- Low volume/mixed is the Chicago market at midday with corn, soybean and wheat futures pulling back from early morning highs. Traders are tired of buying rallies related to US/China trade talk progress, they just want to see a deal. The volume of morning trade is poor/low and few see reasons to place new Chicago positions. Fund managers are defending their large net short positions in corn, wheat and soybeans with new sales. The charts are pointing down and selling a bounce is the right strategy based on prevailing grain market fundamentals. Moreover, traders understand why China may secure US pork via their fight with African Swine Fever, but hard to get your head around why China would secure US corn or wheat when their domestic stocks already account for 51% of the world’s total. Chicago should become political in its pricing as US/China near an end game in negotiations. US and world stock markets are rising on the elevated prospect of a US/China deal while Chicago grains are fading on prevailing price trends. Chicago has little or no price premium if a deal is scored. The surprise in US/China negotiations would be a deal that produces the media reported US ag goods demand of $50 billion annually.
- Chicago brokers report that funds have sold 2,200 contracts of corn, 1,600 contracts of soybeans, and 2,100 contracts of wheat. In soy products, funds have bought 1,900 contracts meal while selling 1,100 contracts of soyoil.
- IEG Vantage (Informa) estimated the 2019 Brazilian soybean crop at 114.5 million mt with Argentina at 55 million mt. In S American corn, Brazil was at 94.5 million mt with Argentina at 46.5 million mt. The Informa soybean crop below most other private forecasts that range from 116-118 million mt.
- USDA Under Secretary Censky is advising the Trump Administration on the importance and need for two-way trade between the US/Mexico. The Trump Administration is considering closing the US/Mexican border to stem the flow of illegals into the US. The hope is that truck/rail crossings will be allowed via the impact on the US with $1.7 billion of goods and nearly 500,000 people legally crossing the border each day. US dairy would be the hardest hit ag sector with over $1.3 billion of product value annually flowing into Mexico. Closure of the border with Mexico (and retaliatory tariffs from China) would make it extremely difficult for US agriculture to endure for any length of time.
- US White House Chief economist Kudlow expressed optimism explained this morning that US/China talks are going well and that China has admitted to IT/IP theft. The Chinese admission argues that both sides are working hard to reach a deal, it is just unknown as to its timing. US farmers are not selling any grain on the hope that President Trump will be able to reach a deal in days/weeks.
- The midday GFS forecast is wetter across upper Midwest with rains of 1.50-3.50″ over the next 10 days. And the forecast offers similar rainfall for the Delta and much of the Gulf Coast States. The abundant rainfall will maintain saturated soils and keep flooding concern in the forefront for the Lower Mississippi River. This is an active and wet weather pattern into the third week of April. Temperatures will be variable with warmth noted for the next week which is followed by much cooler temps during the 11-15-day period with additional storm systems.
- Chicago wants to see a US/China trade deal before reacting. Traders are just plain tired of the constant rhetoric surrounding trade progress. When a deal is reached, we expect a violent upside reaction in Chicago values. Our hope/expectation is for a deal, it is just a question of timing. If 90% of the deal is already completed, it will be tough for the US to walk away.