- Higher in summer row crops and slightly lower wheat has been the morning Chicago trade. Rumours have returned that China is back checking prices on a host of US ag products. Cash connected traders expect that additional US soybeans could be purchased on Wednesday or Thursday. Other US ag good purchases cannot be ruled out, but they are less certain when compared to the Sinograin or COFCO seeking US soybeans for the State Reserve. It is the headline risk that traders worry about in holiday thinned volume trade. The one point that must be made is that any new Chinese demand is not included in any of the WASDE export forecasts! If China books 4 million mt of old crop US soybeans, this would add 147 million bu to 2018/19 US soybean export totals, offsetting much of the decline from others. The point is that 2018/19 US soybean stocks might have reached their high for the season at 955 million bu.
- Chicago CBOT brokers report that funds have bought 2,200 contracts of soybeans and 3,000 contracts of corn, while selling 2,400 contracts of wheat. In soy products, funds have bought 1,900 contracts of soyoil and 2,400 soymeal.
- The US Central Bank is meeting and will likely raise rates another 0.25% on Wednesday. The market expects the increase, but it is the Fed language of future US economic forecasts and rate increases that will be scrutinized. We note that spot WTI crude oil has fallen to new lows at $47.50. Research argues that this break is crude is reaching long term value and purchases should soon be considered.
- The looming US Government shutdown is likely to push a bill for US tax extenders, including biofuels, into 2019. Amid the Democrats taking control of the House, this raises the risk for its passage. The Congress will already have a contentious debate over USMCA which are likely to fray nerves. The good news is that President Trump is expected to sign the 2018 Farm Bill on Thursday. Otherwise, be prepared for long lived political fights and lots of finger pointing by each party.
- Brazilian farmers indicate that Parana and MGDS soybeans have been hurt by weeks of below normal rainfall and rising temperatures. Some argue that 3 million mt of soy production has been lost. But the losses of NC Brazil are likely made up by N Brazil where crops look stellar. We look for CONAB to raise their 2019 Brazilian soybean crop slightly in January to 121-121.5 million mt.
- The midday S American GFS weather forecast is like the overnight forecast. The pattern does not show much sign of change until the middle of next week, some 8-9 days out. Better rains are then projected to push back into the drier areas of NC Brazil. Until then, below normal rains will prevail across NC and NE Brazil with soaking totals for the southern 1/3 of the crop area. Parana crop conditions improve with 2-4.00” of rain and locally heavier amounts. Drier Argentine weather starts on Friday which will allow for flooded fields to start drying. It’s going to take dry weather into early January before fields allow wheat harvest to resume in NC crop areas.
- China appears to have bought US soybeans from the Gulf and is now turning to the PWN. Soy purchase totals initially amount to 250-300,000 mt with orders still working. We hear that China is readying demand for US grain, but no one is hitting the buy button just yet. World wheat prices are steady/rising with the US futures decline expected to be brief. It is tough to be bearish of the world’s cheapest wheat without a decline in world fob offers.