer must be a hawk with a few issues yet to be settled. Research argues that corn and wheat are near seasonal lows. Soybeans remains caught in a broad trading range awaiting 10 million mt of cash demand from China. This is certainly no place to sell a break or turn bearish!

• The Tuesday update from CFTC showed that funds were big sellers in the Ag markets in the week ending Feb 12. Funds sold 29,000 contracts of corn, 16,000 contracts of soybeans, and were sellers of 18,500 contracts of wheat across all three exchanges. In the livestock markets, funds sold 6,900 contracts of hogs and bought 3,600 contracts of cattle. Across the ten principle Ag markets, funds were net sellers of 55,000 contracts, reducing the net length to just 57,000 contracts. The report was as of February 12.

• Soybeans were lower overnight and selling continued on Tuesday. Market news was limited, and traders remain sceptical of a China trade deal, which had the recent weakness in wheat futures pulling soybeans lower. At the close, old crop soybeans were down 8 cents, though May soybeans managed to hold support at the 100-day moving average. Funds were estimated sellers of 9,000 soybean futures.

• The EIA will release the Monthly Biodiesel Production report on Thursday, with data for December. It is typically a slow production month as the year winds down and estimated production margins were not offering a strong production incentive. IA State’s weekly margin estimates showed an average of $0.17/gallon in Dec, down from $0.23 from a year ago and under the summer peak of $0.72. All indications from Washington are that a trade deal with China is close at hand. Such announcement is expected to be viewed as bullish for soybeans and other US commodities.

• Limited news and continued selling in the wheat market pulled corn futures lower through Tuesday. Funds were estimated sellers for Tuesday of 25,000 contracts, for a grand total of 50,000 contracts in the last two days. After the close, the early week Commitment of Traders update showed that for the week ending Feb 12 funds had been net sellers of 29,000 corn contracts. This took their net position to short 15,000 contracts and the first net short holdings since early December. May corn futures have held an approximate range of just $0.20 ($3.75-3.95) over the last five months. Tuesday’s close was back  at the bottom of the range and could draw additional selling later this week. But with the odds steadily increasing that a China trade deal could be announced, it is tough to be bearish. Any export demand from China is not in the USDA balance sheet and would further tighten US stocks.

• Chicago and KC wheat contracts fell to new contract lows as funds added to their shorts by another 7,000 contracts. Chicago closed at $4.60 after falling to a ten-month low on the continuation chart. There is support at $4.60 but $4.40 is a tempting technical target. Minneapolis wheat gained a cent. The relative strength in Minneapolis could be due to intermarket spreading and concern that spring wheat seedings will be down due to wet soils and cool temperatures. Last Friday, USDA updated export sales with a whopping 3.57 million mt (vs. expectations of 2-3 million). Export commitments as of mid-Feb are 800 million bu vs 808 million a year ago. USDA pegged next year’s stocks at 944 million bu vs this year’s 1,010 million. Other than the very long wait for signs of strong US wheat exports, most other global fundamentals are supportive. However, technical algos seem to be in the driver’s seat.  We can’t find a strong fundamental case to sell wheat at these price levels.

• Soybeans were well under the overnight highs through Monday’s trade, but did not follow the grain markets lower at the start of the week. At the close, soybeans were 1-2 cents higher for the day, though funds were estimated sellers of 6,500 soybean contracts. In soy product markets, funds sold 3,500 soymeal and 5,500 soyoil contracts. Soybean export inspections were supportive with a weekly total of 48 million bu, a marketing year high for the year. This also marked the second consecutive week of shipments that were above last year. 27 million bu (57%) of the weekly total were loaded for China. The cumulative total for the year now stands at 920 million bu versus 1,388 million bu a year ago. Weekly inspections are expected to remains strong for the next month as recent old-crop sales are expected to be loaded out immediately. Old crop export estimates will be moved higher in the coming weeks, but US stocks will remain historically large.

• Corn futures were under pressure right from the morning open on Monday, pulled down by the sharp drop in the wheat market. At the close old crop, contracts were 4-5 cents lower with funds estimated sellers of 25,000 contracts of corn through the day. Estimated ethanol plant margins continue to flip back around break even. The average estimated Cornbelt margin has held in a couple of cent range around break even since December. Margins this week are estimated at $.02/gal versus $.22 a year ago. The trade remains optimistic of not just corn exports to China, but also ethanol and DDG’s to help support US ethanol margins. Several levels of technical support come together on the spot corn chart just below the market at $3.67-3.68, where the 200-day moving average and an open chart gap left back in December.

• US wheat futures fell to fresh contract lows with massive fund sales reported by Chicago brokers. The end of the month looms, but funds are piling into a sizeable net short wheat position as chart patterns have turned bearish. KC spot wheat futures are now at their lowest level since January 2018 with the next downside price support area being $4.30 basis March KC futures. Chicago wheat futures has a downside price target of $4.50-4.55. Funds sold an estimated 15,000 contracts in ChIcago wheat, one of the largest, in a single day in years.

• The US exported 25.5 million bu of US wheat in the week ending Feb 21. Crop year US wheat exports at 604 million bu are down 53 million bu/8% from last year. The spot KC wheat/corn spread has pushed down to $.72/bu wheat premium, the weakest since early 2017. HRW wheat is almost working back into Plains feed rations. It is hard to understand why the US would need to feed wheat with HRW 2019 seeding at a 110-year low.

• Dull and mixed has been the morning trade with corn, soybeans and wheat trading either side of unchanged. An early rally failed with profit taking featured ahead of the weekend. The end of the month and uncertainty about the coming steps for US/China trade are restricting Chicago trade today. A mixed to slightly higher Chicago close is expected heading into the weekend.

• China Vice Premier Liu He will be meeting in the Oval office after the Chicago close. All sides suggest that enough progress has been made in this week’s trade meetings, but additional negotiations are needed to reach the finish line. That said, it is likely that the US would ask for additional US purchases of US goods as a measure of good faith to keep the negotiations pushing ahead. Traders are speculating that the buying will be for US grain, not soybeans.

• FAS reported that for the six weeks ending Feb 14 that the US sold 238.4 million bu of corn (40 million bu/week), 240.0 million bu of soybeans (40 million bu/week), and 131 million bu of wheat (22 million bu average/week). The sales were respectable with wheat being above trade expectations. The dumping of six weeks of trade data reflects the importance of having US export visibility each week. For their respective crop years to date, the US has sold 789 million bu of wheat (up 2 million from last year), 1,509 million bu of corn (up 31 million or 8% from last year), and 1,356 million bu of soybeans (down 284 million or 17% from last year). This is the first time during the 2018/19 crop year that US wheat sales exceed the prior crop year. The discount of US to French/Black Sea wheat is producing improved US wheat export demand.

• In the background of the Chicago markets remains this Chinese offer to secure  nearly $50 billion of US ag goods if a trade deal is reached. USDA trade Undersecretary McKinney stated this morning at the USDA Outlook Forum that the US/China are apart on some key issues like IP protection. McKinney’s comment suggests that the US/China may not be ready to ink a deal today and that additional negotiation time is needed. Rumours persist that China is asking for US corn offers and that US sales may have occurred. Pinning down the sellers on who the buyer is remains elusive, but some commercials have been active cash corn buyers at the Gulf with CIF premiums rising. Logistical problems also persist for Gulf exporters.

• The S American midday weather forecast is drier across Argentina. The forecast models are struggling with a complicated pattern shift this weekend and where the rains will drop. The midday model reduced rainfall across Argentina which would be adverse for crops. Cooler temperatures flow southward behind the front with highs in the 70’s and 80’s. Yet, for crop conditions to stabilise requires more than 1.00” of rainfall this weekend. Brazil continues to see near to above normal rainfall with three frontal passes producing 0.75-4.50” over the next 10 days. The forecast is overall favourable to Brazilian crop, yet with El Niño returning, our concern is April dryness.

• US/China trade negotiations will end today with clarification needed of what will happen next. The Mar 1 deadline looms for next Friday with US President Trump heading to Vietnam. Comments later today from both sides will be important. Corn looks to hold the most bullish story going forward, but it’s the first year in many that US demand for corn, soybean and wheat will all outstrip production assuming trendline yields. Chicago volatility is likely to increase as spring planting nears.

• Chicago corn, soybean and wheat futures are firmer in trade today. US new crop seeding estimates from the USDA Outlook Conference pulled Chicago values off their early morning highs. The big news in the marketplace remains the US/ China trade talks in Washington DC, and what it will mean for US ag demand going forward. US/China continue to meet over trade with progress reported. We look for a strong Chicago close today with the key being whether the US/China can reach a trade deal that both Presidents can bless.

• Chicago brokers estimates that funds have bought; 5,500 contracts of corn, 4,300 contracts of soybeans, and 2,100 contracts of wheat. In soy products, funds have bought 2,100 contracts of soyoil and 1,700 contracts of soymeal. The corn market has pushed back to its 50 day moving average at $3.8785 March.

• Bloomberg news is reporting that China is pledging to secure $30 billion of new US ag trade annually, on top of their pre-trade war dollar amounts. In 2017, China bought $19.7 billion of US ag commodities. If the $30 billion is added on top of that amount, the annual US ag goods to China would total be nearly $50 billion dollars. Such massive US ag demand into China has some well-placed commercials wondering whether the US can supply that demand annually. And more importantly, does the US have the logistical infrastructure available amid a booming US economy, to ship $50 billion of the US ag goods through US ports. A US/ China trade treaty that includes such US ag demand would produce a new demand led bull landscape for US ag goods.

• USDA in its Annual Outlook Meeting estimated 2019 US row crop seedings of; 92.0 million acres of corn, 85.0 million acres of soybeans, and 47.0 million acres of wheat. All US cotton acres was pegged at 14.3 million acres with rice down 10% at 2.7 million acres. The big change was WASDE increasing their 2019 US soybean acres by 2.5 million acre due to the decline in winter wheat seeding to a 110-year low. WASDE will update their 2019/20 US corn, soy and wheat balance sheets on Friday.

• FAS will release six weeks of US export sales data on Friday morning. The report will be closely watched by traders. The report should include China demand for 5 million mt of US soybeans along with improved demand for US corn and wheat. Cash traders are on alert for China demand for US corn, sorghum, DDG’s and ethanol. Gulf basis is firm awaiting new demand amid tough river logistics.

• The S American midday GFS weather forecast is slightly wetter across Argentina (different from the overnight run which was drier). The forecast models are struggling with a complicated pattern shift this weekend and where the rains will drop. The midday model places better rains across Buenos Aries which would be helpful to their parched crops. The front is extremely strong, and temperatures will drop 20-30 degrees in its wake. Brazil continues to see near to above normal rainfall with three frontal passes producing 0.75-4.50” over the next 10 days. The forecast is overall favourable to Brazilian crops.

• US/China trade negotiations are ongoing. China imported $129 billion in 2018 from the world. The US wants its share of the market to lower the US/China trade deficit. China will secure more US soybeans, grains, meats and other ag products from the US, and less from S America. Last year, China secured $33 billion of ag goods from Brazil. Their demand for Brazilian beans will decline as the US increases. If a trade deal is done, it increases US and world demand by the purchased amount. China needs to adhere to 2001 WTO pledges and book 9.0 million mt of wheat and 7.2 million mt of corn. This is more bullish grain than soy.

• Egypt’s state grain buyer GASC has been in the market again, purchasing 360,000 mt of wheat for April shipment. The purchase was made up of 180,000 mt of French wheat and 60,000 mt each of Romanian, Russian and Ukrainian origin wheat. Notably missing from the list of offers was the US, adding to concerns that the US export pace has been lagging. As a result, US Chicago wheat futures (May ‘19) continued to fall, closing yesterday at $177.91/t, down $15.34/t on the week (Wednesday to Wednesday), setting a new 2018/19 low. Although French wheat was the most competitive origin, winning half of the tender, pressure from the falling US market and the continued price competitiveness from Black Sea grain origins outweighed the potentially bullish export news. As such, Paris milling wheat futures (May ‘19) closed yesterday at €193.50/mt, down €9.25/mt on the week. UK wheat futures (May ‘19) tracked global wheat markets lower, closing at £164.35/mt yesterday, down £8.15/mt from last Wednesday. Despite the drop in UK wheat futures, physical markets appear to be resisting the fall. With concerns over lacking US wheat exports setting the bearish direction of global wheat markets, without a pickup in US exports, wheat markets could well continue to be pressured. However, some recovery has now been recorded in futures markets following over selling. Information on the volume of US exports between 3 January and 14 February will be published tomorrow.

• 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.

• Additional sell stops have been hit and fund liquidation persists in Chicago. Markets are dep in the red, led by wheat with corn and beans in tow. It is tough to pinpoint exactly what has sparked today’s weakness, crude oil is up $.35/barrel with the Dow up 30 points, but even hogs are limit down.

• Plains HRW basis has been unchanged on the break, rather than improving, while official corn stocks in Ukraine at the end of Nov were reported to be up sharply on the prior year following record production. Otherwise, we would point out once again that that US prices are fundamentally cheap. Gulf HRW’s discount to Russian origin this evening will again widen out to $12-14/mt for spring delivery. EU wheat futures are down the equivalent of only $.05/bu.

• US Gulf ethanol has widened its discount to Brazilian origin to $.40/gal. This week’s rise in Brazilian ethanol is counter-seasonal. And US ethanol production and blending margins continue upward amid the ongoing recovery in crude and gasoline. But no doubt it is a risk-off day in Chicago. Weekly lows should be established by early Tuesday as market focus shifts to the coming USDA Outlook Conference numbers and FAS’s flood of export sales data, both of which will be released Friday. US and Chinese negotiators will continue trade talks in DC, with high-level meetings to begin later on Thursday. Close attention will be paid to whether the March 1 deadline on the tariff truce is extended.

• US export inspections through the week ending last Thursday include 37 million bu of corn (up 7 million from the previous week), 38 million bu of soybeans (down 1 million) and 13 million bu of wheat (down 7.5 million). Corn and wheat shipments were in line with expectations, with a wheat a bit lower. For their respective crop years to date, the US has shipped 952 million bu of corn (up 45% on the year), 870 million bu of soybeans (down 36%) and 579 million bu of wheat (down 10%).

• Bitter cold temperatures were present across much of the Plains and Western Midwest this morning. Light snow cover has expanded to reach into KS and TX/OK panhandles, though pockets of the Southern Plains remain unprotected. Similarly cold temperatures are forecast throughout the next ten days. Lows near zero will continue across the N Plains. And longer term guidance doesn’t hint at any pattern change until the middle part of March.

• The S American GFS weather forecast is a touch drier in Southern Brazil beyond this week, but otherwise S American weather will be largely benign into early March. Rain this week needs to fall as projected in Argentina (0.50-2.00”) in Buenos Aires and southern Cordoba, but widespread boosts in soil moisture will persist in Brazil. This pattern will continue into early safrinha corn growth stages. S American temperatures cool to levels below normal beyond Fri/Sat.

• The big unknown remains Chinese demand for US ag goods in 2019 and beyond. Risk premium in wheat futures has evaporated, while trend/above trend N Hemisphere yields are still needed to stabilise major exporter stocks. Outlook conference and export sales data on Friday should lean positive.

• The CFTC is now quickly catching up on reporting, with Friday’s report current through Jan 22. The report showed that week funds were buyers of corn, soyoil, Chicago wheat, and live cattle, and were sellers in the soybean soymeal, lean hog and feeder cattle markets. Across the six principle Ag markets funds were net buyers of 17,000 contracts, lifting their net long position to 115,000 contracts, versus 98,000 the previous week. A year ago funds were net short a near record large 299,000 contracts

• An early break in the soybean market uncovered demand and futures were 3-4 cents higher at the close. Chicago markets continue to struggle for direction and have ebbed and flowed due to the latest news or rumor on US/Chinese trade talks. The tone from Washington on Friday was positive, and the market rallied ahead of a long US holiday weekend. The Commitment of Traders report showed that for the week ending Jan 22, funds were net short 23,000 contracts of soybeans (-2,000), net long 7,000 contracts of soymeal (-3,800), and were net short 31,000 contracts of soyoil (+17,000). In soyoil, this was the smallest net short position since April of last year. Spot soyoil futures broke through long term chart resistance near $.30/lb three weeks ago but have drifted back to that breakout point this week. If support near $.30 holds this week, a further rally to $.33-34 could unfold as funds cover the remainder of their net short soyoil position. Key support in March soybeans held at the 100-day moving average on Friday, but the market remains caught in a range waiting on a US/Chinese trade deal.

• Corn struggled to find direction amid competing inputs. Another round of US/Chinese talks lie ahead next week. The market doesn’t want to be caught short should a US/China ag package be announced. The US suggests that China and US will be signing MOUs on the points that there is agreement. This is a likely lead up to a March Trade Summit between Trump/Xi. Unknown is whether these MOUs to be signed will become public and include specific dollar amounts. Funds as of Jan 22 were long a net 44,000 contracts of corn. Funds this evening are estimated to be short a net 3,000 contracts. Farmer sales will likely be lacking at current prices. $3.70 support should hold into the start of planting. Brazilian soil moisture will be replenished amid recent and coming rains. Model guidance includes normal/above normal rainfall in key areas through the early part of March. Early safrinha good/excellent ratings will be much better than the previous year. The trade is optimistic on an eventual US-Chinese trade deal, particularly with another high-level meeting scheduled in DC next week. If China pledges to secure large amounts of US ag goods annually, that will be a big deal for grain and meats.

• US wheat futures fell another 2-5 cents led by fund selling in HRW. The European market fell similarly, and this week has been marked by a Russian rush to find export demand. French exporters were awarded the bulk of the recent Algerian tender following the break in fob offers there. We mention that the US’s discount to other origins remains sizeable. Russian fob prices are down $12/mt from early February, but Gulf HRW holds a discount to Russian worth $14/mt. The US market has had to drop to maintain this position, but a string of large export sales lies ahead. Russian flour prices shrugged off weakness elsewhere and found new all-time highs in Ruble terms. Russian flour and wheat tightness won’t be solved by lower prices. Market focus is shifting to a potential build in new crop surpluses if normal weather develops, but crop-critical weather is still months away. Updated climate forecast include normal and well above normal temperatures during Mar-May across E Europe and the Black Sea. Spot Chicago bounces around between $5.00-5.30 near term. Non US wheat exporter stocks are tight and N Hemisphere weather will have real importance in 2-3 weeks.

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Weekend summary 15 February 2019

• Chicago corn, soy and wheat futures have spent the morning weakening on fund selling amid a disappointing US export sales report from FAS. The report showed net US soybean sales cancellations and paltry US corn and wheat sales for the week ending January 3. This week occurred over the New Year’s holiday, but the market took the sales news as bearish amid the surprising China cancellations. Fund sell stops were triggered in wheat with soybeans testing Monday’s low. The back and forth of the political markets continues. Traders argue that the Bloomberg story that the US/China Trade Tariff hike (due on March 2) will be delayed by 60 days is bearish as potential new US ag demand is pushed backwards. But other media sources are awaiting an announcement following the US/China Beijing negotiations that could produce a March US/China Presidential Summit in Florida. US/China trade talks will continue overnight (Friday China time), with announcements to follow.

• We hear positive US/China Trade talk progress. Like the December and January meetings, the US could ask China to secure additional US ag goods as a payment for the tariff delays and for progress with the talks. The big debate is whether China will secure soybeans or US corn. Our lean is in favour of corn.

• US weekly export sales for the week ending January 3 were; 4.8 million bu of wheat, 18.1 million bu of corn with net cancellations of 22.5 million bu of soybean. The sales were below recent weeks and trade expectations. Traders are trying to understand why China cancelled soybeans, but it might have been China privates had purchases on the books before the China Government purchased of 10 million mt in the weeks following. Next week’s combined weekly soybean sales will include sizeable Chinese purchases that will act as a counter.

• For their respective crop years to date, the US has sold 658 million bu of US wheat (down 60 million or 8%), US corn sales are 1,271 million bu (up 204 million or 19% from last year), with soybeans at 1,116 million bu (down 404 million or 26%).

• In May, China offered to secure $35 billion of US ag goods and $35-40 billion of US energy to cut a trade deal and lower the US/China trade deficit. The Trump Administration said yes (mid-May) and then no (day after Memorial Day) which caused the application of US tariffs and retaliatory China tariffs in June. It would be a big disappointment in any US/China trade deal if US ag did not see at least $35-40 billion of pledged demand annually. We remain confident that any US/China trade deal involves sizeable purchases of US meats/grains.

• Chicago brokers report that funds have sold 11,000 contracts of wheat, 7,000 contracts of corn, 8,000 contracts of soybeans, 5,000 contracts of soymeal and 2,000 contracts of soyoil. A Chicago wheat order sparked a one minute sale of 6,700 contracts as March fell below $5.1075.

• The forecast is wetter in Southern Brazil next week and drier in Argentina. The GFS backed down on the coverage and totals of Argentine rainfall in the 8-10 day period. The GFS’s outlook is favourable in Brazil, with widespread soil moisture improvement expected during and just after safrinha corn seeding ends. Weather watchers are eyeing developing dryness in Argentina.

• The Chicago marketplace hit chart-based selling in wheat/soy amid tepid US export sales totals for Jan 3. In political markets, the track record of selling sharp breaks is horrible. We sees value in spot Chicago corn below $3.73. US and world wheat prices have the Northern Hemisphere growing season ahead and will not fall into a lasting bearish trend.