- US wheat futures are lower with the row crops firmer at midday in Chicago. Soybeans have led the bullish charge with double digit gains tied to news that a US Tax Extenders Bill includes a plant/animal-based feedstock biodiesel credit that starts at $1.00 gallon, followed by a gradual subsidy phase out and expiration in 2024. The renewed subsidy has supported a rally in soyoil futures. If the Bill is passed (expected) it would help maintain US soy crush margins. We note that US soyoil demand is record large due to the ending of Argentine biodiesel imports last year.
- Chicago brokers report that funds have sold; 4,500 contracts of wheat, while buying 200 contracts of corn and 4,300 contracts of soybeans. In soy products, funds have sold 1,200 soymeal and bought 4,300 contracts of soyoil.
- Algeria is tendering for wheat with the result due Wednesday. It is widely expected that Argentina will fill the tender, but US export sources report that US HRW wheat on a landed basis almost works. French fob SRW is the most expensive soft wheat in the world at $233/mt, but because of its proximity to Algeria, its only $3-5/mt more on a landed basis. Key will be whether the French are willing to sell wheat below replacement to gain the business.
- There are rumours that Chinese traders had heard that President Trump was going to bash China with talk heightened tariffs late Monday. They sold soybeans ahead of the news. These traders are said to be now covering short soybeans as the market did not follow through. Moreover, we note that unlike prior tough tariff talk from President Trump, China made no comment on being bullied overnight. A Hong Kong scholar Lau (close ties to the Chinese Government) indicated that a truce in the trade war would be offered in Buenos Aires with the details to be ironed out in a framework negotiating agreement. Soybeans are trading back and forth as the political winds blow ahead the G20 meeting!
- Russia is unwilling to let international mediators settle their dispute with Ukraine with President Putin to announce Russia’s response in the next few days. The nerves in the Black Sea are raw and need to be closely monitored
- The midday S American weather forecast is slightly drier for Argentina, but equally wet for Brazil. Totals of 3-6.00” of rain look to drop across the northern half of Brazil with 0.5-2.00” for S Brazil and Argentina over the next 10 days. Near normal rains are expected across Argentina as spring planting accelerates. No extreme heat is foreseen due to persistent cloud cover across Brazil. Highs will range from the 70’s and 80’s across Argentina and the 80’s to lower 90’s across Brazil.
- Big picture politics rules once again. Today there is trade optimism from China that a framework for further talks can be uncovered in Buenos Aries at G20. China did not respond to new Trump Trade Tariff threats overnight. Traders are pessimistic on the prospect for a US/China trade framework while US farmers are optimistic. If the US and China call a truce and keep negotiations going; that will be seen as bullish for Chicago. It is China trade, Ukraine/Russia, and Brexit that holds the market’s attention. This produces whipsaw markets. First notice day looms on Friday against Dec futures. Trading politics is more difficult than trading a weather market.