- Low volume and mixed is Chicago as the market follows existing technical trends. Corn continues to sag on fund selling while wheat is grabbing on tightening US supplies. The soybean market continues to be in a push and tug position awaiting China’s 10 million mt of new soy demand. USDA Sec Purdue has commented that additional (non soy) ag demand is expected to include US grains, but the timing of the buying is uncertain. Commercial sources advise that China is asking for US soybean/corn and DDG offers, but no new sales can be confirmed. Our view is that this is no place to be a seller of grains.
- Chicago brokers advise that funds have sold 2,500 contracts of corn, and 2,200 contracts of soybeans and being flat in soybeans. In soy products, funds have sold 1,400 contracts of soymeal while buying 900 contracts of soyoil. So far, this is the slowest day of the week in terms of Chicago volume.
- For the week ending February 21 the US sold; 17.5 million bu of US wheat, 48.8 million bu of US corn, and 80.7 million bu of US soybeans. The weekly soybean and corn sales were better than traders were predicting. For their respective crop years to date, the US has sold 807 million bu of wheat (up 12 million from last year or 2%), the US has sold 1,557 million bu of corn (up 22 million or 1% from last year), and 1,432 million bu of soybeans (down 239 million or 14% from last year). We note that if China secures half of its 10 million mt of soybean buying in an old crop position, it would add 183 million bu to the US sales pace and further narrow the difference. We see no reason to strongly argue with the USDA 2018/19 US soybean forecast of 1,900 million bu. We have no way of knowing how China will split their soybean demand between old and new crops.
- Pessimism surrounds the US/China trade deal following comments from USTR Head Lighthizer yesterday and the failure of the Trump/Kim talks overnight. However, we doubt that there is any relationship between the failure of the Vietnam Summit and China. Trump’s comment that China was a big help should ease the concern of a connection with Kim and a US/China trade deal. The US has won its WTO dispute with China on its lofty loan levels on wheat and rice to its domestic farmers. The win should help the US in pushing China to drop their loan rates and move to better opening their grain markets.
- The midday GFS S American weather forecast continues to show heavy rains across Northern Brazil into March 10. Totals look to range from 0.75-4. 50” with isolated heavier amounts. Rainfall totals are similar for Argentina and Southern Brazil. The ridge of high pressure that is expected to build eastward from the Atlantic during early March is slower. We do not see any S American crop concern with April the big month for Brazilian winter corn rainfall. Amid a building El Niño, our view is for drier conditions.
- The price bottoming process has commenced with corn futures seeing left over selling due to the end of the month. Corn has the best fundamentals at the Chicago, yet it is possible that May could test $3.70 support. The wheat market is trying to form a bottom on tight old crop world supplies and improved US export demand. Heading into a new N Hemisphere growing season, we are reluctant to turn bearish with WASDE forecasting 2019/20 stock falls in corn, soybeans and wheat.