- Chicago values recovered from early political selling related to US President Trump’s comment that he could live without a US/China trade deal until after the 2020 US election. The potential for another year of an escalating US/China trade war produced broad selling across the US equity and commodity markets.
- And US Commerce Sec Ross indicated that the US would place new tariffs on $156 billion on Chinese goods if nothing changed. Ross left open the chance for a push forward of those tariffs, if there was progress in negotiations, but it all depends on what happens in the next 12 days.
- No deputy level meetings are planned between the US/China, but both countries are in contact. The uncertainty of a Phase One US/China deal has pushed non-fund related traders to the sidelines once again. Guessing on whether a Phase One Deal gets done is something that no trader has an edge on. Traders are reducing risk amid the unforecastable US/China trade war.
- Chicago brokers estimate that funds have bought 2,600 contracts of corn and 2,100 contracts of wheat while being flat in soybeans. Funds are sellers of 1,500 contracts of soyoil while buying 900 contracts of soymeal.
- Argentine President Elect Fernandez will take office on December 6. Rumours are flying that ag export taxes will soon be raised to 35% in soybeans (26% today), 20% on wheat (7% today), and 15% on corn (7% today). The tax increase would raise $2 billion annually and help repay the IMF loan.
- We note that the Peso has fallen far more than the tax hike which mutes the long-term impact. Should the tax rumours prove correct, Argentine farmers will see diminished profitability and will have to decide how to best juggle crop mixtures in future years. Chicago will see the Argentine tax hike as slightly bullish on 2021 and beyond. Farmers have largely moved ahead with planned cropping intentions this year.
- China has turned back to Brazil in the past few days with purchases of at least 6-8 cargoes of soybeans for late January/February. China is working additional cargoes at midday for late February/ March.
- Russia sold 295,000 mt of wheat to Egypt’s GASC in an overnight tender at fob prices ranging from $221.49-222.00 for late January, (average price of $235.94/mt basis C&F). The sale follows the poor Russian November export pace indicating that Russia has wheat to sell. EU prices fell on the news with Chicago coming under pressure. The need of Russia and Europe to export more wheat in 2020 should be capping the world wheat rally.
- The Brazilian weather forecast is favourable with moderate to heavy rainfall of 2-4.50″ for 85% of their summer row crop areas. Other than far southern Rio Grande Du Sol, the dryness will not be an issue for Brazilian crops. High temperatures are forecast to be seasonal 80′s/90′s.
- The Argentine forecast is dry with warming temperatures. The midday solution is warmer than what was offered overnight with light rains offered in the 11-15 day period. The coming warm/dry Argentine weather will accelerate soil moisture decline and increase crop stress. Argentine high temperatures look to range from the 80′s to the mid 90′s in the far western crop areas.
- Wheat did not like the return of Russia as a more aggressive seller. US wheat futures looking like they have forged a seasonal top. Chicago corn /soy futures are trying to hold in the green amid the Trump comments of “No Deal” until after the 2020 US election. Chicago traders were hoping for a Phase One Pact that would end the back-and-forth on US/ China trade. Argentine weather is becoming worrisome and must be watched. We see Chicago markets as stuck in a range awaiting fresh US/China trade news.