- Following firm trade overnight, soybean futures rallied from the morning open to end 11-14 cents higher. News that China would allow imports of US rice for the first time stoked hope that additional US soybean sales are possible. Other news was limited and amid the government shutdown, the only data available in the coming week will be US weekly inspections. The weekly Commitments of Traders report from the CFTC has been delayed until the lapse in government funding has been solved. The last report from the CFTC showed that as of Dec 18 managed funds were net long 13,000 futures contracts. Through Monday, funds were estimated sellers of 17,000 contracts for a net short position around 4,000 contracts (estimated to have sold another 4,500 contracts this week). Given the size of the US soy stockpile, our fundamental view remains bearish on rallies with a spring price target of $8.00 or below.
- Chicago corn futures ended a cent higher amid broadly supportive weekly ethanol data and concern over S America’s late Dec/early Jan weather pattern. Far too much rain will fall in Argentina; drier than normal weather returns to Brazil. US ethanol production last week totaled 306 million gallons, down slightly on the previous week and 4% below late Dec of 2017. However, stocks fell a sizeable 31 million gallons, with weekly stocks/use pegged at a 5-week low. Domestic blend use has improved. Production margins remain negative but will improve as ethanol invenstockstories erode. Black Sea fob basis rallied 10 cents this week. EU corn futures settled at 4-month highs. EU corn’s premium to Chicago has rallied to $60/mt, vs. $40/mt a year ago. The EU market demands record imports of 22.5-23.0 million mt, vs. the USDA’s projected 21. This will add to already record large global corn trade. A neutral outlook is maintained. Close attention will be paid to short term adverse weather in Argentina.
- Chicago wheat futures ended firm in low volume amid a lack of news. What news is available leans bullish. Heavy precipitation has been added to Argentina in the 6-15 day period, with no end in sight to the coming deluge. Harvest in Buenos Aires will be on pause over the next 2 weeks. Interior wheat and flour prices in Russia also continue to move higher. Russian interior wheat prices have hit new 2-year highs and have rallied 20- 50% since spring. Flour prices have followed and now sit near 2014’s record highs. Indian cash prices are also at multi-year highs, and so the world cash market still reflects this year’s collapse in exporter wheat stocks outside of China. US export sales, both daily and weekly, won’t be released until the US government reopens. Gulf fob offers are below Black Sea origin for three consecutive weeks. This indicates that demand for US wheat will likely be strong in 2019. Wheat still has a bullish story, which can only be solved via above trend Northern Hemisphere yields.