- Chicago futures are mixed at midday with soybeans recovering while the grains sag. The corn market ran into fund selling as March fell below the 20 and 50 day moving averages and broke out to the downside on the charts. Funds are heavily long wheat which makes this market vulnerable to profit taking, while the soybean market rallies on the strong prospect of a US/China Phase One Deal signing next week at the White House. Soybeans will be on top of the Chinese grocery list to reach $80 billion over the next 2 years. March soybeans are back challenging resistance at $9.50-9.60. The morning Chicago trade volume is disappointing as the DOW and other financial markets snap back from early losses. The slowing volume trend is likely to keep the Chicago choppy ahead of Friday’s key USDA Report. We look for a mixed close with the range likely in for the day.
- Chicago brokers report that funds have sold; 3,000 contracts of wheat, 5,500 contracts of corn, while buying 3,200 contracts of soybeans. In the products, funds have sold 4,200 contracts of soyoil while buying 2,900 contracts of soymeal. The volume of trade has really slowed at midday.
- US Export Inspections for the week ending January 2 were; 21.7 million bu of corn, 12.7 million bu of wheat,and 35.4 million bu of soybeans. The soybean and corn exports were near trade expectations, while wheat was light.
- For their respective crop years to date, the US has shipped out 339 million bu of corn (down 389 million or 53%), 799 million bu of soybeans (up 162 million or 25%), and 545 million bu of wheat (up 70 million or 15%). We look for WASDE to cut 2019/20 US corn exports by 50-100 million bu and soybeans by 10-25 million bu in Friday’s USDA report. China shipped out 13 million bu of US soybeans through the Gulf and PNW last week.
- Argentina’s new Government is in talk with producers to modify export taxes for those farmers far away from key export ports. The shift in policy is being argued to more fairly apply export taxes since they harm those that are the farthest away. Talks are fluid and the grains, corn and wheat has placed a hold on the 3% export tax that was approved by Congress. Argentina wants to maintain its role as being a primary exporter of world ag products to obtain US$, and the Government is trying to find a favourable mixture of tax vs transportation cost. For now the tax on corn/wheat is 15% while soybeans are being taxed at 33%.
- The midday GFS weather forecast is drier for extreme S Brazil and Argentina into January 16. There is no evidence of any extreme heat, but the GFS model has flipped back and forth between dry and wet forecasts for Argentina and S Brazil. The often more correct EU model offers better rain chances for Argentina/S Brazil, but the midday GFS is something that must be monitored. The remainder of Brazil will see near to above normal rain which will aid crop prospects. The early harvest in Northern Brazil will be starting in 10-14 days.
- A back-and-forth Chicago trade is expected heading into Friday’s USDA Crop Report. We look for a modest 1-2 bushels/acre decline in US corn and 0.5 bushels/acre decline in US soybean yield due to the delayed 2019 Midwest harvest. Brazil’s CONAB will be out Wednesday with its January crop estimate with the US/China to sign the Phase One Trade Deal on Jan 15. With the index fund rebalance starting Wednesday, we look for funds to sell soyoil and KC wheat.