• Chicago futures are weaker at midday, with corn and wheat futures extending overnight losses. Phase One’s seeming confirmation that China will buy US ag products according to needs and market conditions has been the focal point of the market today. This at the least places more pressure on actual confirmed demand from China beginning in mid-February. The market won’t likely receive any more details regarding Phase One following the release of the text on Wednesday afternoon. We would note that Chinese demand for US goods will operate outside of traditional Chinese import protocols.

• The Chinese government is fully expected to issue tariff waivers on needed products, especially meats, which will reduce the burden of higher costs and makes current import margin analysis difficult. Yet, it remains that global grain supplies will be more than adequate longer term amid profitability in Brazil and the Black Sea. Bull markets need constant fuel.

• US export sales through the week ending Jan 9 were higher than the previous week across the board. Corn sales totalled 31 million bu, vs. just 6 million the prior week. Wheat sales totalled 24 million bu, vs. a meagre 3 million the prior week. Bean sales were 23 million bu, vs. 13 million, and weekly meal sales totalled 375,000 tons, the largest of the crop year so far.

• For their respective crop years to date, the US has sold 760 million bu of corn, down 40% from last year, 1,120 million bu of soybeans, unchanged from this week a year ago, and 720 million bu of wheat, up 9%. We have no major disagreement with USDA wheat and soy export forecasts, but corn exports are still viewed as 50-75 million bu too high, even with modest Chinese purchases in 2019/20.

• Needed rain is falling across Eastern Australia, with additional totals of 1-2″ to impact the eastern sections of NSW and Queensland. Longer term climate forecasts suggest Australian drought continues into spring, but recent and coming precipitation will rebuild following devastating fires.

• NOAA’s Feb-Apr climate forecast was updated this morning. Near normal temperatures and precipitation are forecast into the middle of spring across the primary Corn Belt. A wet/cool pattern may linger across the far Northern Plains. NOAA cites current warmth across the equatorial Pacific. However, a full-blown El Niño is unlikely in the coming months. Neutral ENSO is projected through the early part of the US growing season.

• The midday GFS weather forecast has again added to precipitation totals in Central Brazil through the next 10 days but is otherwise unchanged. Pockets of dryness in Mato Grosso, Goias and Minas Gerais will be eliminated by late January. A drier climate develops in Central Argentina and Southern Brazil. This is not yet a concern, but regular Argentine rains will be needed no later than early February.

• March corn has fallen below all major moving averages. A close below $5.55, March Chicago wheat, accelerates fund liquidation. We holds a neutral bias into late winter.

• Chicago futures are mixed at midday with wheat firmer and corn/soybeans slightly lower as large S American crops continue to be made by timely rainfall. We note that again better than expected precipitation fell across key Argentine crop areas overnight. 5-day precipitation accumulation across crop-heavy areas of Cordoba, Santa Fe and northern Buenos Aries range from 3.5-6.5″. A drier pattern is offered to Argentina, but nearby improvement in vegetation health will be ongoing. The message is that only exporter wheat balance sheets feature real fundamental tightness ahead of S America’s harvest.

• US wheat futures have found newer seasonal highs as most trade participants expect coming Chinese demand for higher protein varieties in 2020. And Chicago futures continue to act as a proxy for the major exporter balance sheet, which is the tightest in 6 years. It is tough to be bearish wheat into February, but new sales have been made as we are concerned over the return of Black Sea farmer selling while world trade seasonally slows.

• The US and China’s Phase One agreement has been signed to mixed market fanfare. Aside from wheat’s rally today, US ag futures, including dairy, have done little. The Dow is up 163 points. Crude is down $0.40/barrel despite a modest drawdown in US crude stocks last week.

• Most important will be Phase One’s enforcement mechanisms should China fail to meet its spending targets by 2020. There is also doubt that a Phase Two agreement will be reached anytime soon, with the US and Chinese press at odds as to when Phase Two talks will even begin. Phase Two is required to further ease US tariffs on Chinese manufactured goods. Phase One text is not yet available.

• US ethanol production through the week ending Jan 10 totalled 322 million gallons, up 9.7 million on the previous week and a record for early January. Cumulative weekly ethanol production sits at 5.73 billion gallons, down 1% from last year and in much better alignment with the USDA’s forecast. However, ethanol stocks were up another 23 million gallons to a 15-week high 966 million.

• US gasoline stocks last week were up 6.7 million barrels. US gasoline stocks at 258 million barrels are the largest on record for early January, and the further build has pressured US energy markets at midday. Spot ethanol is down slightly at $1.35/gallon. Futures-based margins sit fractionally above breakeven. Improved ethanol export demand, potentially to China, is needed to provide incentive to plants and blenders moving forward. So far in 2020, weekly residual ethanol disappearance, the best measure of exports, is down 36% from last year.

• The midday GFS S American weather forecast is wetter in Central Brazil in late January but otherwise unchanged. The GFS allows soaking rainfall to expand a bit farther southward Jan 23-30. Rainfall of 3-6″ will impact Mato Grosso, Mato Grosso do Sul, Minas Gerais and far northern Brazil in the 8-15 day period. This rain very likely provides enough to finish crops should it verify. Nearby, moderate rain impacts N Argentina and Southern Brazil in the next 48 hours before drier patterns are established there.

• Wheat’s rally is viewed as function of tight exporter stocks/use and a rising need for favourable Northern Hemisphere spring weather. Corn/soy balance sheets, however, loosen substantially with semi-normal weather in 2020.

• Chicago futures are mixed at midday in moderate volume with everyone trying to guess if China will secure US ag goods (if anything) following Wednesday’s Phase One Agreement signing. The bulls argue that China will make purchases prior to their January 25 Lunar New Year holiday with the bears claiming that China will sign the agreement and then do nothing.

• We expect that China will start their ag buying and adhere to quarterly purchase promises that will be closely followed by USTR. China will not be allowed to wait until the final days of an annual agreement and then “buy it all”. Rather China will conclude regular purchases that will be watched closely by both sides. We expect that China will secure what it needs, US pork, DDGs, ethanol and soybeans. However, we would point out that open interest in Chicago corn/wheat/soybeans has recently been surging.

• Research calculations suggest Chicago corn open interest has risen nearly 60,000 contracts in the past 6 trading sessions while wheat is also up sharply. On Monday, Chicago corn futures open interest was up another 8,153 contacts, wheat up 10,927 contracts with soybeans up 7,123 contracts.

• The sharp rise in open interest has some speculating that China has been securing US futures for forward purchase coverage. We would suggest that the index fund rebalance is also underway and that it is not fair to suggest that all that demand is from China. However, the futures buying has traders on alert that China may be buying futures to engage in a versus cash in the future. The 86-page Phase One Agreement is expected to be released Wednesday morning.

• Chicago brokers estimate that funds are flat in corn, have bought 4,000 contracts of Chicago wheat and 4,200 contracts of soybeans. In soy products, funds are flat of soymeal while buying 3,100 contracts of soyoil.

• Egypt’s GASC secured 240,000 mt of Russian/Romanian wheat at prices that range from $235.30 to $237.00 with freight rates that range from $12.90 to $13.55/MT. Russia sold 180,000 mt while Romania sold 60,000 mt. The purchase covers GASC wheat milling needs into late March. We look for GASC to tender another few times before the arrival of their own wheat harvest in April and May. Turkey has also covered its wheat import need into late March today in a tender.

• The GFS weather forecast is slightly drier for Argentina and more in line with the overnight EU model solution. The remainder of Brazil and Northern Argentina looks to receive adequate rainfall, with their being no hint of any extremely warm temperatures. The combination of cool temperatures and at least normal rainfall is boosting the Brazilian soy crop. A cold front is pushing through S Argentina and producing a few spits of rain. Better rain chances are forecast this afternoon and evening. The rains then push into S Brazil late Wednesday/Thursday. Dry weather follows with improved rain chances returning mid to late next week. The forecast remains generally favourable for S American crops with rain needed across S Argentina.

• Chicago wheat pushed to new rally highs with March corn unable to rise above last week’s high at $3.92. Soybean futures are sagging on the growing S American supply prospect. China is “chock full” of beans amid large November/December imports. Chinese crushers are having trouble moving meal and stocks are building. It is all up to China whether they make new purchases which can push wheat/corn to new rally highs.

• Chicago futures are mixed at midday in thinning volume. Long soybean/short corn spreads are being unwound which is rallying corn and pressuring soy futures. Chicago corn open interest has increased sharply in the past few trading session with a gain of over 21,147 contracts recorded on Friday. We note that much of the increase has occurred in July-December corn futures which argues that someone is pricing back end demand. This would counter the idea of soybean/corn spread liquidation. Moreover, March corn is leading the rally on spreads and it is taking aim at $3.92-3.95 resistance. A record large 2020 Brazilian crop looms with harvest reaching 2% through Friday.

• We look for a mixed/firm close in Chicago as few sellers will want to take on the risk of being overly short ahead of the US/China Phase One Trade Deal signing on Wednesday. The US has stated it will remove China from the list of being a currency manipulator ahead of the Phase One Deal. We continue to hear talk of China making goodwill US ag purchases following the signing of the Phase One Deal. US meats, grains and soybeans are likely to be included.

• US export inspections for the week ending January 9 were; 18.1 million bu of corn, 41.7 million bu of soybeans, and 17.4 million bu of wheat. Soybeans inspections were better than analysts expected with China shipping out 15.2 million bu.

• Crop Year to date US export inspections are; 356.7 million bu of corn (down 410 million or 53%), 843.5 million bu of US soybeans (up 167 million or 25%), with wheat at 565.7 million bu (up 70 million or 14%). The US corn export and sales pace argues for another 75-125 million bu cut in the US 2019/20 corn export forecast. Our forecast assumes that China secures 2-2.5 million mt of old crop US corn.

• Chicago brokers estimate that funds have bought 6,000 contracts of corn, while selling 2,000 contracts of wheat and 3,200 contracts of soybeans. In soy products, funds are flat of soymeal while selling 4,600 contracts of soyoil.

• New crop Brazilian winter corn price bids reached 40 Reals/bag for July-August delivery, a record. The incentive for Brazilian farmers to plant record acres of winter corn are extremely high following first crop soybeans.

• The GFS weather forecast is consistent with the overnight forecast solution with below normal rains to fall across Southern Argentina. Otherwise, the outlook shows near to above normal rainfall for the remainder of S America and crop prospects remain bright. There is no indication of any excessive or lasting heat that would pose a yield risk. The chances for improved Southern Argentine rain should return in late January as the jet stream migrates northward. The midday S American weather forecast leans crop positive.

• The marketplace is doubting that China will show up with new ag purchases following the Phase One signed agreement this Wednesday. Traders are doubtful that China will make any large US grain or soybean purchases nearby. And the lingering bearish supply effect of the January USDA Crop report is being felt with a record large Brazilian soy crop looming. Large soy supplies abound. However, the lack of volume argues that the Chicago break won’t be able to garner much downside momentum.

• USDA January Crop Report Analysis: Market Fireworks were absent in the USDA January report as NASS trimmed 2019 US corn and soybean harvested acres by 900,000, while yield rose 0.5 bushels/acre in soybeans tov47.4 bushels/acre and corn by 1.0 bushels/acre to 168.0 bushels/acre. The increase in US corn and soybean yield was not expected.

• The bulls will argue that smaller US corn stocks argue for a corn yield reduction, but the point is that US 2019 supply is not going to be a bullish driver going forward. Rather, China demand remains the last bastion of bullishness for US grain/soy beans amid the Phase One signing next week. Record large S American crops loom thereafter to pressure Chicago into spring.

• NASS’s US corn data this morning leans neutral short-term but failed to spark a new structural trend in the market. Final US production was raised 31 million bu to 13,692 million. Harvested area was cut 300,000 acres, while yield was raised 1.0 bushels/acre to 168.

• Dec 1 corn stocks were pegged at 11,389 million bu, down 548 million from last year but very close to the trade’s average guess of 11,415 million. However, using known export and ethanol consumption, this does imply record Sep-Nov feed/residual disappearance of 2,433 million bu. WASDE incorporated strong feed consumption in its annual balance sheet, with feed raised 250 million to 5,525 million. The biggest year-over-year changes in Dec 1 corn stocks occurred in IL, IN, OH and SD, where basis will stay strong well into spring.

• US 2019/20 corn stocks were lowered a modest 18 million bu to 1,892 million as enlarged feed/ residual more than offset higher production and a 75 million bu cut to projected 2019/20 exports. Our main concern is that, barring nearby Chinese demand, US exports will be lowered another 50 million bu. Amid ongoing favourable weather in S America into late Jan, concern over US corn stocks is now focused solely on tonnages shipped to China in 2020.

• US soy yield was raised 0.5 bushels/acre to 47.4. Harvested area was lowered 600,000 acres. A net 8 million bu gain in production was offset completely by reduced imports and a 4 million bu decline in carry-in stocks. 2019/20 soy end stocks are unchanged at 475 million bu.

• Dec 1 US soy stocks totalled 3,252 million bu, vs. the market’s guess of 3,179 million. WASDE opted not to adjust its soy residual forecast. Dec 1 wheat stocks totalled 1,834 million bu, right at the low end of trade guesses. This also implies larger than expected Sep-Nov feed/residual disappearance, with WASDE raising its annual wheat feed use forecast 10 million bu to 150 million. US wheat end stocks fell 9 million to 965 million bu.

• However, 2020 winter wheat seeding was pegged at 30.8 million acres, down just 355,000 from last year and roughly 100,000 above expectations. 2020 HRW seedings are estimated at 21.8 million acres, down 660,000 from a year ago; SRW seedings are estimated at 5.64 million, up 440,000 from last year. Initial seedings data implies another 60 million bu drawdown in HRW stocks in 2020 but a modest build in SRW stocks of 8-10 million with normal weather.

• Global balance sheets were left mostly unchanged. World wheat stocks less China were lowered 1.4 million mt amid higher projected global trade, a 1 million mt cut to Russia’s final crop size and another 500,000 mt cut in Australia. Chinese soy imports in 2019/20 were left untouched at 85 million mt. Chinese corn imports were also unchanged at 7 million mt.

• The midday S American forecast maintains rainfall in S Brazil as well as Buenos Aires early next week. Weekly export sales were crop-year lows in corn and wheat.

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Weekend summary 10 January 2020

• Chicago futures are mixed at midday with soybeans firm while corn and wheat sag. The volume of morning trade is abysmal with few traders wanting to take on any new risk ahead of the USDA January Report out on Friday. Most discretionary traders have not returned to trading and are awaiting both the USDA’s Friday report and US/China Phase One Deal signing a week from today before jumping back into new positions. Both events will help key price direction into the end of the month.

• Chicago brokers estimate that funds have sold 1,200 contracts of corn and 1,400 contracts of wheat, while buying 3,600 contracts of soybeans. In soy products, funds have bought 1,800 contracts of soymeal and1,300 contracts of soyoil. Fund managers are not showing much interest in taking new positions. The Index Fund roll and rebalance starts near the close and persists for 5 trading days.

• In a midmorning press conference, US President Trump indicted that Iran appears to be “standing down” and that the US was ready to embrace peace. The US will impose new sanctions on Iran, but the broad US stock indexes surged to new highs while crude oil  prices fell to sharp losses on the prospect of reduced tensions. WTI March crude oil is priced at $59.60, down nearly $3.00/barrel. Gold has also fallen 1% on profit taking

• CONAB estimated a record large Brazilian soybean crop of 122.2 million mt, up 1.2 million from their December forecast. CONAB estimated the 2020 corn crop at 98.7 million mt, up slightly from their estimate of 98.4 million last month. History argues that CONAB tends to be too conservative in January and with normal weather, the Brazilian soybean crop could rise 2-6 million mt and corn 2-5 million mt. We consider the range for the 2020 Brazilian soybean crop at 123-129 million mt with corn at 99-105 million mt depending upon Mother Nature.

• Weekly US ethanol production and stocks data was slightly bearish with rising stocks and reduced blender demand. US weekly ethanol production amounted to 312 million gallons vs 313 million in the week prior. This consumed around 108 million bu of corn. US ethanol stocks grew to 944 million gallons, up 61 million gallons or 7% from last week. The stocks rise was a result of diminished blender demand. US board-based ethanol margins rest at $0.O5/gallon. A seasonal peak in US ethanol production has likely been scored with reduced production into spring. We anticipate WASDE will trim its US corn grind in coming monthly reports. US ethanol is not a bullish demand driver for US corn prices.

• GASC secured 300,000 mt of Russian, Ukraine and Romanian wheat in an overnight tender for late February shipment.

• The midday GFS weather forecast is slightly wetter for Argentina and Southern Brazil over the next 10 days with better coverage and rain amounts for N Argentina. Southern Argentina will see reduced totals while Brazil well-watered. There is no evidence of extreme heat for either country and yield potential should continue to rise. The forecast is favourable for S American crops for another 2 weeks and time is running out for a Brazilian weather problem that would drop their crop below 120 million mt.

• Friday’s USDA crop report just ahead and the fear is that NASS will release a smaller US corn and soy crop due to the latent 2019 Midwest harvest. And we expects that China will make initial US ag purchases following the Trump/He signing next week in DC. Yet, the market must prepare for record large S American soy/corn production and keen export competition beyond mid-February. An abundance of world supply is a theme returning in late January.

• Chicago futures are slightly weaker at midday as US and world crude markets ease and fresh bullish ag specific news is lacking. Next week’s signing of the US and China’s Phase One agreement will offer support to soybeans and meats on breaks. But the USDA’s looming January crop/WASDE report is unlikely to feature a meaningful tightening of major crop balance sheets. S American weather forecasts remain broadly favourable as rainfall moves southward in Brazil. And the elimination of large net short positions in soybeans and KC wheat last week is noteworthy.

• The US$ is up sharply and has recovered well from late December’s 5-month low.

• Spot WTI crude is down $0.60/barrel at midday as world energy markets debate futures production, trade and logistics.

• All eyes will be on the Strait of Hormuz, which is cared for by Iran and which accommodates roughly one-fifth of global oil movement. Yet, the trade is also aware of the US’s newfound position as a major crude exporter, with the US becoming a net exporter of petroleum products in late 2019. Just last week, the US exported a record 31 million barrels of raw crude. Net US crude imports in late Dec fall to just 13 million barrels, which compares to 40-50 million in 2018. Any lasting rally in WTI will be met by greater US production.

• US ethanol futures are flirting with 3-month lows. Futures-based ethanol margins have fallen to $0.07/gallon, vs. $0.35 in early Dec. Midwest cash ethanol margins have followed, with spot revenue in the W Midwest just barely above variable costs.

• Needed soaking rain will fall across New South Wales and Queensland in eastern Australia Jan 16-22. This is too far out to place much confidence in forecast details, but the EU and GFS models have been consistent in projecting precipitation of 1-2″ to Australia’s Eastern Ag Belt. Coming rain won’t alter Australia’s 2020 grain supply and demand, but will aid in firefighting as well as begin to replenish soil moisture. A series of additional rain events are desired between now and wheat planting, which occurs in late March/early April.

• The midday GFS weather forecast is wetter in South-Central Brazil and drier in RGDS in the far south of the country. Cumulative 10-day totals across Mato Grosso do Sul, Goias and Sao Paulo have been raised to 4-7″, or some 150-200% of normal. Daily showers continue in Mato Grosso. However, far Southern Brazil will be left arid and vegetation health in RGDS already indicates noticeable yield declines there. Whether the EU model follows this drier trend in Southern Brazil will be monitored. But Brazil’s overall climate pattern will be conducive to above-trend national soy yield. Moderate rain returns to Central Argentina Jan 13-14.

• Managing risk over the next several months amid heightened geopolitical and trade uncertainty will be key. Our thoughts remains to sell strong rallies as a meaningful cut to current and future global crop stocks is needed to turn outright bullish.

• Chicago futures are mixed at midday with soybeans recovering while the grains sag. The corn market ran into fund selling as March fell below the 20 and 50 day moving averages and broke out to the downside on the charts. Funds are heavily long wheat which makes this market vulnerable to profit taking, while the soybean market rallies on the strong prospect of a US/China Phase One Deal signing next week at the White House. Soybeans will be on top of the Chinese grocery list to reach $80 billion over the next 2 years. March soybeans are back challenging resistance at $9.50-9.60. The morning Chicago trade volume is disappointing as the DOW and other financial markets snap back from early losses. The slowing volume trend is likely to keep the Chicago choppy ahead of Friday’s key USDA Report. We look for a mixed close with the range likely in for the day.

• Chicago brokers report that funds have sold; 3,000 contracts of wheat, 5,500 contracts of corn, while buying 3,200 contracts of soybeans. In the products, funds have sold 4,200 contracts of soyoil while buying 2,900 contracts of soymeal. The volume of trade has really slowed at midday.

• US Export Inspections for the week ending January 2 were; 21.7 million bu of corn, 12.7 million bu of wheat,and 35.4 million bu of soybeans. The soybean and corn exports were near trade expectations, while wheat was light.

• For their respective crop years to date, the US has shipped out 339 million bu of corn (down 389 million or 53%), 799 million bu of soybeans (up 162 million or 25%), and 545 million bu of wheat (up 70 million or 15%). We look for WASDE to cut 2019/20 US corn exports by 50-100 million bu and soybeans by 10-25 million bu in Friday’s USDA report. China shipped out 13 million bu of US soybeans through the Gulf and PNW last week.

• Argentina’s new Government is in talk with producers to modify export taxes for those farmers far away from key export ports. The shift in policy is being argued to more fairly apply export taxes since they harm those that are the farthest away. Talks are fluid and the grains, corn and wheat has placed a hold on the 3% export tax that was approved by Congress. Argentina wants to maintain its role as being a primary exporter of world ag products to obtain US$, and the Government is trying to find a favourable mixture of tax vs transportation cost. For now the tax on corn/wheat is 15% while soybeans are being taxed at 33%.

• The midday GFS weather forecast is drier for extreme S Brazil and Argentina into January 16. There is no evidence of any extreme heat, but the GFS model has flipped back and forth between dry and wet forecasts for Argentina and S Brazil. The often more correct EU model offers better rain chances for Argentina/S Brazil, but the midday GFS is something that must be monitored. The remainder of Brazil will see near to above normal rain which will aid crop prospects. The early harvest in Northern Brazil will be starting in 10-14 days.

• A back-and-forth Chicago trade is expected heading into Friday’s USDA Crop Report. We look for a modest 1-2 bushels/acre decline in US corn and 0.5 bushels/acre decline in US soybean yield due to the delayed 2019 Midwest harvest. Brazil’s CONAB will be out Wednesday with its January crop estimate with the US/China to sign the Phase One Trade Deal on Jan 15. With the index fund rebalance starting Wednesday, we look for funds to sell soyoil and KC wheat.

• Chicago futures are sharply lower at midday in a risk off session. The fund flows are in the direction to reduce risk relative to the US strike against a key Iranian General and the promised retaliation by Iran. Crude oil has rallied sharply, but the US$ has retreated from a sharp early gain.

• It is unlikely that US/Iran are entering a long military conflict, but tensions are high and Chicago grain markets have enjoyed a multiweek rally. As such, traders are cutting their risk and banking profits. We look for funds to continue with their selling ways into today’s close.

• Chicago brokers report that funds have sold; 7,000 contracts of soybeans, 5,550 contracts of corn, and 4,300 contracts of wheat. In soy products, funds have sold 3,500 contracts of soyoil and 4,100 contracts of soymeal. Normally, rising crude oil would be bullish for the biofuel crops of corn and soyoil.

• US Export Sales for the Week Ending December 26 were; 11.5 million bu of wheat, 20.9 million bu of corn, and 12.1 million bu of soybeans. The sales were below expectations, but it was a holiday week. Please note that there were 1.9 mt of US soyoil sales cancellations while US weekly meal sales were just 94,700 mt. China booked just 160,200 mt of US soybeans while exporting 419,000 mt last week. In the 2019/20 crop year, China has booked 11.1 million mt of US soybeans which includes/exceeds their promise to take 10 million mt made in October.

• For their respective crop years to date, the US has sold 693 million bu of wheat (up 40 million or 6%), 723 million bu of corn (down 530 million or 42%), and soybean sales of 1,084 million bu (down 54 million or 5%). Mexico has taken 9.0 million mt of US corn or some 50% of the total with sales to others at a record low. If not for Mexico, US corn sales would be below the pace of 2012, when US corn exports dramatically sank due to sky high corn prices of $7-8/bu.

• lnforma estimated the 2020 Brazilian soybean crop at 125.6 million mt with Argentina at 54.0 million mt. The lnforma Brazilian soybean crop estimate would be a record large by some 5 million mt.

• US ethanol production likely reached a seasonal high before Christmas with last week’s total falling to 1,066 barrels/day or 313 million gallons per week vs 318 million in the prior week. US ethanol stocks were down to 884 million gallons vs 902 million last year. US ethanol stocks are down 9% on last year. US crude oil stocks fell below last year (down 3%) at 430 million gallons.

• The midday GFS weather forecast is wetter for S Brazil and Argentina into January 13. There is no evidence of any extreme heat and the coming rainfall should be adequate to maintain strong S American crop production. And near normal rainfall is indicated for Argentina and S Brazil in the 10-15 day period. S American crops are in good to excellent condition which should translate into above trend line yields should favourable weather persist for another 3-6 weeks. The early harvest in Northern Brazil will be starting in 10-14 days. Some early cutting is already under way as farmers defoliate a modest portion of their September seeded soybean crop.

• It is hard to say whether Thursday’s Chicago rally amounted to a seasonal top. That potential exists, but there should be a retest rally that offers another sales chance. US corn, wheat and soy export interest remains modest and S American weather forecasts are favourable. The US export opportunity is in retreat. Yet, the USDA Jan 10 Crop Report lies ahead and US President Trump looks to sign the Phase One Trade Deal on January 15.

• Chicago futures are higher at midday as funds continue to close out their net short positions in corn/soybeans ahead of the Jan 10 USDA crop report and the Jan 15 signing of the US/China Phase One trade pact. S American weather and crop discussions have not had much impact on Chicago price in recent weeks, but that could change following the mid-January Trump Phase One Trade Pact signing.

• We would note that China has yet to confirm the Trump Presidential signing (from their side) on Jan15 or the timing of the arrival of Liu He, China’s Vice President in charge of the trade negotiations to Washington DC. The Phase One Deal appears to be completed, but China is not bragging about the outcome

• Traders report that new money was put to work shortly after today’s opening with large volume noted on the buy side. We suspect that additional inflows will be seen in coming days which will be price supportive. Any market correction should be shallow/short lived until later in the month.

• Chicago brokers estimate that funds have bought 5,000 contracts of wheat, 6,200 contracts of corn, and 2,000 contracts of soybeans. In soy products, funds have bought 5,300 contracts of soyoil while being flat in soymeal.

• FAS will release their weekly export sales report on Friday morning at 7:30 am CST. We look for weekly export sales of; 300-375,000 mt of US wheat, 650-850,000 mt of corn and 600-700,000 mt of US soybeans. The Christmas Holiday likely reduced sales for the week. Traders will not pay too much attention to the weak totals. However, note that Argentine corn is cheaper than the US Gulf beyond February while Brazilian soybeans are 20 cents cheaper/bu than the US Gulf beyond mid-February. The point is that the widow for US corn or soybean export demand is rapidly closing.

• The Baltic Ocean Freight index posted its largest one-day loss in nearly 6 years to start 2020. The Index is now at it’s lowest in 7 months and posted a large 10.5% decline today. The dry bulk index has fallen 61% since posting a top in September of at 2,518.00. The decline in freight bemoans the slowing demand for grain charters, something that we have remarked upon recent times. Research argues that world grain buyers front loaded their demand from August through October, and their demand is now in retreat.

• Chicago soybean/soy product deliveries against January futures have been large with today’s total of; 1,485 contracts of meal, 597 soybeans and 605 contracts of soyoil tendered. No strong stoppers have emerged suggesting cash abundance.

• The midday GFS weather forecast is slightly drier for S Brazil and slightly wetter for Central and Northern Brazil over the next 10 days. There is no evidence of any extreme heat, in fact, below normal temperatures are expected over the next 2 weeks across much of Argentina and the southern third of Brazil. Better rains are indicated for Argentina in the 10-15 day period which should maintain favourable growing conditions. S American crops are in good to excellent condition which should translate into above trend line yields should favourable weather persist for another six weeks.

• Research back in mid-December indicated that Chicago corn, soy and wheat markets would likely “melt up” to a first half January high. Our upside targets have been reached in March soybeans at $9.60-9.75, March Chicago wheat at $5.60 with corn just a few cents from our $3.95-4.05 (March futures) target. Our view now is that the upside is becoming limited. A sideways trade is forecast for next week as traders position for the Jan 10 USDA report and Trump Jan 15 trade signing.