- Chicago ag futures have weakened at midday as energy and equity markets drift lower into the weekend. USDA Outlook Forum data in the last 24 hours has failed to provide much insight. It is back to waiting on confirmation of Chinese demand for ag goods, monitoring S American combine reports and tracking the spread of coronavirus. Limited activity is expected into close. We would reiterate that Outlook Forum balance sheets were bullish soy, bearish corn and neutral wheat. But it is Northern Hemisphere weather that will dominate price determination in the months ahead.
- US export sales through the week ending Feb 13 featured a slowing of wheat and soy demand, but solid corn demand amid competitive US prices. Weekly corn sales totalled 49 million bu, vs. 38 million the prior week. Japan emerged as a sizeable buyer, purchasing 20 million bu. Wheat sales were 13 million bu, vs. 24 million the prior week. World trade is seasonally slowing. Final US wheat exports in 2019/20 will be fine-tuned based on official Census exports moving forward. Soybean sales totalled 18 million bu, vs. 24 million the previous week. Soy oil sales were a solid 42,000 tons. The USDA’s annual US soy oil forecast of 1,900 million lbs increasingly appears 100-150 million lbs too low.
- We note it was this week a year ago that the USDA updated its 2018/19 commitments following last year’s lengthy government shut down. This week’s report provides a more accurate a picture of sales compared to last year. Corn sales to date sit at 985 million bu, down 35% from last year. Total wheat commitments are 818 million bu, up 4% on last year. Total soy commitments are 1,229 million bu, down 9% from this week a year ago. China remains active in securing new crop Brazilian beans for spring arrival.
- There also appears to be a noticeable slowdown in world corn and wheat trade through the first half of February, the message being that Chicago ag futures need a structural demand driver to sustain rallies.
- This afternoon’s CFTC report is expected to show that managed funds are short at net 63,000 contracts, vs. 72,000 the prior week. Managed funds are also estimated to be short a net 72,000 contracts of soy, vs. 92,000 the prior week. Fund are long an estimated 58,000 contracts of Chicago wheat.
- The midday GFS weather forecast has again added to Brazilian precipitation totals through the next two weeks. A pattern of stagnant heavy rainfall is forecast, with cumulative totals upward of 5-8″ due across Mato Grosso, Goias and Minas Gerais. The pace of Brazilian soy harvesting and safrinha seeding so far have matched longer term averages, but delays will mount if the GFS forecast verifies. We would mention that the EU and Canadian models have kept soaking rainfall in Brazil more scattered. The GFS forecast is likely overdone, but the solution cannot be dismissed outright. Dry but cool weather will persist in Argentina into early March.
- The ongoing spread of coronavirus continues to provide headwinds to global financial markets, with the Dow down 200 points and spot crude down $0.5O/barrel. It likely takes a warming of Northern Hemisphere temperatures before calm settles in. Our longer-term message remains that weather issues are needed to trigger lasting elevated prices.