- Chicago ag markets are mixed with any directional passion lacking. The volume of trade is slow with uncertainty hanging heavy regarding coronavirus and what, if any, impact it will have on Chinese purchases of US ag products. We look for a mixed trade with Thursday’s weekly export sales report to underpin corn and livestock markets on the expectation for sizeable new sales.
- Wheat futures are sinking amid the likely increase in sales from Russia from mid-February onward as the spread between old and new crop prices equates to nearly $0.80/bu. There is no incentive for a Russian farmer to store wheat beyond March. Moreover, the Russian ag ministry has stated that it will offer annual export quotas for grain exports to help manage its domestic supply.
- Russia did not alter its expectations for 2019/20 Russian grain exports with wheat staying put at 36.0 million mt. Russian wheat exports have slowed dramatically since October as Russian grain prices started to rise. Research argues that 2019/20 world wheat demand was front loaded which means that Russian wheat exporters will have to become more competitive ahead of their new crop. Research argues based on pace analysis that 2019/20 Russian wheat exports could decline to 32-33 million mt.
- Chicago brokers estimate that funds have sold 2,400 contracts of Chicago wheat, 3,000 contracts of corn, and 1,900 contracts of soybeans. In soybean products, funds have sold 2,100 contracts of soyoil and 2,600 contracts of soymeal.
- US President Trump inked the new USMCA this morning. The new deal will assure US agriculture with both bordering neighbours.
- USDA Sec Purdue indicated that he had no idea whether the coronavirus would affect China’s pledge to secure US farmgate goods under the January 15 Phase One Trade agreement. We hear that China has been in touch with the US, but China has until July or August to meet its purchase pledges before USTR would call out China and ask for discussions. The point is that the debate on what China will or not do will persist. China is likely in the coming weeks to announce/release duty free import licenses so that its importers can step forward and make new US ag purchases outside of the TRQs that are already in force. China can secure US corn with TRQ import licenses already issued.
- 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 and adds to our confidence that extreme dryness will be averted across S American during February. No extreme heat is offered which will aid crops in both Brazil and Argentina. Research maintains that Brazil will harvest a record large soybean crop in 2020.
- This is no place to make new sales with Chicago lows likely scored earlier this week amid coronavirus fears. Yet, Chicago rallies won’t be sustained unless actual Chinese buying of US ag goods is confirmed.
- US President Trump appears confident in his call for US farmers to buy larger tractors and more land amid China’s expected ag purchase plans at a USMCA signing ceremony. Chicago wants to see actual China demand before reacting with any upside vigour. Research expects that China will return from its Lunar New Year holiday with concrete plans for US ag purchases.
- We expect that China will issue duty free licenses for new purchases in the coming weeks.