- Chicago corn, soybean and wheat futures are mixed at mid session. It is all about US export demand potential in determining morning Chicago price action. Soybeans are weaker as China is showing no interest for nearby US soybeans while China could book US corn as it is the cheapest feedgrain in the world with TRQ import licenses outstanding and active. Wheat is rising on world values (gains in French and Russian markets). French grain markets are embroiled in a labour/transit strike while Russian farmers are tight fisted with existing old crop wheat stocks. At some point in mid to late February, we expect that Russian farmers will wake up to the hefty old vs new crop premiums of over $24/mt. Chicago has a firm feel, the risk as we see it is to the upside into the weekend.
- Chicago brokers estimate that funds have bought 4,600 contracts of wheat while selling 3,100 contracts of corn and 7,400 contracts of soybeans. In soy products, funds have sold 4,300 contracts of soyoil and 2,200 soymeal. US weekly export sales for the week ending January 17 were; 13.6 million bu of corn, 44.0 million bu of soybeans, and 16.0 million bu of wheat.
- For their respective crop years to date, the US has shipped out 371 million bu of corn (down 440 million or 54% from last year), 888 million bu of soybeans (up 170 million or 24%) and 585 million bu of wheat (70 million or 13.6%). The US corn export pace is pitiful and calls for a further 100-150 million bu in 2019/20 US corn exports. Even if China were to secure 2-3 million mt of old crop US corn, it is hard to statistically justify the USDA annual forecast.
- There is no UDSA confirmation that China booked US corn off the PNW for spot shipment last Friday. Cash sources report that they cannot rule out that a few cargoes were sold, but other than China asking for PNW and Gulf fob corn offers, nothing else appears to be occurring. China sources speculate that China could book US ag commodities before the Spring Festival holiday which starts on Saturday, but most expect that China will wait until early February before becoming more active buyers. The US/China Phase One agreement calls for China to activate US pork by no later than January 25, while the grains have 30 days, February 25. Amid a potential bullish Feb US WASDE report that includes China demand for US ag goods is expected to underpin Chicago grains.
- The midday GFS weather forecast subtracted rain from Argentina while adding it to Northern Brazil. The 10-day Brazilian rainfall forecast now includes totals as much as 5-8.00″ which will produce localised flooding. Argentina will be dry for much of the 10 and 14 day forecast as soil moisture declines. The falling soil moisture profile will introduce the potential for heat next week with highs ranging from the upper 80′s to the upper 90′s. The forecast has to be watched with the early soybean harvest underway across Mato Grosso and Goias.
- The declining soy/corn ratio has Midwest farmers talking about planting more corn. The new crop soy/corn harvest ratio stands at 2.37. The next downside price target for March beans rests at $9.00-9.05, a 61.8% retracement of the Nov-January rally. We would not advise a bearish bias below $9.00. Wheat has pushed to new rally highs and we expect that March corn will try to test $3.92 resistance this week. Until there is greater harvest pressure generated from N Brazil, Chicago has more upside potential than downside risk.