• Wheat/soybean futures are bouncing while corn values hold in the red. Corn prices are sagging on the worry over US export and biofuel demand while technical short covering provides lift to wheat/soybeans. A mixed Chicago close is expected with trade rather normal.

• May corn futures have accelerated their decline based on slowing US export and domestic demand. Goldman Sachs indicated that corn is the best grain to short amid its bearish fundamentals. Goldman argues that corn’s use in biofuel and for livestock feed consumption is in decline amid the Covid-19 crisis. We have an initial downside price target of $3.40-3.45. A more bearish outlook would likely require getting past the March 31 March Stocks report and a normal planting window for the 2020 crop. Then, May corn futures could drop to $3.20 longer term support.

• Chicago brokers estimate that funds have sold 8,400 contracts of corn, while being a net buyer of 3,200 contracts of wheat and 4,400 soybeans. In soy products, funds have bought 1,900 contracts of soymeal while selling 900 oil.

• The DOW has rallied more than 1,000 points on a news that the Trump Administration plans provide immediate emergency funds to Americans in need to stem the building economic damage of home stay. The US Central Bank injected funds into the commercial paper market to help the liquify the corporate debt market. The moves were timed to add confidence to consumers and investors. The problem is that a treatment or vaccine for Covid-19 would be much more effective in creating a lasting financial market bottom.

• There is no indication of buyers/importers becoming more interested/aggressive in their food import needs amid the Covid-19 virus spread. In fact, as demand for everything but the basic dry goods is in decline, importers worry about having a capability to offload cargoes and not rack up demurrage charges. The Covid-19 outbreak in China caused port workers to stay off the job, which cost importers millions in demurrage costs as vessels just waited at port.

• April cattle/hog futures have raced to limit gains on the need to restock the retail supply chain after the Covid-19 buying blitz of the weekend and recent days. Packers paid up $1/cwt on cash cattle on Monday and are likely to keep paying up to keep kill lines well supplied with stock. As consumers turn away from food service and to home cooking, the demand for ground beef and a host of other meat products is on the rise. We look for cash cattle and hogs to trade higher for the next several weeks on the demand pull.

• Russian fob wheat prices are weak amid lacklustre export demand at $205/mt. The fob Russian wheat weakness will persist until there is real weather threat for the new crop. It is a few weeks early for Russian weather to be a big factor in 2020 yield determination. That exercise will start in April.

• The midday GFS weather forecast offers few changes from the overnight run with more modest rainfall for Argentina and Southern Brazil of 0.5-1.25″ with totals across Central and Northern Brazil of 3-5.00″. Rain is needed across Southern Brazil with the best chance being in the next 48 hours. The rains across Northern and Central Brazil will be abundant.

• Tuesday rallies following sharp Monday slides have been commonplace in recent weeks. Chicago traders need to see expanding grain demand for them to offset their building net short position. Until Covid-19 demand losses can be qualified, it is hard to pick a Chicago bottom. Yet, research downside price target in corn is fast approaching at $3.40-3.45 May. Soybeans have a target of $7.80-8.10 May with Chicago May wheat having support below $4.80. It is becoming late to be overly bearish.

• Chicago ag futures are sharply lower at midday following a cascade of selling in commodity and equity markets. Traders are reducing their exposure across many markets as they are unable to handle the extreme day to day volatility.

• The unforecastable up-and-down profile of US equity markets has added to trader anxiety. Hedge fund risk managers are telling their traders to reduce exposure and overnight risk, which is causing a reduction in liquidity, exactly the opposite of what the US Central Bank is trying to prevent.

• Chicago trade volume was active on the reopen but has slowed at midday. Key going home is whether May corn/soybean futures can close above chart-based support at $3.60 May corn and $8.37 May soybeans. The US wheat market is a follower of the summer row crops with Russian fob offers slipping lower.

• The big difference in US financial markets is that Covid-19 is likely to be an economic drag on the US/world economy for months to come. Traders had hoped that US Covid-19 cases would peak in mid to late April with a 2-week assurance period needed that new infections are not occurring. This means the negative economic impact of Covid-19 on the US/world economy could continue into May. This is “weeks” longer than what was feared by traders on Friday.

• Chicago brokers estimate that funds have sold 3,000 contracts of wheat, 8,700 contracts of corn, and 5,100 contracts of soybeans. In soy products, funds have sold 5,400 contracts of soyoil while being flat in meal. Chicago brokers have moved upstairs with the trading floor closed. Friday’s CoT report indicated that fund managers had reduced their net positions, yet Chicago prices still declined. Our bet is that funds are now starting to add to net shorts.

• US Export Inspections for the week ending March 12 were; 38.5 million bu of corn, 16.0 million bu of soybeans, and 16.5 million bu of wheat. Corn inspections were larger than expected while wheat/soybeans were disappointing. The week’s big exporter wheat Egypt at 4.7 million bu. China did not ship out a cargo of US beans

• For their respective crop years to date, US corn exports rest at 627 million bu (down 452 million bu or 42%), while US soybean exports at 1,124 million bu (up 106 million or 10.5%), while US wheat exports at 725 million bu are up 63 million bu or 9%. Research argues that 2019/20 US corn exports are overstated by at least 100 million bu while soybeans are overstated by at least 250 million bu. The slowing export demand makes sustaining a short covering bounce difficult.

• US livestock futures have rallied sharply from extended limit losses to sharply higher trade at midday. The market had become extremely oversold and vulnerable to a rally with June cattle priced at $85.25, at $4.50 limit losses. The CME rally has no fresh news associated with it other than shorts wanting to collect windfall profits. The CME livestock rally has lifted grains

• The biggest impact on US grain prices longer term will be the ongoing drop in US energy prices. Crude oil values have fallen to $28.10 in WTI April futures, $2/barrel under last week’s low. The next downside price target rests at $26.00, the lows that were scored back in 2016. Biofuel margins are deep in the red.

• The forecast offers few changes from the overnight run with modest 0.5-1.50″ rains for Argentina and Southern Brazil with totals across Central and Northern Brazil of 3-5.00″. More rain is needed across Southern Brazil, but enough rain will drop for the immediate need of winter corn. Soybean harvest should remain active across much of Central and Southern Brazil for the next 2 weeks.

• US Covid-19 infections are likely to worsen as testing is expanded and the US medical system feels the impact of a worsening pandemic. The grain/ag markets are likely to form a bottom until the fear over the virus subsides, which is not expected until mid to late April. The next chance for a lasting Chicago rally is the March 31 stocks report and then North American weather/seeding progress.

• Chicago ag futures are lower at midday amid the ongoing bruising that world financial markets are enduring. The DOW is trading with losses of nearly 2,000 points at its lowest levels since early 2019. CME livestock futures are limit down amid the concern of slowing consumer demand. Argentina is becoming more aggressive with its fob summer corn offers while Russia is seeking fresh demand for old crop wheat stocks. The point is that ahead of a new Northern Hemisphere growing season, there is concern for demand as end users/importers curtail interest amid the world’s health uncertainty.

• We expects a sharply lower Chicago close on additional liquidation as the market moves through resting purchase orders. Prior weekly price patterns show declines during the end and the beginning of the week with rallies in the middle. Amid the worsening spread of Covid-19 in the US, investors will likely wait until there are “signals” that the virus is being controlled before returning on the buy side of equity/commodity markets.

• Before the Chicago markets bottom, margin must return to feeding livestock, producing biofuel and importing grain. Such margin does not exist today amid $32 crude oil and the uncertainty on future demand via Covid-19.

• Chicago brokers estimate that funds have sold 3,200 contracts of wheat, 6,000 contracts of soybeans and 8,400 contracts of corn. In soybean products, funds have been sellers of 5,400 contracts of soyoil and 4,300 contracts of soymeal. Any buying has been short covering or resting consumer purchase orders.

• FAS reported that for the week ending March 5, the US sold 16.6 million bu of wheat, 57.9 million bu of corn, and 11.1 million bu of soybeans. US corn sales were better than expected due to Japanese/South Korean purchases. China cancelled 3.2 million bu of US soybeans with known old crop sales declining to just 2 million bu. There are 44 million bu of soybean sales in the unknown category which are likely to be China importers. Undelivered old crop soybean sales stand at just 153 million bu with China shipping pace in fast retreat.

• For their respective crop years to date, the US has sold 868 million bu of wheat (29 million above last year or 3.4%), 1,106 million bu of corn (down 503 million or 31%), and 1,263 million bu of soybeans (down 247 million or 16%). Research statistically argues that 2019/20 corn export estimates could fall another 100-125 million bu with US 2019/20 soybean exports to be off 200 million bu or more. The outlook for US corn/soy and wheat exports is darkening amid the slowing demand trends via Covid-19 on domestic and trade demand.

• WE have been asked where the Chicago bottom is? Our response is that when margin returns to biofuel and livestock industries. US corn/soybean and wheat exports are seasonally slowing under competition from abroad. US ethanol prices are at record low but are still priced above unleaded gasoline. US ethanol producer margins are negative. Biodiesel margins are negative and livestock feeders are not placing animals amid the unknown of future demand with CME livestock futures under acute pressure. The domestic demand outlook for US grain/soybeans must brighten for a bottom to form.

• The US Central Bank injected $1.5 trillion of liquidity in the repo market (repurchase agreement, a form of short-term borrowing, mainly in Government securities) for Friday to shore up the US financial outlook. The injection was massive and looks to supply huge amounts of cash to the US Covid-19 strapped economy. The injection has rallied the DOW 1,000 points.

• There is a bounce in the US financial markets following the Central Bank’s $1.5 trillion injection of liquidity. The injection is in response to the worsening US economic outlook. It does not change the health woes of Covid-19! Unfortunately, a new round of FED QE will not alter the demand prospects for US farm goods. The FED is acting via a disfunction in some US financial markets. This cash helps treat the symptom but does not cure the patient. The market has to wait until more results are in on Covid-19. It is still risk off for now.

• Chicago ag futures are mixed but mostly lower at midday. Corn has followed crude lower. Wheat continues to struggle amid ongoing declines in Black Sea cash prices. Soybeans are firm on the heels of modest export demand. Spot WTI crude has done little since the overnight session and is down $1.15/barrel. The Dow has extended its overnight loss to 980 points. The US administration has hinted at a deep cut to payroll taxes, but this does not look to have nearly enough bipartisan support in Congress. Governments across the world are proposing a host of stimulus packages.

• FAS’s daily reporting system featured a sale of US soybeans worth 194,000 mt to an unknown destination. 126,000 mt are designated for old crop delivery. This is likely China amid talk that Chinese importers had purchased 2-4 cargoes of US origin off the PNW. Additional sales announcements will be watched for this week and next, but we doubt this is the beginning of a major US soy buying program on behalf of China. China has secured most of its spring/early summer needs from Brazil. Argentine soybean offers for Jun-Jul arrival have become more consistent and are well below US origin.

• US ethanol production through the week ending March 6 totalled 307 million gallons, down 10 million on the previous week but up 10 million on the same week in 2019. Stocks fell slightly as export and blend disappearance stayed intact. But at 1,022 million gallons current US ethanol stocks are still record large for early March and near the all-time high scored the prior week.

• US crude stocks also rose by 7.7 million barrels last week. This is an untimely boost in stocks as the Saudi-Russia battle for market share will be ongoing for some time, Saudi stated this morning it would not back off its production levels. It is also clear Russia aims to reduce the footprint of US shale on the world energy market and indeed US shale production will struggle to make ends meet at current prices. Crude rallies will be laboured as supply rises and demand stays weak until coronavirus is contained.

• The message is that weak energy prices are a bit more structural in nature, while coronavirus could lose its grip on financial markets by summer. Still, the potential return of COVID-19 next autumn will linger in the background throughout the next several months.

• Other news is lacking. A rather wet pattern will continue across the mid-South and Southern Midwest into the final days of March. This will begin to attract attention in April, but ag markets will be dominated by macro conditions in the near term.

• We also mention that Northern Plains snow cover is far below what it was in mid-March a year ago. Recall the Dakotas, MN and WI were blanketed by 10-20″ plus of snow on March 11, 2019.

• The midday forecast remains consistent. Moderate to heavy rainfall will linger across Central Argentina throughout the next 3-4 days, with cumulative totals into Sunday pegged in a range of 0.50-2.00″. The midday GFS forecast has also pulled better rain chances in Southern Brazil into its 10-day forecast. This further boosts ours confidence that a pronounced and favourable pattern shift lies ahead in Brazil.

• Macro market weakness will continue for some time and finding offsetting bullish ag input is difficult. It is tough to be overly bullish ahead of the N Hemisphere growing season, but oversupply will dominate without yield loss.

• Also, it is crucial to recognise “big picture” risks as the 2020 growing season approaches. Lasting rallies have been tough to sustain in recent years as S American planting commences soon after US yields are determined. We expect this to be replicated in 2020.

• The March USDA Report is normally non-inspiring and today’s report followed without any surprise. Chicago is unmoved following the report and price direction will go back to focusing on the macro markets and potential slowing of the world/US economic outlooks.

• WASDE left 2019/20 US wheat, corn, soybean end stocks unchanged from February at 940 million bu, 1,892 million bu and 425 million bu, respectively. The “no change” was not a surprise, but the pressure will be growing on WASDE to cut us corn and soybean export estimates aggressively in coming months based on pace analysis. Ahead the April WASDE, NASS will release their Stocks/Seeding Report and it is not unusual that WASDE analysts pass on making any sizeable adjustments until after March. WASDE did lower their farmgate price estimates 5 cents in corn and soybeans at $3.80 and $8.70/bu. WASDE held the US wheat farmgate price at $4.55. Importantly, farmgate cash averages are below current Chicago bids which is acting to cap rallies.

• WASDE did raise both the Brazilian and Argentine soybean crop estimates by 1 million mt (126/54 million mt) taking world soybean production to 341.8 million mt, down less than 1.0 million from last year’s record. The world has an abundance of soybeans.

• We note that 2019/20 world soybean end stocks were raised to 102.4 million mt (up 3.5 million), which is only down 9.5 million from the prior year’s record. WASDE held China crop year soybean imports at 88.0 million mt, up 5.50 million from 2018/19. China has been a larger importer of soybeans this year for political reasons and restocking of reserves following the US/China trade war.

• USDA forecast 2019/20 US soybean end stocks at 425 million bu. WASDE did raise US soyoil exports by 200 million pounds to 2,100 million pounds, but end stocks held steady as biodiesel production was reduced. Research argues that US 2019/20 soybean end stocks will be raised at least 150-200 million bu as US soybean exports are cut. Research does not expect that China will import large quantities of US soybeans until late summer or autumn. The increase in US old crop soybean stocks will cap rallies in May futures above $9.00.

• 2019/20 world corn end stocks were raised to 297.3 million mt, up 0.5 million from February. The Brazilian and Argentine corn crops were left unchanged at 101.0 million mt and 50.0 million mt, respectively. China’s 2019/20 corn imports were unchanged at 7.00 million mt, 2.5 million more than the prior year. We estimate that China has secured 3.5 million mt of world corn, leaving potential demand of 3-3.5 million mt.

• World wheat stocks were a record large 287 million mt, down slightly from February. The Australian wheat crop was cut to 15.2 million mt from 15.6 million. World wheat exports were raised 800,000 mt to 183.6 million mt. The world wheat balance sheet came as no surprise as WASDE waits to gauge future demand /trade.

• The DOW opened 945 higher but has given back most of those gains heading into the midday hour. Wild swings are expected in world financial markets until there is certainty that the Covid-19 virus threat has waned. Investors are not willing to chase a US financial rally amid the weakness of crude oil and the unknow surrounding how the US will handle Covid-19. The Italians, who have a very good health system, are failing miserably on controlling the virus.

• The midday GFS weather forecast is consistent. Shower chances will increase across Argentina today and into Southern Brazil during the weekend. The 11-15 day forecast calls for improving rain chances for all of Central and Southern Brazil. No extreme heat is noted which favours crops.

• USDA March reports can be boring, and todays’ report was no exception and lacked any fanfare. Chicago will go back to trading strong Midwest cash corn bids against a background of waning export demand. Argentina has dropped its July fob corn offer to 25 cents over vs the US Gulf at 62 cents. Argentine corn $0.38/bu cheaper in July. And the US FAS ag attache raised their forecast of China 2019/20 corn stocks to a record large 223 million mt. This is up 11.5 million from February, which WASDE could soon incorporate in their own balance sheets.

• Chicago outlook stays weak on slowing US export demand, the demand loss on coronavirus amid weakening GDP, and a 2 million mt larger S American soybean crop with Brazil and Argentina production rising to a record 180 million mt. China is booking additional Brazilian soybeans for June today.

• Chicago ag futures are lower at midday in thinning volume as traders see the bounce in the US stock market as a reason to take partial profits on net short corn, soybean and wheat positions. New Chicago buying is limited and the price pattern of down early in the week, with a rally in the middle and down again late week shows merit.

• We look for this price pattern to be followed again with the next 2-3 weeks critical for containing the coronavirus spread in the US. If worsening clusters of US Covid-19 develop, there will be a deeper decline in US and world asset prices.

• The panic selling of overnight appears to be calming, but it is premature to think that a bottom has been scored. It is just that the grains/soybean and equity markets are trying to fill open chart gaps left from Friday. The acute weakness in energy prices will have a long-term depressing impact on oil values. Putin has told the Saudi’s that he is willing to seek market share for the next 6-10 years. We believe this to be too long, but we fear it will be months before both sides can get together on any crude production cuts. The sharp fall in crude oil is bearish to the US bio-crops of corn and soybeans.

• Chicago traders estimate that funds have sold 4,100 contracts of soybeans, 3,200 contracts of soymeal and 3,000 contracts of soyoil. In corn, funds are flat while being buyers of 5,700 contracts of Chicago wheat. Someone bought 6,000 contracts of Chicago wheat in a few minutes that rallied the market 6-7 cents.

• The grains bounced along with crude oil as it came off $28.59 June futures lows to rally nearly $7.00/barrel to $35.50 plus. The rally in crude caused a lift in commodities, but amid a gloomy economic outlook, a rally above $40/barrel would require the Russians/Saudi’s/US (Trump Admin) coordinated effort to rally oil prices. We note that the price of biodiesel is trading above the price of diesel while US ethanol producers are estimated to be losing close to $0.30/gallon. US ethanol industry consumes nearly 5.50 billion bu of corn for ethanol consumption. Research suggests that US discretionary blending and ethanol exports are limited with crude below $40/barrel.

• US farmers have slammed shut their barn doors while Russia is on holiday and Argentine farmers are striking for the next 4 days against higher export taxes. Brazilian farmers are willing to sell newly cut soybeans, but outside of funds, there is not a natural cash seller of corn, soybeans or wheat.

• US export inspections for the week ending Mar 5 were 32.6 million bu of corn, 21.0 million bu soybeans and 15.3 million bu of wheat. All were disappointing. China showed up exporting 5.13 million bu of US soybeans last week. The pace of US soybean exports are expected to dramatically slow through late spring.

• The price of the Russian Ruble and Brazilian Real have set historical lows. The Real reached 4.80:1 US$, a record low. Values for Brazilian corn and soybeans are near record highs in their local currency, which is spurring 2021 production with farmers able to lock down 81-85 Reals per bag for harvest next February. Huge farm profits and forward selling is pressuring Brazilian fob Feb prices which is offered 70 cents cheaper than the US Gulf for November.

• The midday GFS weather forecast is like the overnight run. Daily showers will continue across Northern Brazil while dryness persists across Argentina, Paraguay and S Brazil for another 2-4 days. Rain chances start to return to Central Argentina tomorrow and linger into the weekend. The 11-15 day forecast calls for improving rain chances for all of Central and Southern Brazil.

• Rumours abound that China may have secured 120-180,000 mt of US spring wheat. China is asking for offers on DDGs and sorghum, but no new sales can be confirmed. Demand destruction is the worry for Chicago grain/soy prices due to a slowing world economic outlook with US/world cases of Covid-19 on the rise. A test of support at long term support at $8.50 May beans and $3.50 May corn is forecast.

• Continued weakness in the stock market amid concerns of a slowing world economy weighed on Chicago soy trade. May soybeans gave back all early week gains and were lower for the week. The Commitment of Traders report showed that funds were net short 36,000 soybean contracts (-39,000), net short 18,000 soybean meal contracts (-59,000), and net long 15,000 soybean oil contracts (-8,000). The buying in soybean meal was the largest one week of buying since the data series began in 2006. We estimate that by Thursday, funds had nearly covered all of their soybean/meal positions, which is why prices fell at the end of the week. Hedgers were large sellers on the soybean rally of nearly 51,000 contracts taking their net short to a 6-week high. US soybean export inspections are expected to dramatically slow in coming weeks. Chinese demand is needed for US old crop soybeans or WASDE is facing a chore of significantly reducing US soybean export forecasts by more than 150 million bu. It is the lack of export demand that will cap Chicago rallies. Our downside price target rests at $8.50

• Chicago corn futures settled 2-7 cents lower led by March. Fundamental input remains bearish. The EU and GFS weather models have trended even wetter across the drier areas of Central Brazil March 15-20, with the whole of the safrinha corn belt to see rainfall of 1-3″. Spot crude fell an incredible $4.70/barrel. Spot ethanol scored a new 14-month low at $1.235/gallon. Longer term, we highlight that the Argentine government will keep its proposed export tax on corn unchanged at 12%, while raising its tax on soy products to 33%. This will shift 2020/21 acres from soy to corn, and so S America’s footprint on the world corn market will continue to expand. And a new record low in the Peso will sustain profitability. Chicago corn valued in Pesos is up six-fold from 2014! A bearish outlook is held on structural issues such as currency, weak biofuel margins and the coming Argentine corn harvest. Bounces will occur amid weather threats. Normal Midwest seeding will push Dec corn to $3.60.

• Chicago wheat’s recent downtrend is ongoing and additional fund length is shed. There is little wheat-specific news available, but world futures followed crude’s plunge. The Russian Ruble hit a new 14-month low. Weakness in the Ruble continues to drag interior Russian wheat prices higher which in turn weighs on fob prices. Fundamentally, wheat is chasing seasonally declining world demand. Managed funds on Tuesday were long a net 15,000 contracts, down 27,000 from the previous week. We estimate that since Tuesday funds have sold only 5,000 contracts. The spec community is nearing a flat position but additional liquidation is expected without a lasting recovery in global financial markets next week. More attention will be paid to developing dryness in Russia beyond April 1, but amid rising global corn supplies a major weather issue is needed to boost July Chicago above $5.30. A bull market would be created by a drought in the Black Sea or the EU this spring or early summer.

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Weekend summary 6 March 2020

• Chicago ag futures are mixed at midday in a reversal of Wednesday’s action, summer row crop futures are weaker while the Chicago wheat market bounces. The volume of Chicago trade is subsiding as traders deal with the extreme volatility of world equity markets and the unknown economic impact of coronavirus.

• The DOW fell to 800-point losses early today but is crawling back to just 500 point loss on the hope that China workers are slowly returning to work with the supply chain to normalise in 2-3 weeks. We look for a mixed Chicago close as traders start to think ahead to next week’s USDA March 10 Crop Report and the March Stocks/Seeding Report on March 31. US corn, soybean and wheat export demand is sliding as world importers turn to cheaper prices offered by Brazil, Argentina and Russia for grain/soy.

• Chicago brokers estimate that funds have sold 2,600 contracts of corn, 3,600 contracts of soybeans, while buying 2,400 contracts of wheat. In soy products, funds have sold 1,900 contracts of soyoil and 2,800 contracts of soymeal. Fund activity is having an oversized impact on Chicago values with end users and importer unwilling to chase a rally.

• The Brazilian Real and the Argentine Peso continued their decline to record lows against the US$. The Brazilian Real has fallen to a new low of 4.65:1 US$ with the Argentine Peso at a new low of 62.5:1. The decline of these key S American currencies is raising prices to domestic farmers just as harvest is gaining speed. We note that the Russian Ruble is testing its one year high at 67.1:1 US$. The sliding value of the key ag currencies will enhance their export aggressiveness and steal future US export chances.

• FAS reported for the week ending February 27 that the US sold 19.9 million bu of wheat, 30.3 million bu of corn, and 12.7 million bu of soybeans. The soybean and corn sales pace were disappointing, while wheat was slightly bullish.

• For their respective crop years to date, the US has sold 852 Xmas of wheat (up 22 million or 3%), 1,049 million bu of corn (down 546 million or 34%), and 1,251 million bu of soybeans (down 188 million or 13%). The US corn and soybean export sales pace remain disappointing and call for fresh trade reductions for USDA in their March report. Research argues that US 2019/20 corn exports are overstated by at least 100 million bu with US 2019/20 soybean exports overstated by at least 150 million bu. Both will add to WASDE end stock projections.

• China is releasing reduced duty import licenses for US ag goods that are good for a year. The news is not surprising as China is moving ahead with promises to accept applications and issue licenses (online) after March 2. Chinese importers must report actual purchases and prices back to their Government.

• China is not expected to turn to the US for ag purchases until US price offers are competitive with non-US suppliers. China has been an active buyer of June Brazilian soybeans with European exporters reporting that China has also booked small tonnages of South African corn. US Gulf/ PNW corn, soybeans and wheat are noncompetitive with other suppliers which will cause Chinese buyers to wait on lower US offers. They have a year to use newly issued licenses.

• The midday GFS weather forecast is like the overnight run. Daily showers will continue across Northern Brazil while dryness persists across Argentina, Paraguay and Southern Brazil. Rain chances return to Central Argentina early next week. The 11-15 day forecast calls for improving rain chances for Central and Southern Brazil.

• Chicago traders are starting to think that WASDE may be overstating US 2019/20 US corn and soybean exports (without an immediate return of Chinese interest) with a new crop production cycle is around the corner for the Northern Hemisphere in 30 days. The US 10-year note has fallen to a record low 0.92% arguing for a US recession.

• Chicago ag futures are mixed at midday with wheat futures lower while the summer row crops push higher. The March/May corn spread has pushed out to an unusual 2 cent premium while May soybean tests resistance at $9.10. Funds are short of corn/soybeans and long of wheat which appears the driver of Chicago direction as the world equity market trades back-and-forth in extreme terms. Funds continue to exit their net short corn/soybean positions as the US 10 Year note drops to a record lows below 1% and the DOW is up over 600 points.

• We look for a mixed Chicago close with US farmers becoming more aggressive of old crop sales as prices reach their cash targets ahead of spring planting.

• Corn has reached a 62% retracement with the 50-day moving average resting at $3.875 May. March corn open interest is being quickly liquidated with the total likely to fall below 3,500 contracts as of the close. Cash corn basis is mixed depending on area movement, and the firmness in the E Midwest basis is something that the farmer should be rewarding. Once the 2020 crop is in the ground, the outlook for US cash corn and soybean basis darkens. Funds are covering net corn/soy shorts, but no end user or importer is willing to chase a rally. When the fund covering slows, a Chicago top will form.

• Chicago brokers estimates that fund managers have bought 7,000 contracts of corn and 4,300 contracts of soybeans, while selling 3,600 contracts of wheat. In soy products, funds bought 4,100 contracts of soyoil while being flat in meal.

• FAS confirmed that China has booked 110,000 my of US sorghum. The purchase was following the activity from last week. China has been booking US sorghum to make a popular Chinese spirit named Baijiu. China has been willing to pay the import tariffs due to strong profit margins and the lack of sorghum from Australia due to their dire drought. We do not yet see that China is willing to secure other US feedgrains or soybeans.

• We cannot confirm that China is seeking US corn, soybeans, ethanol or DDGs. Rumours of such demand prevail. China has anti-dumping duties on US DDGs and ethanol that must be removed before US trade can commence. US exporters report that China is securing Brazilian soybeans well out into June. There is no evidence that China is willing to start a new crop US soybean purchase program. And Argentine corn is priced under the US Gulf by 20 cents, so if TRQs were to be used, there are now cheaper source of supply available to importers on a fob/cif basis.

• US ethanol production rose to 317 xm gallons vs 310 million gallons last week. US ethanol stocks rose to a record 1,049 million gallons up 3% from last year. US ethanol exports were horrible at 43 million gallons with future’s based production margins plunging to minus $0.20/gallon, the worst in 2 years.

• The Brazilian Real forged a new low vs the US$ at 4.56:1. The ongoing Real weakness is lifting already strong profit margins for Brazilian farmers. We expect the Real to weaken to $4.70-4.80 where a top should form. The Real weakness is encouraging Brazilian farmers to price a growing share of 2021 soy crop amid margins that are plus 25-35% depending on their variable farm costs.

• The midday GFS weather forecast is similar to the overnight run. Daily showers will continue across Northern Brazil while dryness persists across Argentina, Paraguay and Southern Brazil. Rain chances return to Central Argentina next week. The 11-15 day forecast calls for improving rain chances for S Brazil.

• Funds are covering out of last week’s sales which has pushed May corn/soybean futures back to upside chart-based resistance at $3.85 May corn and $9.10 May soybeans. The delivery of March futures has refocused Chicago on tight domestic cash corn supplies and strong basis. This supportive element will fade as March futures expires and/or corn/Chicago wheat is delivered.