- News that President Trump was to speak to China President Xi today and China saying that China Vice Premier Liu would visit the US next week sparked some modest Chicago short covering this morning. The US and China appear to be in dialogue, but there does not appear to be any change in the hardline stance that were taken last Friday in Beijing. Talk is good, but action is better and there is no indication that China nor the US have softened their stances. President Trump has tweeted that good things will happen for US trade, but what that exactly means is uncertain. China continues to play a hard line on some US ag products. Whether the product is meats, soybeans, fruits or vegetables, China is holding these US commodities at port with CIQ asking for long and arduous inspection processes that is costing US exporters. This “inspection hold” is happening while products from other countries are sailing into China without any lengthy CIQ inspection demand. Since US product specs have not changed prior to when the trade dispute started, the CIQ product inspection hold appears to be related to deepening US/China trade tensions. However, trying to predict the next speck of news/rumor is impossible which produces great uncertainty and risk for any trader.
- Chicago brokers reflect that funds have bought 3,400 contracts of corn, 2,300 contracts of soybeans, while being flat in wheat. In soy products, funds have sold 2,100 contracts of soyoil while buying 900 contracts of soymeal.
- There are conflicting reports as to what the Trump Administration will announce on Iran’s nuclear program, and pending any sanctions. One report suggested that President Trump had decided to approve the program without sanctions. This caused a sharp drop in crude oil futures. Others say that such a rumor is incorrect. The marketplace should await an exact announcement before reacting (amid rumors that cannot be confirmed). The corn market has been willing to look past the rise and fall in crude oil in recent days.
- The IMF has opened talks with Argentina for a line of credit. Last week, Argentina raised its lending rate to 40% to stabilize its Peso, which had slumped to a record low at 22:1 late last week. The Argentine Government is in dire need of funding with a 40% lending rate that is substantially hurting its economic growth rate. Argentina’s outlook depends on external financing and its options are drying up.
- The Black Sea midday GFS weather forecast has maintained solid rains for the winter wheat areas of SW Russia and Ukraine over the next 14 days. The rains have already started and the outlook for winter grain crops is improved. The long-range forecast shows a ridge of high pressure shifting northeast to the Scandinavian countries, and holding there into late May.
- The midday GFS weather forecast update is wetter across the Plains and SW Midwest as each forecast run is adding rain chances beyond the next 6-7 days. The jet stream sags southward with rain increasing in frequency beginning the middle of next week. WI/MN are drier than was suggested in prior runs which would help advance planting. We anticipate that most of the remainder of the Plains will be able to substantially advance plantings this week with the rains proving to be beneficial. The moisture for the Plains is needed by HRW wheat as the crop enters the reproductive stage. US producers report that they are making solid progress on their spring seeding program. The 11-15 day forecast offers additional Plains/ Delta/S Midwest rain chances with areas of the Plains receiving 1-3.00” of rain.
- We doubt that Chicago rallies can be sustained without favourable news on pending US trade tensions with China and NAFTA amid the better rain chances for the Plains and Midwest. USDA’s May WASDE will be released on Thursday with the trade positioning long corn/wheat amid the expectations of declining 2018/19 stocks. Weather problems are needed for the bulls.