- Mixed has been the morning trade with corn futures weaker while soybeans/wheat are firm. The volume of trade has been holiday constrained with several large traders having closed their books on 2018. Funds are heading into a flat position in wheat/soybeans by covering a modest short. Funds are long corn with last week’s buying being much larger than expected. We look for a firm close with any decline limited at least through the week.
- The US and China are making good progress on trade talks and this is offering real “headline risk”. The US and China are said to be talking daily. Traders fret that China could secure additional US soybeans (or other ag products) at any time, which offers real headline risk to short positions. Unless there is a breakdown in the ongoing US/China talks, the market risks are to the upside, with funds willing to engage a more bullish chart outlook.
- Chicago brokers report that funds have bought 2,300 contracts of wheat and 2,700 contracts of soybeans, while selling 3,000 soybeans. In soy products, funds have sold 1,600 contracts of soyoil while buying 2,000 soymeal.
- US weekly export inspections for the week ending Dec 13 included 34.8 million bu of corn, 35.8 million bu of soybeans, and 25.1 million bu of wheat. For their respective crop years to date, the US has shipped out 629 million bu of corn (up 265 million or 72%), 557 million bu of soybeans (down 394 million or 41%), and 430 million bu of wheat (down 75 million or 15%). The corn shipping pace to date is positive while soybeans/wheat data are slightly bearish. In the case of US wheat, both the sales/shipping pace are really starting to improve.
- Argentine fob wheat prices have exploded to the upside in the past ten days with bids at $236/mt and offers at $240/mt this morning. A few weeks ago, Argentine wheat was the cheapest in the world. However, the acute slowdown in farm selling amid quality/quantity issues from recent wet weather has spiked prices. Argentine farmers are worried that unharvested wheat in the northern half of the belt will be downgraded to feed. Private crop estimates have slid to 17-17.8 million mt. With Brazil needing 7-7.6 million mt of high quality of Argentine wheat for milling, the offers to others in the world could be limited. We look for recent optional origin sales of wheat to Algeria to be switched to the EU. The problem is that EU feed prices are again rising faster than milling wheat which is raising competition for export markets.
- The midday S American GFS weather forecast at midday is wetter in parts of Central Brazil but is also drier in Argentina in the 8-15 day period. High pressure aloft loses its influence somewhat in Brazil beyond the next 8 days, but a pattern of below normal rain will continue into Dec 26. Moisture deficits will widen through the period. In Argentina, excessive rain persists in northeast growing area for another 36 hours. Moderate rainfall of 0.50-2.00” returns to the wettest areas of Argentina into Christmas. Wheat quality remains the primary issue.
- Headline risk are sizeable in thin volume holiday markets. New purchase orders from China outside of soybeans could spark grain rallies. A close above $5.225 in March KC wheat sets an upside price target of $5.40 with January soybeans having upside resistance at $9.30-9.40. Our leaning is that additional Chinese demand will be in the offing, but its exact timing is uncertain.