- Tweets from President Trump and US Trade Policy Czar that China was either buying or about to secure US soybeans offered support to the complex this morning. Corn and wheat futures are sagging on news that Egypt’s GASC is delaying shipments of wheat due to problems with LC (letter of credit) issuance. Corn appears to be caught in between (again) the two with the market lacking fundamental inspiration with S American weather largely favourable. The prospect of large S American crops looming is likely to cap rallies heading into the holidays.
- US President Trump tweeted that China would immediately secure US soybeans and liquified natural gas. The news rallied Chicago soybean futures around 7am CST this morning. We can confirm that China started checking US soybean fob price offers late yesterday. Although commercials are unwilling to confirm actual cash buying, they do indicate that expectations that China’s Government will secure some 5 million mt of US soybeans in an old/new crop position. We expect that China will want to book US soybeans before China returns to Washington DC during the middle of the month. Dates are still being worked on, but it is expected that a Chinese delegation will be return to Washington to start negotiations on IT/Industrial protections with USTR head Robert Lighthizer.
- US soybean cash markets should easily be able to absorb 5 million mt of old/new crop soybean demand without much difficulty amid the abundance of supply. Most US exporters are flush with soybeans and to speculate that if China were to book half of the 5 million mt in an old crop position, the 92 million bu would not substantially raise basis bids. And there is no real reason for China to book Chicago futures as cash basis bids are attractive. We cannot confirm Chinese interest in US corn, sorghum, ethanol, DDGs or meat or dairy products at this time. It is possible that China could make purchases if US/China negotiations are fruitful but making purchases ahead of a deal would cause cancellations if the negotiations turned politically sour. Our expectation is that China will wait to gauge how US/China IT protection negotiations progress before seeking other US ag/energy products.
- The midday S American GFS weather forecast is drier across SC Brazil and much of Argentina with rains of 0.25-1.00”, or about 50% drier than what was offered overnight. The confidence is the forecast is diminished based on the change from prior runs. Yet, a high-pressure ridge shows more stability that will have to be closely monitored. No extreme temperatures are noted, but as soils dry, temperatures could rise during the last week of December. Better rains are needed across Argentina and S Brazil, but so far, the dryness is not having an impact on crops via cool temperatures and adequate soil moisture.
- The odds are high that China is either buying or will soon buy US soybeans for their reserve. China’s leadership has returned home from S America along with a trade delegation from Brazil. If there is to be immediate US ag buying, now is the time. The Chinese delegation is expected to return to Washington for negotiations in 8-10 days. The delegation does not want to show up without making sure prior agreements are fulfilled.