- Chicago Ag markets are sharply mixed at midday. Soybeans have been the upside leaders on deeply oversold technical conditions and last week’s larger than expected fund net short position and have been up as much as 7-8 cents. Corn futures have drifted lower on the overall lack of export demand, while Chicago wheat has been caught in the middle and is lightly mixed at midday.
- Funds have been active buying soybeans and selling corn, and light soybean/wheat spreading has also been noted this morning.
- Chicago brokers estimate that funds have been net sellers of 4,000 contracts of corn, buyers of 3,500 contracts of soybeans, and have bought 1,500 contracts of Chicago wheat. In the soy product markets, funds have bought 1,500 contracts of soybean meal and have bought 1,000 contracts of soybean oil.
- S American Farmers have been aggressive sellers over the last two weeks as Brazilian and Argentine currencies have weakened, which has more than offset Chicago declines. Chicago brokers this week suggest that S American hedge pressure has been reduced this week as Brazilian and Argentine selling has been completed, at least for now. This, along with reduced US farmer selling, has limited orders above the market.
- At the same time, the drop in Chicago soy values has uncovered good Chinese demand for new crop Brazilian supply. Chinese buyers have reportedly been active booking Brazilian soybeans for late first and second quarter shipments.
- Soybean oil futures are modestly higher at midday, with support coming from continued strength in Malaysian palm oil futures and a USDA export sales announcement. Ahead of the morning open, FAS announced an export sale of 20,000 mt of old crop soybean oil to Morocco. Soybean oil export sales announcements are rare, but the US is expected to see increased export demand in the year ahead as global vegetable oil supplies tighten.
- Spot palm oil futures have rallied more than 40% from the summer lows to the highest level since November 2017. At the same time, Chicago soybean oil peaked in early November and has declined since. This, along with a strong US$, has narrowed the spot soybean oil/palm oil futures spread to just 1cent/lb today, the narrowest that the spread has been since February 2017.
- The midday S America GFS weather model update maintains good rains across nearly the entirety of the key Brazilian growing regions. This will aid growing crops and help producers finish up planting the final acres. The key soybean producing areas of Argentina look to remain concerningly dry into next week. The GFS shows rains in the 6-10 day forecast ranging from 0.25-1″, with the heaviest totals to fall in the Northern Argentine soybean belt. The Argentine forecast will be watched closely.
- Monday’s Crop Progress report showed that there was still an estimated 1.4 billion bu of corn unharvested, with an estimated 135 million bu of soybeans to cut. The trade is already expecting modest yield declines in January. Chicago traders are burned out on the back and forth China news, and yet the headlines continue to move prices. The market focus remains on trade negotiations with China and the upcoming Dec 15 tariff deadline.