Monthly Archives: December 2019

23 December 2019

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  • Chicago futures are higher at midday with corn, soybeans and wheat all trading in the green on fund short covering amid the hope that the US/China will sign a Phase One Trade agreement in early 2020. Since the US announced that a deal had been reached some 10 days ago, the theme of Chicago trading has shifted from selling rallies to buying breaks.
  • Funds need to flatten out their short corn/soybean position amid the return of a large buyer (China) of US ag products which include; grains, soybeans, meats and dairy. The potential for China to be a large US ag buyer is the highest in soybeans/ pork, but also include the grain and grain products.
  • We look to the first half of January as time when emotion will boil over in terms of China’s Phase One importance for US agriculture. As a deal is signed and the January Crop Report is released, Chicago’s focus will shift to a record large Brazilian soybean crop and enlarged US corn/soy 2020 seeding.
  • January should produce a seasonal top with prices to then ease heading into spring amid an abundance of world supply. We look for a higher Chicago close and mixed trade Tuesday heading into the Christmas holiday. Chicago closes at noon on Tuesday.
  • Chicago brokers report that funds have bought 4,100 contracts of soybeans, 3,200 contacts of corn, and 2,600 contracts of wheat. In soy products, funds have bought 3,100 contacts of soymeal while being flat in soyoil.
  • US Export Inspections for the week ending December 19 were; 15.2 million bu of corn, 39.8 million bu of soybeans, and 21.2 million bu of wheat. The wheat exports were above trade expectations, while corn and soybeans were disappointing.
  • For their respective crop years to date, the US has shipped out 300.2 million bu of corn (down 370 million or 55%), 727 million bu of soybeans (up 144 million or 25%), and 520.2 million bu of wheat (up 69 million or 15%).China shipped out 15.4 million bu of US soybeans last week rep resenting 39% of the total. We note that China continues to secure Brazilian soybeans beyond mid-February with sources estimating that China has already purchased more than 21 million mt from Brazil for late January through March. Those sales are not expected to be shifted to the US, so any future Chinese demand is likely to be focused on the July-November timeframe in 2020.
  • NASS will release the Quarterly December Hog Report at 2 pm CST. The NASS Hog Report is expected to show a December stockand breeding herd that is up 3%, a new record. Considering the kill rate being up 5-6% in recent weeks, a kill that is only up 3% going forward will be bullish.
  • The midday GFS weather forecast is wetter for NE Brazil with better rains during the 6-10 day period. More limited rain is offered for Southern Brazil with totals of 0.5-1.25″ while Argentina sees normal rain. There is no indication of any lasting heat with highs ranging from the upper 70′s to the mid 90′s. The 11-15 day period calls for near to above normal rainfall for S Brazil and Argentina which would be ideal. We see nothing at this time that would argue against a record Brazilian soybean crop in 2020.
  • Funds have shorts left to cover in corn/soybeans in the days heading into 2020. Breaks will be short/shallow. Once the US/China Phase One Deal is announced and the January 10 USDA Crop Report has released, the potential for a record large S American crop and expanded 2020 US corn/soybean seeding will take centre stage. Our bias remains one of being cautiously bullish into early 2020.

19 December 2019

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  • Limited news ahead of the holiday season had soybean futures slightly lower on Thursday.
  • The US Weekly Export Sales report showed routine sales while FAS announced daily sales of 126,000 mt to China.
  • The future soy outlook all comes down to politics. Commercial traders are concerned that there could be some trapdoors in the Phase One agreement that may not mandate that China reaches $40 billion. It is unlikely that China will pay up for US soybeans, especially with Brazilian export basis in decline.
  • Brazilian soybeans are offered at $10.23/bu for December while US offers are at $9.98. However, Brazilian fob soybeans are $0.12-0.14 under US offers for Feb/Mar. China was rumoured to have booked another three cargos of Brazilian soybeans for March today.
  • It is forecast that funds will cover their net short position by early 2020. Yet, new Chinese tariff waivers are needed to sustain January futures above $9.40 resistance. Chicago will focus on the timing of the US/China inking the Phase One Trade Agreement.
  • Chicago corn futures ended unchanged in tepid volume. Funds have been active in covering shorts since last Friday but look to pause as the trade closes its books on 2019. There is still nothing concrete available with respect Chinese buying in 2020. Work suggests that total US corn consumption will benefit only modestly. Food products will be favoured.
  • Export sales through the week ending Dec 12 totalled 67 million bu, near expectations. Recall this included last week’s sizeable sale to Mexico worth 45 million bu. Non-Mexican demand totalled just 22 million bu. 2019/20 commitments to destinations other than Mexico sit at 341 million bu, down 56% from mid-December a year ago. Cumulative corn sales account for just 37% of the USDA’s forecast. Pace analysis still indicates the USDA will lower its forecast by 50-100 million bu in Jan.
  • Fund short covering is still expected in the weeks ahead. But with needed Argentine rainfall imminent, rallies above $3.95, March, will be laboured without confirmed S American yield loss.
  • US wheat futures ended slightly lower. It remains that Chicago and KC contracts are overbought, and Gulf wheat maintains a decent premium to all other origins for delivery into late winter. Additional fuel is needed to sustain this rally, but increasingly world wheat traders will be exiting the market for the year.
  • Estimates suggest that funds since last Tuesday have bought/covered a net 15,000 contracts in KC. This leaves their net short at just 9,000 contracts. It remains unlikely than an outright bear trend emerges into early 2020 as German winter seeding are estimated down 7% from last year and as ongoing Northern Hemisphere warmth is being monitored. However, a decent boost in soil moisture lies ahead across the Southern Plains next week. And following slow Russian exports to date, competition for Jan-Feb world trade will be ongoing. Clarity over potential Chinese demand is needed.

18 December 2019

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  • Chicago futures opened lower and recovered in morning trade as funds returned to their short covering ways. Fund buying returned after the traditional opening which is becoming commonplace until their short corn/soy position is covered. There can always be a modest correction or pause, but the arrival of sizeable new demand (China) is welcomed. Looming China demand limits the downside in Chicago heading into the January Crop Report. S America and the US MUST produce big crops in 2020 to reignite a sustained bearish decline. The complexion of the Chicago/CME price action has changed amid the return of China to the US marketplace as a big ag product buyer.
  • Chicago brokers estimate that funds have bought 3,000 contracts of corn and 4,000 contracts of soybeans, while being flat in wheat. In soy products, funds have sold 2,000 contracts of soyoil and bought 2,000 contracts of soymeal.
  • The complexion of US trade disputes changed last week with the US/China principle agreement, the coming vote on USMCA and the fast track for US/EU and a hard Brexit turning the UK to the US on trade. Chicago/CME can correct, but amid the better demand for US ag products in coming months, the ag markets will have levity and producers must be more patient to reward rallies. For the next 4-8 weeks, a bullish rather than bearish outlook should be embraced.
  • Egypt is signalling that it will resume checks of wheat cargoes at port of origin. This will hopefully reduce the CIF wheat cost for GASC amid rising world wheat prices. The “sellers” premium for wheat sales to GASC should fall and it is hoped that any cargoes found not to comply will be rejected far earlier in the process. The change has exporters wondering if the next few GASC tenders could be pushed forward as coverage now extends into February 7.
  • Argentina will likely raise their export taxes on corn, soybeans, wheat and other ag products by another 3%, or 8% for row crops, following the weekend Presidential Decree of a new 5% tax. FOB trading has dramatically slowed on the tax news, and traders are waiting for Government clarification on what the exact tax rate will be. Research indicates that the tax will not have much if any impact on Argentine 2020/21 production plans. The Argentine currency exchange, The ROFEX, is pricing the Argentine Peso at 84:1 US$ or another 42% decline from today’s rate. This fall in the Peso more than offsets the 8%increase in grain taxes. Argentine farmers report that they will expand wheat and soybean seeding in 2020. Corn acres will decline in cost.
  • The midday GFS weather forecast is like the overnight, with the exception being that the midday has pulled out 0.5-1.00″ of rain for Southern Argentina. The dryness across NE Brazil remains intact, it is the reduction in rainfall totals for S Argentina that must be closely followed. The extended range forecast offers improved rainfall chances for S Argentina and much of the Brazilian crop areas. Overall, the 2-week forecast is non-threatening. A record Brazilian soybean crop is being made.
  • Chicago corrections/breaks will be short and shallow as values push higher into early 2020. The return a big buyer of US ag products will keep the bears dancing. US grain and soy fob offers are expected to push well above the rest of the world. At some point, imports of S American corn/soy beans are expected as their 2020 harvest gets underway February and March. Spot China demand nearby will be for US pork and soybeans. Other US ag goods such as DDGs, ethanol, corn and wheat will have to wait until the US/China Phase One Agreement is signed and 30-45 days has passed for its installation.

17 December 2019

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  • Ag markets found buying interest at the traditional open, with volume weaker than in prior days. Estimates suggest that since Friday morning, funds have bought/covered a net 45,000 contracts of corn, 30,00 contracts of beans and 25,000 contracts of Chicago wheat. Our thesis into early 2020 is that large fund shorts in corn/soy continued to be pared down, but rallies moving forward, into the Phase One’s signing, will be more laboured amid improved S American weather forecasts. The midday GFS forecast is slightly wetter across the driest areas of Argentine’s southern ag belt in the next 10 days. Soaking Argentine is still hinted at during the final days of December.
  • Macro markets are firm. The Dow is up 90 points. Spot WTI crude is up another $0.60/barrel at $60.80. Falling US rig counts and elevated exports implies a steady/bull ish trend for energy markets into Q1 2020.
  • And the leader of the ag space today has been Chicago soy oil, which has found a new two-year high, basis spot. There is talk that US legislators have tentatively agreed to re-instate a $1/gallon tax credit to biodiesel blending as part of the broader tax credit extension plan. The biodiesel credit will be re-instated retroactively and be extended through to the end of 2020. US biodiesel production has faltered in recent months, but on the margin will improve if the tax credit is extended.
  • Malaysian palm oil futures overnight remain perched at multi-year highs. EU rapeseed futures have rallied to newer multi-year highs amid rising competing veg oil markets. Veg oils will find ample support on breaks.
  • The Argentine government’s plan to boost grain/soy export taxes is being fine-tuned with higher rates. The new proposal puts the tax on corn/wheat exports at 15%, vs. a prior target of 12%. The cap on soybean export taxes will be raised to 33%, vs. 30% previously. We doubt 2019/20 seedings will be affected, with corn planting to reach 56-57% complete this week and soybeans to reach 64-65% complete. We also mention that it is margin that will drive future acreage rather than the rate of export tax exclusively.
  • lnforma this morning pegged final US corn production at 13,568 million bu, vs. USDA’s 13,661. Final US soybean production is estimated at 3,540 million bu, down 10 million from USDA.
  • lnforma also puts 2020 corn seeding at 94.1 million acres, up 4.2 million from 2019. New crop soy seeding is forecast at 86.2 million acres, up 10.6 million from final acres in 2019. However, we note that lnforma’s corn estimate is up just 1.3 million from intentions a year ago, with their soy forecast up 1.6 million. 2020 wheat acres are projected to decline another 900,000 to 44.3 million, a new record low.
  • The midday GFS weather forecast has added another round of regionally heavy rainfall to Cordoba and Buenos Aires in Argentina Dec 25-27. Similar totals are expected across Argentina’s southern crop belt on the weekend. This brings the GFS’s projected 10-day totals there to 2.0-2.5″, which will boost soil moisture significantly. Rain is still forecast to expand into Northern Brazil beyond Dec 24.
  • The path of least resistance remains higher into the opening of 2020 as shorts exit the market. Measuring potential upside risk will be difficult until more is known about the scale and timing of Chinese buying.

16 December 2019

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  • Chicago soybean futures started the week 14-15 cents higher on continued fund short covering. Monthly NOPA data was disappointing relative to expectations, but the market focus this week is on funds unwinding their large net short position.
  • Weekly soybean export inspections were lower for the third consecutive week, but with expectations at 46 million bu. Cumulative inspections for the year now total 685 million bu, up 23% from a year ago but still below average. The lack of significant Chinese business is still noticeable on the chart for the first quarter. However, 55% of last week’s inspections total was headed to China. The trade is hopeful that the Phase One agreement will allow for a much stronger export rate in the last half of the year.
  • January soybeans closed above all major moving averages on Monday, and we expect fund short-covering to support Chicago prices into early 2020.
  • Chicago corn futures ended 5-7 cents higher as the market further digests the US and China’s completion of a Phase One agreement. Detail remain lacking, and may never be fully available, but the market’s chore in the near term is to pare down substantially funds’ sizeable net short corn position.
  • Managed funds last Tuesday were short 115,000 contracts. It is estimated that funds Friday evening were short a net 106,000. Correlation lacks precision, but work does suggest that the covering of 80-100,000 short contracts is worth $0.15-0.20/bu in March Chicago corn by early Jan. This places initial resistance at $3.95-4.00.
  • Argentine weather is improving and spot corn is fairly valued at $3.75-4.00 until much more is known about China’s spending on us ag goods in 2020.
  • US wheat futures rallied 11-17 cents, finding new highs for the move. It feels odd that US wheat is leading the post-Phase One deal ag rally, but we would mention there is concern over crop development across the Black Sea, lack of snow cover, and across the US Plains, where a pattern of dryness may stay intact into late January.
  • The RMA continues to add data to its winter wheat insurance enrolment series. As of today, winter wheat acres enrolled sits at 8.9 million acres, down 0.9 million from last year. This data won’t be overly accurate until early Jan, but already it is probable that total US winter wheat acres fall by 500-900,000 acres in 2020. This exacerbates nearby concerns over N Hemisphere production potential.
  • However, note that US Gulf wheat is again priced well above competing origins. World cash prices are stronger this evening but have met the initial upside target of $214-216/mt, basis spot EU/Black Sea.

12 December 2019

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  • Chicago markets have rallied by varying degrees at midday, driven by positive US-China trade news, perhaps the most positive of the season. Dow Jones is reporting that the US trade team has elected to not implement new tariffs on Dec 15, and is also offering to reduce the total tariff burden on Chinese goods by up to 50%. Our understanding is that this is the US team’s proposal, and there is no word on China’s response. What the US gets in return is unknown, but surely some measure of new ag purchases will be included. Oddly, US wheat futures have led the morning rally despite a sizeable US corn sale to Mexico.
  • As trade talk details emerge, key will be whether China’s stance toward raising US ag purchases based on market conditions, rather than committing to a certain per-year dollar figure, has been altered. However, Chicago markets will be well supported into the weekend as risk premium is added.
  • US export sales through the week ending Dec 5 were also mostly positive. Corn sales through the period totalled 34 million bu, vs. 22 million the prior week and the largest since September. This is fractionally above the pace needed to meet the USDA’s target, and suggests demand is being shifted to the US as S America’s export campaign comes to an end. Exporters this morning sold 1.1 million mt of corn to Mexico for 2019/20 delivery.
  • Wheat sales totalled 18 million bu, vs. 8 million the prior week. Soybean sales were 39 million bu, vs. 25 million the prior week. And US soy oil sales were a solid 66 million lbs vs. 24 million the prior week.
  • For their respective marketing years to date, the US has sold 610 million bu of corn, still down 44% from a year ago in early December. Exporters have sold 990 million bu of soybeans, up 9% on last year; and 623 million bu of wheat, up 4%.
  • We would remind that corn sales of 30-35 million bu need to be recorded in each remaining week of the 2019/20 year to validate the USDA’s 1,850 million bu forecast. This in turn requires major yield loss in S America. But a nearby stronger demand pull will keep longer term support at $3.65-3.70 intact. New cash sales will only be made on rallies amid ongoing political uncertainty and as operational models at midday fail to boost rain chances across some 50% of Argentina’s Corn Belt. However, it is still entirely up to Presidents Trump and Xi whether a comprehensive trade deal is made.
  • The midday GFS weather forecast is wetter across the heaviest corn producing regions of Argentina Dec 19-22. Cumulative totals of 1.5-3.0″ are offered to southern Cordoba and northern Buenos Aires, a region comparable to IA/ IL in the US. Confidence in the details of the midday GFS is low, with other models still much more arid in Central Argentina. But the EU model’s release this afternoon will be watched closely.
  • Otherwise, dryness stays intact across Northeastern Brazil amid an anchored ridge of high pressure there. The remainder of Brazil will see normal/above normal precipitation throughout the next 10 days. Extreme heat remains absent from both Argentine and Brazilian forecasts.
  • Short covering is featured amid the possibility that a Phase One agreement is reached by the end of 2019. Work also suggests that spot corn at $3.70 is a bit undervalued fundamentally. Key to the extent of any recovery will be the details (ag purchase tonnages) of any US-China agreement.

11 December 2019

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  • The midday Chicago grain trade is weaker as funds return to sell soybeans and corn. The wheat market appears to be sinking in sympathy. The USDA December report did not offer any bullish inspiration and Chicago values are softening on the fear that US President Trump will either apply a new round of tariffs or continue negotiations to reach a new pact. The big surprise for Chicago would be if the US/China were able to reach a Phase One Deal.
  • The morning volume of Chicago trade has improved from yesterday’s horrible level (third lowest of the year on a USDA report day) as March corn futures have slid below the November lows. The market feel is bearish, but corn is reaching back into an area of fundamental support at $3.65-3.70. End users will likely take forward coverage beyond Q1 into this support. Soybeans and wheat may have additional downside on fund sales and a lack of importer demand.
  • Chicago brokers estimate that funds have sold 9,000 contracts of corn, 3,000 contracts of wheat, and 4,800 contracts of soybeans. In soy products, funds have sold 2,300 contracts of soymeal and 2,400 contracts of soyoil.
  • FAS announced the sale of 585,000 mt of soybeans to China and 140,000 mt to an unknown buyer (likely China) for the 2019/20 crop year. Today’s total sales amount to 725,000 mt. We understand that China offered new duty-free import licenses to Chinese crushers for upwards of 2.0 million mt of US soybeans. Monday was an active sales day with as many as 1.0 million mt of US soybeans being sold. It is believed that some 300-500,000 mt of US soybeans could still be sold to China, but that it is uncertain since US soybean cargoes sold to Chinese crushers in late October/November (either afloat or being loaded) did not receive duty free import licenses. These cargoes either at port or on the way, which could be used against the 2 million mt that China pledged to secure on Friday.
  • Showers are occurring across portions of La Pampa and Buenos Aires. The rain was unexpected and not fo recast by the models. The showers have not been very heavy, but any rain is helpful and the green blobs on the radar is helping spark some of the fund selling this morning.
  • US ethanol production ramped up 315 million gallons last week vs 312 million last week and 308 million last year. This is the second week of the 2019/20 crop year that US ethanol production has exceeded a year ago. The data was supportive of corn. The US Central Bank will end their last policy meeting of 2019 this afternoon. The odds-on bet is that the Fed will be on hold with interest rates.
  • The US Central Bank looks to be on hold throughout much of 2020 with US inflation rates gradually increasing with time.
  • The midday GFS weather forecast is slightly wetter in Southern Argentina while staying dry across NE Brazil over the next 10 days. A high-pressure ridge over NE Brazil which could produce some needed rain for Argentina as tropical moisture is pushed southward. A cold front will pull through Argentina late this weekend which will be closely watched. Much of the Brazilian crop areas will be well watered (except NE Brazil). No lasting heat is expected beyond the next 24 hours
  • Chicago markets fall much easier than they rally. The drop today ran into air pockets with fund selling pushing corn below the November lows. End users will secure forward coverage on a scale down basis. We now see less downside risk in corn vs soy or wheat, but there is no incentive for new risk taking ahead of China trade deadlines and uncertain S American weather.

10 December 2019

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  • The USDA’s December WASDE is often a dud in terms of new statistical data, and this year’s release failed to deviate from that trend. Protocol prevents WASDE from making changes to US production. It is too early to adjust S American yield potential. The bottom line is that the USDA has kept US and world supply and demand unchanged from previously, with the only meaningful revisions being modest boosts in 2019/20 Chinese production. Chicago futures are mixed but very little changed at midday.
  • US corn and soy balance sheets were left completely untouched. US wheat imports were lowered 15 million bu. US wheat exports were raised 25 million bu. US wheat stocks were lowered 40 million.
  • USDA cites a strong pace of US wheat exports to date, along with competitive fob offers. We agree with both, but key in the weeks ahead will be whether traditional buyers of US wheat front-loaded purchases during the first half of the crop year. EU wheat futures are down slightly today despite French wheat being the cheapest origin offered to Egypt.

US End Stocks (million bu)

2018

Nov

2019

Dec

2019
Corn

Soybeans

Wheat

2,114

913

1,080

1,910

475

1,014

1,910

475

974
  • World corn stocks were raised 4.6 million mt, mostly due an upward revision to 2019 Chinese production worth 6.8 million mt. S American crop sizes were unchanged.
  • World soy stocks were raised 1 million mt on a like-amount boost to Chinese production.
  • World wheat stocks were raised to a new record high 289.5 million mt. 2019 Chinese production was lifted 1.6 million mt. Major exporter production was lowered a net 1.1 million mt as reductions in the S Hemisphere offset a combined 1 million mt combined hike in the EU/ Russia. Global domestic wheat use was lowered 1.4 million mt, with projected world trade down 0.87 million mt.

World End Stocks (million mt)

2018

Nov

2019

Dec

2019
Corn

Soybeans

Wheat

319.2

109.8

277.9

296.0

95.4

288.3

300.6

96.4

289.5

World End Stocks Less China (million mt)

  

2018

Nov

2019

Dec

2019

  
Corn

Soybeans

Wheat

107.9

90.4

138.1

100.7

76.3

142.6

99.5

76.2

142.0

  
  • We still looks for a 75-100 million bu cut to total US corn use within the USDA’s January release, but otherwise prevailing trends will stay intact Our broad outlook is bullish meats and vegetable oils, Malaysian palm oil stocks at the end of November totalled 2.26 million mt, down 96,000 tons from Oct and down a sizeable 750,000 tons from Nov 2018. Much smaller S American corn crops are required to tighten global grain balance sheet and stimulate meaningful fund short covering.
  • The midday GFS weather forecast is wetter in Southern Argentina as well as in Mato Grosso and Mato Grosso do Sul in Central Brazil. Note that the GFS forecast maintains a needed shift to wetter weather beginning next Thurs/Fri. The arrival of rainfall late next week will also act to moderate Argentine temperatures. Yet, other models need to confirm this potential change in the coming days.
  • Today’s report is rather boring even by Dec WASDE standards. US Chinese trade progress and Dec-Jan S American weather will dominate price determination moving forward, a Phase One US/China deal being the most significant bullish catalyst nearby.

9 December 2019

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  • Chicago futures are mixed at midday with the WASDE December report out tomorrow. The soybean market has held firm on rumoured China demand while grain rallies are capped by large world crops and an expected cut in US 2019/20 corn exports. We look for a mixed close (soybeans firm, grains lower)with all eyes on whether US President Trump decides on the Phase One US/China trade pact later this week. Whether the US December WASDE report is bullish or bearish, it is the state of US/China trade that determines price action into the New Year.
  • Rumours abound that China secured 1-2 million mt of US soybeans out of the Gulf amid firming cash basis bids. Traders speculate that China is making the soybean purchases as a goodwill gesture with US/China negotiations ongoing. It is likely that China’s State importers of Cofco or Sinograin are the buyers.
  • Chicago brokers estimate that funds are flat in wheat and corn, but buyers of 4,000 contracts of soybeans, 3,000 contracts of soyoil and 900 contracts of soymeal. Funds are not showing any interest in adding to their long wheat or cutting short corn posit ions.
  • We cannot imagine that private Chinese crusher would step forward for US soybeans amid the uncertainty regarding US/China trade ahead of a key December 15 deadline looming from US President Trump. Commercial sources indicate that China still has 3-5 million mt of soybean import needs to cover from the US before the arrival of the new Brazilian soybean crop in February.
  • US weekly export inspections for the week ending December 5 were; 18.9 million bu of corn (down 338 million or 57%), 48.7 million bu of soybeans (up 114 million or 22%) and 478 million bu of wheat (up 73 million or 18%). China shipped out 30.5 million bu of US soybeans last week or 63% of the total. The US corn export pace remains deeply disappointing with sales and shipments well behind levels needed to reach the WASDE annual forecast.
  • Argentine farm selling has dramatically slowed at the start of the week as farmers hold their collective breath on when the new Fernandez Government will raise export taxes. Most expect increases to be announced this week. And the Brazilian Real and Argentine Peso are slightly firmer. US farmers are also light cash sellers amid the hope that US President Trump will approve a trade deal with China. It is a big week for grain market moving news.
  • The midday GFS S America weather forecast is similar over the next 8 days, but wetter for Argentina during the 9-15 day period as several fronts work through the country. S Argentine rainfall during Dec 17-25 is estimated in a range of 0.75-2.00″, a wetter change. Dryness will remain an issue across NE Brazil with the forecast being slightly warmer. A ridge of high pressure over NE Brazil would move rain southward into Argentina. Today, Brazilian crops are in mostly good condition.
  • Soybeans are the bullish Chicago leader amid the large fund short position and new Chinese goodwill buying of 1 -2 million mt of US soybeans. US corn and wheat lack export demand that would allow the grains to follow (beans). Malaysia will be out with their monthly production/stocks data overnight with USDA’s WASDE due out Tuesday. But the big event will be decided on the weekend as US President Trump decides on a Phase One Deal with China. US/China trade deal holds the best hope for a nearby recovery.

5 December 2019

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  • Chicago Ag markets are mixed at midday with soybean and wheat futures higher while the corn market is slightly lower. US corn export sales have yet to recover and the window for new sales is narrowing to make up lost ground. We look for a mixed close with the potential that Argentina raises grain and soy export taxes on Friday with the installation of Fernandez as the new President of Argentina.
  • Rumours abound that a large Argentine crusher is having financial difficulties and had to liquidate existing short hedges in soymeal. The covering started late Wednesday and was sizeable after the opening with trade sources suggesting that the crusher bought close to 3,000 contracts over several minutes of time. The GMO order (Get Me Out) added about $3/ton on the price of March soymeal futures. The uncertainty of currency and politics are colliding in Argentina.
  • Based on the political and economic uncertainties within Argentina and the likely hike of export taxes, we would anticipate that Argentine exporters and crushers will move to doing business on more of a spot basis, compared to offering product months in advance as has been the case in recent years. This will not change the tonnages of ag products that Argentina sells/exports, just the visibility of future price offers.
  • Chicago brokers estimate that funds have been net sellers of 3,000 contracts of corn, but buyers of 4,200 contracts of soybeans and 1,800 contracts of Chicago wheat. In the soy products, funds have bought 3,500 contracts of soybean meal and 900 contracts of soybean oil.
  • US export sales for the week ending November 28 were; 8.4 million bu of wheat, 21.4 million bu of corn, and 25.1 million bu of soybeans. All sales were at the lower end of expectations with some traders citing the US Thanksgiving Holiday for the shortfall. We suspect that US export demand is still lacklustre.
  • The USDA announced the sale of 245,000 mt of US soybeans sold to an unknown destination. The sale was split into 120,000 mt for 2019/20 and 125,000 mt for 2020/21. The buyer is rumoured to be Mexico or an EU crusher. No China crusher will secure US soybeans out into 2021 amid US/China trade uncertainty in our opinion. 10 million mt of US soybean duty free licences into China have been largely used. In the weekly export sales report, China took 298,000 mt of US soybeans, were mostly switches from unknown destinations. This is not new Chinese demand.
  • The midday GFS weather forecast remains arid for nearly the entirety of Argentina while Brazil stays well-watered. No extreme heat is noted. The key corn producing areas of Argentina look to remain concerningly dry into next week. Another 10-15 days needs to pass before a yellow flag is raised for the soon to pollinate initial corn crop. The drying soil moisture profile has to be monitored. Brazilian soybean crop estimates are rising and totals of 123-125 million mt of soybeans should not be ruled out.
  • Chicago values are rising on fund short covering following the Argentine crusher that exited a meal hedge. Chicago values are still chopping back and forth and we do not expect this trend to change unless a US/China trade deal is completed or the dryness in Argentina becomes more entrenched. US export demand remains disappointing and US exporters fear that strong world demand from August into November sapped some forward business. Research holds a view that the downside price risk is limited for now.