- Chicago markets are lower at midday amid macro concern and an ongoing lack of fresh news surrounding US-Chinese trade negotiations. The next meeting between the two takes place later this week in Beijing, but in the last week the lack of news has emboldened world grain bears. Interest rate yield curve inversion has been a major talking point this week, with the bond market seemingly pricing in a rate cut by year-end. Debate is ongoing whether Fed interest rates will be unchanged or lower over the next nine months, but the concern over a continued slowdown in US/world economic growth is present. The US$ is up slightly this morning, having found support at February’s low but work maintains that the US$ Index reached a lasting peak at 98 points.
- The US Census department continues to catch on official US trade, with January data released this morning. The US’s trade deficit with all countries fell to $51 billion, vs. expectations of $57 billion. The US’s deficit with China fell to $33.2 billion. Reduced total imports are cited. This is viewed as mixed, but a modest boost in net trade expected in the first quarter will keep US GDP growth at least stable in the near term. The value of US ag exports in Jan totalled $11.4 billion, unchanged on the year. The value of ag exports to China totaled $791 million, down $1.1 billion from the previous year. US exporters are finding other markets. This week’s EIA report is viewed as slightly bearish corn/ethanol but the data is being driven heavily by US weather. Ethanol production through the week ending last Friday totaled a meager 287 million gallons, down 8 million on last week and down 19 million from the same week in 2018. Recall a sixth of all US ethanol production capacity has been shuttered due to flooding. Ethanol stocks were unchanged and record large at 1,026 million gallons. Crude stocks last week were up 2.8 million barrels. A draw in stocks was expected. Spot WTI at midday is down $0.50/barrel.
- The midday GFS weather forecast is drier across the Southern third of Brazil, which accounts for 35-38% of safrinha corn area. A stagnant pattern lies ahead, with normal/above normal rain offered to Mato Grosso and Goias while little no rain is forecast elsewhere. Rain will be needed in S Brazil by mid-April. The US forecast is generally unchanged, if a bit drier in Plains and wetter in the Midwest late next week and beyond. The EU and GFS models overnight trended wetter, and so it remains that lasting (and needed) dryness is unlikely into the first week of April. Widespread rainfall worth 0.50-1.50″ impacts the heart of the Corn Belt on the weekend. A second and more widespread event works across the Plains next Thurs-Sat. Scattered showers are probable across the N Plains and Midwest in the 11-15-day period. Temperatures will be variable, with abnormally cold readings due this weekend.
- The lack of trade news and elevated farmer selling has weighed on row crop markets. We do expect S America’s corn crop to be absorbed quickly by record consumption. A lasting bearish trend is unlikely amid funds’ sizeable short positions and less than ideal weather persists in the US and Europe.