- Chicago values are stronger at the start of the week with wheat leading the bullish charge amid dry weather conditions across the S Plains and the cold/snowy conditions across the Dakotas. Wheat has acted to pull up corn, with soybeans reacting to the hope that the US/China are working through their trade differences/tensions. President Trump before his weekly cabinet meeting indicated that he was hopeful on the progress scored in NAFTA and that Chinese President Xi will do the right thing. Moreover, he tried to assure US farmers that he stood with them, and would support their incomes. The news flow has been positive which along with the cold and snowy weather across the Midwest has offered a bullish tailwind for Chicago. A higher close is expected with the USDA April report to be released on Tuesday. Chicago brokers report that funds have bought 7,000 contracts of corn, 5,700 contracts of corn, and 4,800 contracts of wheat. In soy products, funds have bought 3,500 contracts of soymeal while being flat in soyoil.
- US weekly export inspections for the week ending April 5th were; 15.8 million bu of wheat, 76.2 million bu of corn, and 13.7 million bu of soybeans. The corn export total was above trade expectations while soybeans were below. The export data argues for a further 10-20 million bu cut in US wheat exports, a 25 million bu cut in US soybean exports, and 50 million bu bump in US corn exports.
- President Trump commented that if China wanted to hit the farmers (who are great patriots), we will support them. The financial support can come from either the CCC Corp funding or an obscure law known as Section 32. This law can take funds that are generated from customs duties, and use them for a wide range of things like disaster payments, or purchasing commodities for schools or other donation programs. Section 32 would let China pay for the US farmer financial support. Section 32 had been restricted from USDA using any funding for disasters or other emergencies. However, that all ended when Congress passed the US Omnibus Spending Bill for 2018, just a few weeks ago. Under reduced restrictions, The USDA Secretary must provide written notice on its expenditures to both the House and Senate at least two weeks in advance. This is the way that the US Government will support the farm community. However, deciding on the allocation is another matter that is still being discussed.
- We have learned that China did not include soymeal on its 25% tax list since meal cannot be imported into China under quarantine restriction. China added the restriction several years ago to protect its domestic soy crush industry.
- Chicago wheat futures are rising on the Plains dryness and the lack of moisture in the forecast. The Russian fob market reached $210/mt, the highest price in three years on strong demand. Funds are covering shorts while corn and soybeans are following. We have no way of knowing how China will react to the new positive overtones from President Trump. Our bet is that China’s response may not be as “warm”. However, in this market of adding or subtracting trade risk, today is a day of addition.