• Chicago values are weaker at midday with the grains leading the decline. Wheat futures have fallen to its lowest level since October 11 with the corn market in tow. Dec Chicago wheat fell below its 100 and 200-day moving average which spiked values lower for a short period of time on active fund selling. Whether wheat closes below those key moving averages will be watched closely by traders.

• The soybean market is feeling the pain of large deliveries against November futures. The soy deliveries were not expected amid the sluggish and latent Midwest harvest. China demand for US soybeans has been lacklustre this week as negotiations are said to be progressing.

• Chicago needs to see sustained Chinese buying which is not occurring, and the Midwest harvest looks to advance next week, regardless of the snows that are flying today. We look for a lower close with some bounce in Chicago soy going home. Chicago needs fresh demand news to feed the bulls.

• Chicago brokers estimate that funds have sold 4,900 contracts of wheat, 4,300 contracts of corn, and 3,100 contracts of soybeans. In soy products, funds have sold 2,600 contracts of soyoil while being flat in soymeal.

• US weekly export sales for the week ending October 24 were; 18.1 million bu of wheat, 21.6 million bu of corn, and 34.7 million bu of soybeans. The wheat sales were slightly above trade expectations while soybeans/corn were disappointing.

• For their respective crop years to date, the US has sold 536 million bu of wheat (down 55 million or down11%), 449 million bu of corn (down 410 million or 48%), and 708 million bu of soybeans (down 76 million or down10%). The US corn sales are at pace that is just above the 2012 drought year.

• US Biodiesel production fell to 156 million gallons in August from 759 million gallons in July according the Energy Information Administration. Soyoil was the largest ingredient at 701 million gallons.

• FC Stone is expected to release their November US corn/soybean production estimates on Friday. IEG (lnforma) is rumoured to also be releasing their US November crop forecasts on Friday or Monday. Traders will start to think ahead to next week’s USDA November corn/soybean production estimates. We estimate 2019 US corn yield at 166 bushels/acre and soybeans at 47.0 bushels/acre. Our view is that the US corn yield will fall slightly to the October frost/freeze which pushed corn tests weights lower across the N Plains and the W Midwest.

• Brazilian farmers are receiving new crop cash bids of 87-88 Reals/bag for soybeans, one the highest bids in years. It is rare that Brazilian soybean farmers have witnessed such good prices during planting, although some replanting is occurring, Brazilian farmers are upbeat on 2020 crop prospects with rains in mid-November likely to brighten yield prospects.

• Following another 24-36 hours of light snow across the Lakes States, the forecast turns cold/dry for the next 10-12 days. Such weather is helpful in returning producers to harvest. The cold/drying forecast will help strongly advance harvest into mid -November.

• US President Trump remains optimistic on a Phase One trade deal with China saying that a new location is being sought. This underpinned the soybean market. However, corn/wheat values act heavy on slowing US export demand. US corn sales to date are down over 400 million bu from last year with Ukraine harvesting a record large crop. Corn bulls need a bullish US corn yield on November 8.

• P.S. An interesting article I received today (from a respected commentator) stated he had been bearish for the last three years (which previous writings confirm), and this bearishness was largely based upon President Trump’s trade and farm policies. However, he says he was not bearish enough given “false promises” relating to the ethanol industry in particular. In addition he refers to the major price cycle low that is scheduled for this autumn (which I can agree is scheduled but the specific timing could be questionable) and suggests that current price moves confirm the formation of such a low.

• Further, he is critical of the USDA’s current crop forecasting accuracy, particularly in not highlighting quite how poor the US corn and soybean crops are this season, suggesting that it will only be in January when true harvest data is made available.

• Consequently, he is now bullish into the 2020 US election year with the comment that if ag commodities are still as weak this time next year Donald Trump will be a “one term wonder”. The US/China trade war is looking closer than ever to some sort of resolution, which should (if there is any sense in the world – and that is questionable) ignite some US price recovery coinciding with a post major cycle price low.

• It seems sensible at this time to consider these thoughts and position accordingly, and I believe this ties in with our thought processes, well documented for some time.

• Low volume and mixed is Chicago at midday as traders tire on the ongoing political woes that are plaguing US/Chinese trade talks. Chile due to its worst social unrest in a generation, cancelled the November 16-17 APEC meeting this morning. Chilean President Pinera cited “common sense” for the cancellation with its president needing to be with its people. Chile’s social unrest is tied to rising costs and falling wealth with a hike in public transportation costs igniting mass protests several weeks ago. The unrest is likely to persist and could worsen.

• The Chile APEC cancellation left the US/China without a signing country. Neither side would be willing to ink such an agreement in their home country for the fear of sending out the wrong impression prior to Phase 2 or 3 negotiations. Thus, a delay appears likely for the Phase 1 Deal.

• Amid US talk that China would not commit to the timing or a hard financial commitment on US ag goods purchases, the APEC cancellation has some thinking that the December 15 US tariff increase is the next pressure point for both sides. The US has been reluctant to take this tariff increase off the table so that there is an event with consequences should the US/China fail to reach a deal. Time will tell, but traders don’t like market or political uncertainty.

• Chicago brokers estimate that funds have sold 1,300 contracts of corn, 900 contracts of wheat, and 2,500 contracts of soybeans. In soy products, funds are flat in soymeal while selling 2,100 contracts of soyoil.

• US weekly ethanol data showed that 1,004 barrels were produced last week vs 996 barrels a week ago. The gain is seasonal with the new US corn harvest but is still well below the pace of recent years. The extra production will produce a gain in the US corn grind to 295 million gallons vs 293 last week. US ethanol stocks were 887 million gallons, down 7% from last year. Research maintains that WASDE is 50-75 million bu too high with their October estimate of 5,400 million bu.

• Russian 2019 corn production is estimated at a record 14-14.5 million mt this year amid expanded seedings and record yields. Russia will export an estimated 5-6 million mt in 2019/20 which compares to 2.8 million last year. Russia looks to continue its expansion of corn production in the years ahead with sales to continue into Iran, Korea and Turkey.

• The midday GFS weather forecast offers less snow for NW IL and SE IA with totals up to 6-14″ for S WI and Ml. The midday GFS shifted the snows further north and east. The remainder of the forecast is little changed with rainfall of 0.25-1.50″ for the E Midwest/Delta while the W Midwest and Plains are largely dry for the next 10 days. The coldest air resides in the Plains and Rockies with lows in the upper teens to mid 20′s. The cold and dryness should push farmers to accelerate their harvest during early November.

• Today is a good example of markets that have become less anticipatory and more reactive when rain/snow and strong cash basis levels collide to rally spot Chicago corn futures. Wheat is trying to follow with soybeans declining on the potential for US/China trade signing delays amid the canceling of the APEC meeting. The narrative of world grain prices is one of oversupply. Except that SE Russian wheat stocks are tight, and supply needs to be railed from the Volga Valley and Siberia. This is placing a bid under Russian fob export offers.

• Chicago futures were slightly lower to start. However, buying developed shortly thereafter with values bouncing on positive US/China trade news. But, the volume of Chicago trade remains sparse with midday activity lacklustre.

• Traders argue that early buying developed as China reported in the South China News that they are ready to sign Phase One agreement. China sources claim that enough progress has been made that a signing could occur in November. However, comments from USTR were not as optimistic and Chicago prices retreated into the midday hour. The politics of US/China trade is keeping the market unsettled with neither the bears or the bulls able to garner traction.

• Chicago brokers estimate that funds are flat in soybeans/wheat while buying 2,800 contracts of corn. In the soy products, funds are flat in soymeal while buying close to 2,300 contracts of soyoil.

• The Financial Times is reporting that China will miss its 10% ethanol blend target in their gasoline by 2020. Backlash from energy firms/ local governments have pushed back against China’s effort to utilise more ethanol in the past two years. Now many private sources argue that it will be a long time before the10% blend rate takes hold and launches China’s corn demand upwards. And amid the rapid build out of their electrical charging system, some ponder if ethanol will ever be utilised above 8% as the Government directly pushes to electrical power for environmental reasons.

• Traders are awaiting the results of GASC’s wheat tender for Dec 1-15 shipment. FOB French wheat was the cheapest offer for 1 cargo at $214.86/mt while the next cheapest origin was Ukraine followed by Romania. Russian fob wheat was offered at $221.25/ mt. The Russian wheat market can miss a few GASC tender sales, but Russian wheat cannot miss many or it will not be able to reach its annual export target of 34.0 million mt. A year ago, Russia exported 35.4 million mt of wheat, so it is becoming statistically obvious that Russia needs to become more competitive in GASC tenders for January forward.

• Chicago traders are looking for China demand to surface on Thursday’s export sales report. Large US soybean sales and a greater amount of US red meat needs to be sold to China for a rally to unfold. Traders hear that China has secured large amounts of US pork, but CME hog futures have been sliding on needed confirmation. Remember that unlike the grains, there is no daily sales reporting for US red meat which leaves traders guessing on sales tonnages.

• Rumours about that the Fernandez Government will be raising its export taxes by 10-20% in December. This is causing farmers/exporters to be more aggressive in offering grain nearby. Argentina is not offering fob corn beyond December.

• The midday GFS weather forecast offers less snow for NW IL and SE IA with totals up to 10″. The remainder of the forecast is little changed with rainfall of 0.25-1.50″ for the remainder of the E Midwest/Delta while the W Midwest and Plains are dry. The coldest air resides in the Plains and Rockies. Cold air lingers into early November. The cold and dryness should push farmers to accelerate their harvest.

• It is another day of trading headlines. China said that a Phase One Deal was likely which was then pushed back against by the USTR. Chicago needs to see/taste new Chinese demand to spark a rally ahead of the Nov 8 USDA report. Otherwise, a lack of fresh news/demand will cause a slow erosion in Chicago prices. Chicago acts heavy and our view stays broadly bearish on rallies until there is clear evidence of adverse S American weather from mid-November forward.

• P.S.  Just in – Egypt’s General Authority for Supply Commodities (GASC) purchased 235,000 metric tons (mt) of wheat at average price of $235.89/mt (basis C&F), which is $5.30/mt higher than previous tender. Of the total, France and Romania sold 60,000 each and Ukraine sold the remaining 115,000 mt.

• Mixed has been the morning with the grains (corn/wheat) weaker while soybean futures are higher in slow volume trade. The market lacks direction and traders are not willing take on new positions amid the choppiness of recent weeks. US farmers are trying to push ahead with the summer row crop harvest while S American weather is far from perfect for planting.

• US farmers won’t sell breaks while end users won’t chase rallies. Chicago remains adrift with the November USDA Crop Report the next big fundamental event. Until then, it is difficult to get overly excited about a net long or short position. We would reiterate our “market chant” of not wanting to sell hard breaks or buy sharp rallies.

• Chicago brokers estimate that funds have bought 2,200 contracts of soybeans and sold 4,800 contracts of corn and 3,600 contracts of Chicago wheat.

• US export inspections for the week ending October 24 were; 15.0 xmv of corn, 57.6 million bu of soybeans, and 19.2 million bu of wheat. The US corn export pace remains extremely disappointing.

• For their respective crop years to date, the US has ,exported just 136.5 million bu of corn (down 206 million or 60%), 296.2 million bu of soybeans (up 16 million or 6%) and 316.5 million bu of wheat (up 73 million or 23%).The US corn export pace to date is the slowest since 2012, the last Midwest drought year when corn values were trading above $7.00/bu. China shipped out 19.7 million bu of soybeans for the week or 34% of the US weekly total.

• FAS reported 135,000 mt of US soymeal to the Philippines for the 2019/20 crop year.

• Russia appears to have planted a record amount of winter wheat estimated by private sources at 16.3 million ha (40.3 million acres) vs 15.9 million ha (39.3 million acres) last year. Assuming trend yield, the extra area should produce in a range of 78-79 million mt, up slightly from the current crop year. Ukraine’s wheat seedings look to be down slightly via autumn dryness, so the Russian gain places full focus on spring and early summer growing conditions in 2020.

• Chinese pork prices pushed to another record high to start the week with some wondering where the rally really stops. Demand for the holiday season is weeks away, but will be sizeable. Meat shortages are worsening in urban areas.

• The Argentine Peso is trading slightly stronger this morning at 59.3 to 1$. The Peso is stable following the election as new economic platforms are awaited from the Fernandez Administration .

• The midday GFS weather forecast offers more snow for portions of NW IL and SEIA with totals up to 15″. The remainder of the forecast is little changed with rains for the remainder of the E Midwest while cold air pours southward from Canada. The coldest of the air looks to reside in the Plains and Rockies. Cold air lingers into early November slowing US corn and soybean harvest.

• Trade volume is just horrible with little interest in trading at midday. The breaks won’t carry through while rallies are capped by harvest pressure. US corn exports are horribly slow while China is not showing renewed interest for US soybeans. French wheat prices sagged while Black Sea offers are steady. The cash markets are not offering any new direction. Our view heading into the November USDA report is for a choppy sideways marketplace that just won’t follow through.

• Chicago futures have been mixed this morning, and again fresh news is limited to US-China trade sentiment. This morning there was talk that China would ask for an easing of planned future, and some existing, tariffs on Chinese goods in order to secure additional US ag goods nearby. Details remain lacking, but newswires now report that the two sides are close to working out parts of the Phase One agreement. Additional calls are scheduled.

• Soybeans initially rallied on the is news but have since weakened as no new bean sales to China were announced this morning.

• The midday GFS forecast is consistent in returning dryness to Central Brazil through the next 6-7 days. A more normal pattern of Brazilian rainfall is advertised thereafter. But amid coming soil moisture declines there is less room for ongoing dryness in Nov and Dec, when the wet season is supposed to be fully established.

• We hear that producer s in Mato Grosso and Goias this weekend aim to plant 24 hours a day in an effort to match last year’s seeding pace. This makes the return of rainfall beyond Nov 3 even more important A sizeable boost in Brazilian soybean planting progress next week.

• Weekly Ukrainian corn yields continue to decline as harvest advances. Yields reported this week are down 2.5% from last year with 66% of the crop having been harvested. This suggests the USDA’s Ukrainian corn production estimate of 36 million mt is still marginally too low. The recent negative trend in Ukrainian weekly yields will be watched closely. Weekly Russian corn yields continue to exceed prior records with harvest there at 65% complete. The message is that the Black Sea crop in 2019 will be record/near record large, which will prolong competition for world trade into early 2020. It is left to adverse S American weather to trigger further world corn supply dislocation.

• Other news is lacking. All eyes will be on the Phase One agreement details when they are available in the weeks ahead, and whether the US is willing to ease tariffs on Chinese goods prior to a complete deal being signed.

• Confirmation of trade progress would give a boost to raw material markets, and US-Chinese trade remains the biggest issue for commodities in the near term.

• The midday US GFS forecast is unchanged from the morning. A weak tropical event is moving into the Delta/Southeast and combines with cool front to trigger moderate to heavy rainfall across the E Corn Belt on the weekend. Cumulative totals of 0.50-2.00″ through Monday will favour IL, IN, OH, K and TN. A pattern of complete dryness and chilly temperatures evolves Oct 29-Nov 8. Light rain returns in the 11-15 day period but soaking precipitation is not indicated.

• Ag markets continue to ebb and flow on the heels of positive/negative news regarding US-China trade progress. Work maintains that choppy trading is most probable into mid-November. Closer attention will be paid to Brazilian dryness if it persists into mid-November. And recall Argentina’s Presidential election is this weekend. A change in power there will spark discussions about higher Argentine grain export taxes.

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Weekend summary 25 October 2019

• Ag futures are again mixed at midday, with soybeans finding support on additional sales to China while grains are slightly lower on another week of disappointing export demand. Talk that China is committed to buying $20 billion of US ag products is being met with mixed sentiment. Most of the trade understands that this value is in line with pre-tariff Chinese buying, and still details of the proposed $20 billion are not available. There is talk that China scaling into purchase of $40 billion would require an elimination of tariffs on Chinese goods. All eyes will be on November’s APEC summit in Chile.

• US export sales through the week ending Oct 17 included 19 million bu of corn, vs. 15 million the prior week; 10 million bu of wheat, vs. 15 million the prior week; and 17 million bu of soybeans, vs. 58 million the prior week. Recall US corn sales need to average 39 million per week to meet the UDSA’s forecast.

• Only Mexico is buying US corn in bulk. Large soybean cancellations worth 21 million bu were made by unknown destinations.

• Weekly US pork sales totalled just 19,000 mt, with no new Chinese demand recorded. CME hog futures have extended this week’s correction amid the overhang of a nearby oversupplied market.

• For their respective marketing years to date, the US has sold 427 million bu of corn, down 49% from a year ago; 517 million bu of wheat, up 13%; and 678 million bu of soybeans, down 12% from mid-October a year ago. FAS did announce another US bean sale to China worth 264,000 mt. Yet, pace analysis suggests even more Chinese demand is needed to meet the USDA’s annual 1,775 million bu soybean export projection.

• Australian wheat crop estimates continue to shrink. Contacts suggests a sizeable amount of wheat in the East will be harvested for hay. This will aid feed supplies there, but will work to lower actual wheat for grain production. There is also a growing concern over autumn plantings as the Australian sorghum crop needs to be completed by December. The two-week Australian weather forecast remains dry. Longer term climate guidance maintains a pattern of below normal precipitation in primary grain areas into late November.

• The midday GFS forecast is wetter in Cordoba and Buenos Aires in Argentina this weekend but is drier in Central Brazil over the next two weeks. The EU model has been favourably wetter in Brazil, but closer attention will be paid to Brazilian precipitation forecasts moving forward. The wet season there is supposed to begin in earnest by November.

• The midday US GFS weather forecast is drier in IL but otherwise unchanged. Heavy precipitation into early November will be confined to the Delta/Southeast and far Eastern Corn Belt. A deep low pressure trough will sink into the N Plains/Great Lakes. This will block meaningful precipitation but will send Central US temperatures to levels 6-20 degrees below normal. Freezing overnight lows will be widespread across the US Ag Belt Oct 30-31. Harvest progress accelerates.

• The lack of details regarding US-China’s partial trade agreement have capped new raw material buying . Drier extended range Brazilian forecasts give the bears pause. Ag markets lack direction into the USDA’s November WASDE release.

• The morning has been mixed in Chicago, with corn, wheat and soybean markets trading narrowly around unchanged. FAS this morning announced another 128,000 of US beans sold to unknown destinations. Otherwise, there is little new for either the bulls or the bears to sink their teeth into. EU grain futures have followed Chicago to modest losses.

• This week’s EIA report featured US ethanol production still well below year-ago levels, but also a further tightening US ethanol supply and demand. Ethanol production through the week ending Oct 18 totalled 293 million gallons. This is up 6 million on the prior week but down 3% from the same week in 2018. Weekly ethanol stocks last Friday fell 30 million gallons to 897 million, down 11% from mid-October a year ago. Exports continue to lag, but there is a growing need for enlarged US ethanol production. Margins are profitable.

• EIA also pegged US crude stocks last week (less reserves) at 433 million barrels, down 1.7 Mil from the prior week. A modest build in stocks was expected, and spot WTI crude is up $0.70/barrel at midday. Spot WTI is now $4/barrel off seasonal lows scored in early September.

• The Brazilian Real continues its recovery from lows scored last week. Long-awaited pension reform has cleared Brazil’s Senate on Tuesday and now only awaits signature by President Bolsonaro in November. This bill looks to reduce Brazilian public spending by some $200 billion over the next decade, and is viewed as a crucial step in stabilising Brazilian finances. The Real looks set to continue to strengthen in the weeks ahead.

• Markets will be paying close attention to this weekend’s Presidential election in Argentina. Argentina’s Peso has inched to a 7-week low at 58.9 to 1 $US. Argentina inflation will persist for some time, but key nearby is whether grain/soy export taxes are raised in late 2019/early 2020. Polls continue to suggest Kirchner-based Alberto Fernandez will take power, and a boost in export duties is a real possibility. The additional cost to export will raise Argentine fob prices as well as work to lower farmgate prices. Argentine exporters have enjoyed reduced export taxes since 2015.

• The midday S American forecast is unchanged from prior runs. Needed rain will impact S Cordoba and Buenos Aires into the weekend. Brazilian rainfall will favour Mato Grosso, Parana and RGDS in the South.

• The transition to Brazil’s wet season remains, but totals of 1.0-1.5″ will favour 60-65% of Brazil’s Soy Belt in the next 5 days.

• The midday GFS weather forecast is slightly wetter in southern IL and IN early next week but is otherwise unchanged. A cold/dry pattern will be intact throughout the next 10 days across Plains and Western Corn Belt. This will allow harvesting to accelerate, with soils firming due to cold temperatures there. Moderate rains impact the E Corn Belt Sun-Tues. No additional precipitation is forecast Oct 30-Nov 8. 16 to 30-day guidance maintains a drier than normal trend into late November. A warming of temperatures is also due beyond November 2.

• Research maintains that direction will stay lacking into November amid a rising world wheat market, pitiful US corn export demand and uncertainty over near-term Chinese buying. S American drought is unlikely into late year.

• Chicago grains are easier with soybeans holding in the green in mixed midday action. An overnight rally failed to gain any bullish euphoria with the Midwest harvest to restart in the west on Tuesday. The US soybean harvest will surpass 50% sometime this week with corn to reach that same level during the closing days of October. US corn harvest progress will be much slower than soybeans with farmers waiting for the crop to dry down. Otherwise, no Chinese sales announcements produced selling from some of the faster moving bulls. A mixed Chicago close is expected in an overall sideways marketplace.

• Chicago brokers report that funds have sold; 3,200 contracts of wheat, 4,100 contracts of corn, and 3,000 contracts of soybeans. The funds are on the sell side of the marketplace this morning in all Chicago grains except soyoil, where they are flat.

• US Export Inspections for the week ending October 17 were; 20.9 million bu of corn, 47.6 million bu of soybeans, and 20.7 million bu of US wheat. The soybean export total was in line with trade expectations while wheat was better and corn less.

• For their respective crop years to date, US corn shipments are 119 million bu (down 194 million bu or 62%), US soybean shipments are 237 million bu (up 16 million or 7%), while US wheat exports at 370 million bu (up 68 million or 22%). China shipped out just 2.6 million bu from the PNW, so the soy shipments were largely from others.

• Black Sea wheat prices have been rising on short covering, tight fisted farmer holding and some unusual Russian cross border trade into Kazakhstan. The combination has forced a rally in world wheat prices as end users stepped up their forward coverage. However, with just Algeria in the world market on Tuesday, the outlook for world wheat export demand has subsided and a correction appears to be under way. Moreover, it is doubtful that Black Sea wheat can rise too far above $210/mt or just a few dollars above current levels. As rain helps the Argentine wheat crop finish, future wheat rallies will depend on the finding of new demand to China.

• The GFS forecast calls for near normal rains for Brazil into November 1. There is no evidence of any lasting dryness for either Argentina or Brazil over the next 10 days. The building El Niño favors Brazilian 2020 yields.

• As a Central Midwest storm system pulls eastward, the forecast is drier for the remainder of the Central US over the next 10 days. The forecast aids the harvest for the N Plains and the W Midwest as colder Canadian air filters southward. Following a few warm days, temperatures turn chilly into November. The midday model maintains the trend of below normal temperatures and rainfall for much of the Plains and the Midwest.

• China has an acute need for red meat imports, but their interest in US soybeans and grains is said to be slowing. Amid a US soy harvest that will speed ahead later this week, it will be difficult to sustain a further bull rally. Short of a S American drought, world grain markets are oversupplied. But amid the US/China political uncertainty we would suggest some caution.

• Chicago prices are higher at midday on fund buying and the hope that China is securing US soybeans and grain. China confirmed overnight that it will buy US ag commodities, but as you can expect, it did not provide tonnages or the timing of shipments. The purchase confirmation by China is a step forward to the US/China ratifying the Phase 1 Trade Pact. We would note that this trade pact is expected to include China ramping up its ag purchases to $40-50 billion dollars by 2021. Nearby, we expect that China will secure what China needs in terms of foodstuffs. On its nearby shopping list is; US pork, soybeans and cotton with some exporters hinting that China could also secure US HRW wheat.

• We look for a firm Chicago close with traders eying whether March corn can reach above $4.10 and March soybeans above $9.75. March Chicago wheat is trading at $5.25 and could rise another $).05-).15 depending on China buying interest. The hard part of the China rumours is trying to decipher just what they will secure on this purchase round. We hold a view that much of China’s purchasing will be completed by early November, before the APEC Meeting.

• Chicago traders estimate that funds have bought 5,200 contracts of soybeans, 4,900 contracts of corn, and 3,600 contracts of Chicago wheat. In soy products, funds have bought an estimated 3,100 contracts of soymeal and 2,700 contracts of soyoil.

• Tyson Fresh Foods is banning the feed additive ractopamine in market hogs that it buys from its farmers beginning in February of 2020. The move is likely related to Chinese demand for US pork. It is estimated that eliminating the feed additive will trim US pork production by 90-120 million pounds annually either by slowing feed conversions or keeping pigs on feed longer (thereby slowing movement through production facilities). Friday’s weekly FAS export sales report is expected to show additional demand by China for US pork. South Korea and Mexico have been slower buyers of US pork, but the ongoing rally in cash hogs amid record large kills argues for a demand led bull for now.

• The USDA will resurvey harvested acres in MN and North Dakota to gauge if farmers have changed their plans. Snow and cold hit the region last week and the resurvey will likely to produce a modest reduction in harvested acres. We would argue that regional yield will be impacted more than harvested acres. Our estimate is that the weekend cold /snows reduced US corn production by 140 million bu of corn and upwards of 20-30 million bu of soybeans.

• US White House Economist Kudlow indicated a lot of cooperation over the Phase 1 US/China Trade Pact. However, tech transfer may be pushed into Phase 2.

• CME Livestock futures are pressure from comments from China’s Veterinary Bureau forecasting a return to normal pig numbers in 2020. We are extremely doubtful of this forecast with ASF uncontrolled and China’s pig herd in sharp decline. We argue that it will be years before China’s pig herd returns to anything close to the size when it was discovered in June 2018. Cold Canadian air follows with a frost/freeze into the Central US.

• A tropical storm in the Gulf of Mexico has reduced the chances of Central US rain this weekend. Only limited totals are expected through Sunday with improved rain chances for the N Midwest starting Monday through Wednesday. Dry weather follows with the next chance of rain starting on Friday Oct 25. This rain looks to impact the E Midwest with totals of 0.25-1.00″. Dry /cool weather follows. The Central US harvest pace should advance normally in coming weeks.

• It is a firm day, but before any trader chases a rally, they will want confirmation of China buying. Our advice stays the same, don’t chase rallies or breaks. Political markets do not follow through.

• The morning has been mixed with US wheat futures firmer while summer row crop futures hang with losses. Soybean futures have been able to trade on both sides, but corn values are firmly the red amid slowing US corn export demand and the expanding Midwest harvest. We look for a mixed close as Chicago grains remain rangebound awaiting the confirmation of Chinese demand for US grain and other ag products.

• Chinese sources report that a meeting between the Chinese Government and State Owned Enterprises (SEO’s) was held in Beijing. The meeting was to discuss US ag purchases following last week’s US/China verbal trade pact.  The meeting ended without resolution for new US ag demand. Sources suggest the irritant of Hong Kong and a House Bill in support of the protesters produced today’s “no decision”. This could quickly change depending on the politics, but uncertainty of large/new Chinese ag demand persists at least for today.

• It is the constantly changing US/China politics and flow of daily media news which makes US ag markets so difficult. Note that yesterday, CME hog futures posted limit gains amid the rumour of China demand with these markets sharply lower today on US/China political concern. One must be careful in chasing Chicago/CME rallies and/or selling breaks.

• Chicago brokers estimate that funds have sold 4,400 corn and 2,900 contracts of soybeans, while buying 2,400 wheat. In soy products, funds have sold 3,200 contracts of soymeal while buying 1,100 contracts of soyoil.

• Egypt’s GASC secured 405,000 mt of Russian, French and Ukraine wheat. The breakdown is 285,000 mt of Russian and 60,000 mt each of Ukraine and French. The price is said to be $7-8/mt higher than their tender of just 10 days ago. This is confirming the Russian wheat rally in the interior and at port.

• US President Trump stated that the Phase One of the US/China trade deal is being papered and won’t likely be signed until he meets with Xi in Chile.

• However, China is angered by the House Bill favouring Hong Kong protesters and have threatening retaliation. Trump just stated again that China is already starting purchases of sizeable amounts of US ag goods and that “good feelings” persist. In the past, the US/China have been able to keep “other” politics out of the trade negotiations and Washington sources expect that will occur again. If China is making large US purchases, they should include; pork, soybeans and cotton. The US weekly export sales report is released Friday.

• Mexico was confirmed as buying 228,600 mt of US corn today. No new Chinese soybean or grain purchases were noted.

• The midday GFS weather forecast is like the overnight run with any heavy rains pushed into the east and SE US. Temperatures will be variable with a frost likely for the E Midwest by the closing days of October. Dryness is noted through Friday with rains on the weekend followed by dryness during the 9-15 day period. The rains on the weekend look to range from 0.15-0.85”. The US corn and soybean harvest will gain speed in the coming weeks across the Plains and W Midwest. US soybean harvest is becoming active in most areas.

• Midwest cash basis levels are starting to leak as farmers move their recently harvested crops against existing cash contracts or make new sales. And Brazilian farmers are also active sellers amid the Real vs the US$ at 4.16:1. The weakening S American currencies will to spur additional spring seedings. The Brazilian weather forecast features better rainfall.