- Fund short covering and cash selling has been active in Chicago as corn, soybeans and wheat rise to moderate gains. The volume of trade has been huge as funds exit a portion of their positions as soybean futures score six-month highs. US and Brazilian farmers are active in selling cash soybeans/corn on the rally as cash prices push strongly upwards. The movement is large enough that we expect that cash basis levels will be in retreat later today. So far, there is no evidence that China is securing US soybeans.
- We look for a strong Chicago close amid an open chart gap with funds having additional shorts to cover. However, unless Chinese demand is seen/confirmed, we think corn/soybeans will be limited to strong Chicago rallies. China’s tariffs remain in place which prevents private Chinese soy crushers from making US purchases. We note that US pork futures are sharply lower. If China was to secure US ag commodities, US pork would be on the top of their list, ahead of the early February Lunar New Year. No private buyer of US ag goods is seeking US grain, meats or other ag products according to cash sources. Maybe this demand will develop, but a Chinese buyer will not chase a Chicago rally with just 90 days to secure/ship/land the goods. Chicago financial markets will be closed on Wednesday to honor President Bush. Chicago has decided not to close the ag markets, they will trade normally.
- Weekly Export Inspections for the week ending November 29 were; 40.8 million bu of corn, 38.3 million bu of soybeans, and 17.4 million bu of wheat. The soybean and corn export totals were on the high end of expectations. Wheat exports were just routine. US soybean exports are 353 million bu behind last year’s pace, WASDE will not change their US 2018/19 soybean export estimates due to the weekend trade truce between the US/China. Chinese trade tariffs have not been reduced, so WASDE will assume no change in US/China soy trade. WASDE would have to see actual new sales or a lowering of tariffs to make any change.
- The midday S American weather forecast is close to the overnight solution with above normal rain to fall across the northern half of Brazil with totals of 3-8.00”. Much below normal rain is expected across Argentina and S Brazil as spring planting accelerates. No extreme heat is foreseen due to persistent cloud cover across N Brazil. Highs will range from the 80’s to lower 90’s across Brazil. The dryness across Argentina and S Brazil is favourable for now, the good news is that showers return in the 11-15 day period. The rains would be ideal for crop development. The S American weather forecast is favourable except for above normal N Brazilian totals.
- Chicago traders argue that they need to taste/feel Chinese demand and a lowering of their domestic tariffs to sustain a Chicago rally. The trade truce places a peg of support under Chicago at last week’s low amid the prospect of China buying. US wheat prices can’t rally much further, or risk become noncompetitive in the world marketplace. And Chicago corn is facing headwinds on the prospect of record large Latin American production and reduced US exports beyond May.