- Chicago ag markets are mixed, with corn higher on nearby export demand and wheat/soy a bit weaker on a lack of fresh fundamental news. Macro markets continue to stabilise despite ongoing elevated uncertainty surrounding China’s coronavirus. Spot WTI crude is $0.45/barrel at $53.60. Ethanol and gasoline futures have followed. The Dow at midday is up 200 points.
- Exporters this morning sold 124,000 mt of corn to Mexico for 2019/20 delivery. FAS’s daily reporting system since last Thursday has featured new corn sales of 522,000 mt. Weekly FAS corn sales are likely to reach/exceed 1.0 million mt in each of the next two reports.
- Argentine fob corn basis continues to firm. Fob basis this morning is quoted at $0.75-0.90/bu over Chicago futures for Feb-Mar. This compares to Gulf basis of $0.67/bu over. Argentine and US origin corn is offered near parity for Apr-May.
- Argentine corn basis typically begins its seasonal retreat once harvest reaches 30% complete (late April), but importers today see US corn as a more logical supply for winter/spring arrival. And recall managed funds are estimated to be short some 75,000 contracts of corn currently.
- However, US ethanol production margins remain negative in spot and deferred positions. The EIA’s weekly report on Wednesday will reveal further seasonal declines in US ethanol production, while a lack of export improvement will keep ethanol stocks at/above last year.
- Other news is lacking but European ag futures have turned positive at midday. Even rapeseed (and Chicago soy oil) futures have largely shrugged off incredible weakness in Malaysia’s palm oil market overnight.
- We doubt that coronavirus, with known information, will cause any lasting damage to global demand and trade flows. But we reiterate that it will take time to measure just how contagious and dangerous the illness is.
- The US forecast maintains heavy rain/snow across OK and central KS in the next 24 hours. A brief drop in US temperatures occurs beyond Feb 4, but bitterly cold readings will stay confined to the Northern Plains.
- The midday GFS weather forecast is wetter in Argentina compared to the overnight release. This puts the GFS in better alignment with the EU model’s forecast. Net draws in soil moisture will persist in Buenos Aires, but two meaningful events will impact Cordoba and Northern Argentina in the next 10 days. The arrival of this moisture will prevent a pattern of excessive heat there during the first 10 days of Feb. Normal rain continues in Central Brazil. Excessive precipitation will stay confined to Minas Gerais the fringe producing areas in eastern Brazil.
- Sideways trading looks likely to occur into late February, but like a year ago rallies will struggle into Mar-Apr as S American crops are gathered.