- Mixed with reduced volume has been Chicago this morning. Corn and soybeans have traded both sides of unchanged while wheat futures are firmer. The selling pressure from funds is still lingering in corn, but the selling has subsided in wheat and soybeans. We look for a mixed close with hawkish comments for USTR Lighthizer capping an early Chicago rally effort. Research argues against making sales ahead of the start of a new N Hemisphere growing season and makes no sense at current levels heading into March.
- Chicago brokers indicate that funds have sold 4,500 contracts of corn, while buying 1,200 contracts of wheat and being flat in soybeans. In soy products, funds have bought 2,100 contracts of soymeal while selling 1,700 contracts of soyoil.
- As expected, hawkish comments from USTR Lighthizer occurred this morning in his testimony to the House Ways and Means Committee. The USTR head stated that it is too early to predict. the outcome of the US/China trade talks. However, significant progress has been scored. Moreover, China cannot “buy off” the US with massive amounts of US soybean purchases. Also, the Ambassador claimed that the Trade Agreement must be enforceable, as China has failed to keep prior promises. As you would expect, Lighthizer said that much has yet to be done, but in the end it is the President’s decision on what the US should accept. Finally, the Ambassador stated that this is a process and that the US and China will be engaged on more structural issues for years to come and that any agreement will be binding. Unfortunately, Lighthizer did not provide details of the 6 Memorandums of Understanding that were signed last week and the details that each contained. We have not changed our view that a trade deal is close, but President’s Trump/Xi will have the final say. There is cash talk that China has secured US DDGs overnight and demand for offers for US soybean and corn prices continue. China will secure the 10 million mt of US soybeans as a sign of good faith. Media reports from China hint that from their side, a deal is also at hand, without providing specifics.
- US export sales data will be released regularly on Thursday for the first time this year. Next week, the CFTC will catch up on their positioning reporting.
- The midday GFS S American weather forecast continues to show heavy rains across Northern Brazil for the next ten days. Totals look to range from 0.75-4.50″ with isolated heavier amounts. Rainfall totals were reduced for Argentina and Southern Brazil. The ridge of high pressure that is expected to build eastward from the Atlantic next week is farther south on the midday run. Our confidence in this solution is low and confirming model runs are required.
- The bottoming price process has commenced with corn futures seeing some left over fund and cash related selling due to the end of the month. Corn has the best fundamentals in Chicago. Our view is that a US/China deal gets done in March. USTR Lighthizer must be a hawk with a few issues yet to be settled. Research argues that corn and wheat are near seasonal lows. Soybeans remains caught in a broad trading range awaiting 10 million mt of cash demand from China. This is certainly no place to sell a break or turn bearish!