- Chicago grain markets are firm at midsession on diminished selling as the US DOW index rallies 500 points as the fear of coronavirus is in retreat. The volume of Chicago morning grain trade has been modest. Aggressive sellers that were present late last week are no longer evident. Traders are leery about being overly bearish following the 2-day injection of $1.6 trillion yuan into the Chinese economy. Such massive economic stimulus can produce pent up commodity demand when virus worries wane.
- We find it somewhat premature to suggest that the worst of coronavirus has passed, but following recent sharp commodity losses, a bounce was due. Traders will be closely assessing the medical progress in fighting coronavirus going forward. Any drug or mixture of drugs that fights coronavirus will cause short covering.
- Chicago brokers estimate that funds have bought 3,000 contracts of wheat, 4,000 contacts of corn, and a net 800 contracts of soybeans. In soy products, funds have bought 2,000 contracts of soyoil while selling 2,000 contracts of meal.
- US White House Economist Kudlow stated that the export boom from the US/China Phase One Deal could be delayed, but that the economic impact would be minimal. The US/China Phase One Deal is a multiyear commitment. We note that China’s commerce minister stated overnight that China would be looking to world ag imports to stem the developing foodstuff shortfalls. China may ask for deferrals on energy commitments, but in terms of food needs, coronavirus has created a more acute need for imported meat and other US food ready products.
- We doubt that the Trump Administration will alter any Phase One China purchase commitments with the yearlong agreement not even started. Rumours persist that China could release duty free import licenses for US ag goods in coming weeks.
- Brazilian soybean exporters report that China has been more active in securing 5-7 cargoes of soybean cargoes for April. Brazilian soybean cargoes are selling below the US Gulf for April.
- Thailand is reporting that that it is seeing a benefit of mixing a cocktail of drugs in treating coronavirus. However, it is too early to declare any gold standard mixture for treatment. It is hoped that the medical community will uncover treatment mixtures/methods that becomes effective for critical to serious patients. It is all about further lowering the mortality rate.
- The midday GFS weather forecast is too wet for Northern and Central Brazil with rainfall totals raised from the overnight solution to 5-10.00″. Such rains will slow the harvest and cause concern for the winter corn seeding. This will become more of a market topic if the wet trend persists. We note that the 11-15 day forecast maintains the wet trend into February 20. Optimal seeding dates for winter corn run from early February into mid-March. Corn seeded after mid-March struggles with the dry season that often starts in late April and May.
- Chicago values are bouncing with Monday’s losers being today’s winners. We remain confident that China will adhere to its Phase One Purchase Agreement and start releasing duty free import licenses in coming weeks. The real struggle for Chicago is not coronavirus, but the tug-and-pull from the world’s oversupply of grain/oilseeds and China’s sporadic US buying to occur under the duty-free licensing system. Research awaits China demand to finish 2019 sales and work into a larger short position for 2020 crops. S American crop sizes are too large to sustain a China purchase rally.