- Diminished volume and mixed has been the morning Chicago grain trade as market participants fear US trade protectionism from The White House and the USDA March Crop Report to be released Thursday at 11 (US time) tomorrow morning. US steel and aluminium tariffs are expected to be announced this week by President Trump. Retaliation is already being offered by a host of countries along with a WTO challenge noted as a countermeasure. We would agree with a comment from the IMF head stating, “There are no winners in trade wars.” Also, traders have concerns that the USDA March report may not cut Argentine crop production as much expected. An Argentine soybean crop of 38 million mt or a corn crop of 36 million mt does not justify May soybeans above $10.75 nor May corn at $3.90. Especially if USDA raises the 2017/18 US soybean end stocks on trade. We are anticipating a lower Chicago close as traders reduce their market exposure and sell out a portion of their profitable long positions. Several climate forecasters suggest that there are improved W Plains rain chances during the last ten days of March. Such rain would be timely. Amid the weather, political, and USDA report uncertainty, traders lament, “When in doubt – just get out”
- Chicago brokers report that funds are flat in wheat, while buying 3,100 contracts of corn and selling 3,400 contracts of soybeans. In soy products, funds have sold 2,600 contracts of soymeal and 1,800 contracts of soyoil. FAS did not report any new US sales under the daily reporting system. The weekly US ethanol production increased to 1,057k per day vs 1,044 last week which consumed 311 million bu of corn. US ethanol stocks rose to 972 million gallons vs 965 million last week. The data/report was broadly supportive. The midday GFS American weather forecast calls for limited rains across the W Plains over the next 10-12 days. There could be a few showers over far Eastern Kansas, but otherwise, the forecast looks void of meaningful into March 20. It’s now the last ten days of March that potentially holds the best chance of improved moisture. Seasonally, the Plains start to receive rain in late March and early April, and this year’s acute soil moisture shortage makes the last ten days of March highly important for the US HRW wheat crop.
- Pre-report positioning has pressured Chicago futures so far today, with the meal spreads leaking amid weakening cash basis offers from the US Gulf and S America. The US cash pipeline is full and offers to export soymeal from Argentina are getting more aggressive. We note that Argentina is also more aggressive in corn offering June fob corn some $2-3/mt below the Gulf. We expect that funds will maintain their market length into spring seeding. Our bet is that Chicago consolidates its recent gains.