- Corn, soybean and wheat futures opened higher following the overnight gains and large US corn and soybean weekly export sales. However, news that the Trump Administration was going to finger Chinese officials that were involved in US intellectual theft pulled values off their early highs. Cyber theft remains a stumbling block for the US/Chinese negotiations and the China hawks in the White House want to make sure that the next 69 days are focused on that on this issue, compared to the 3 million mt of soybeans that China has booked in recent days. China is still asking for US corn and other ag good offers this morning, and some commercials expect that China will book another 2-3 million mt of US soybeans before the Christmas holiday. We anticipate that China will secure 5 million mt of US soybeans for their reserve that will be shipped out in the 2018/19 crop year. Corn, wheat or other US ag goods could follow the soybean demand.
- Amid S American weather turning more favourable and the harvest underway in Mato Grosso, a US/China trade deal is the only way that Jan soybean futures can justify their being above $9.00. If a Chinese IT/IP protection deal cannot be worked out, a US/China trade deal won’t be completed, and the complex would hold considerable downside risk. This is a “gut check” in terms of US/China negotiations. China needs to agree to protecting IT/IP if a deal is to be worked out. Buying soybeans and reducing the US/China trade deficit was easy. We notes that PBOC (Central Bank of China) lowered their lending rate by offering a new programme to small private firms called the TMTLF which is like programs offered by the EU and Japan during times of economic contraction. China is trying to reflate its economy which could be important to world commodity valuations in 2019.
- US Weekly Export Sales for the week ending Dec 13 were; 11.5 million bu of wheat, 77.7 million bu of corn, and 104.2 million bu of US soybeans. For their respective crop years to date, the US has sold 612 million bu of wheat (down 81 million or 11%), 1,166 million bu of corn (up 169 million or 14%), with soybean sales at 1,011 million bu (down 436 million or 30%). China has booked a known 2.016 million mt of US soybeans. With this week’s daily announcements, US soy sales are pegged at just over 3.0 million mt with the US holding 4.6 million in the unknown category. US corn and soy sales were as expected, but wheat was disappointing.
- GASC booked 120,000 mt of wheat in their latest tender, Ukraine sold 60K at $263.7/mt (basis C&F), and Romania sold the remaining 60K at $264.1/mt (basis C&F) all for February. The GASC Romanian offer was up $8-14/mt from last week for a shipping period that was only one week later. Major exporters (ABCDs) did not offer Russian wheat to GASC which has some speculating that Russia may move to place an export duty on wheat in their Ag Ministry/exporter meeting tomorrow. That duty would likely not start until March, but it would shift world wheat demand to non-Russian destinations, including the US. World wheat prices have reached their highest price since 2014 amid tightening major exporter supplies.
- The midday GFS S American weather forecast is unchanged from prior runs. Strong and expansive high-pressure ridging exits NE Brazil on the weekend. Slowly this will allow meaningful rain to move out of Argentina and back into N Brazil. The rains start after Christmas and expand in coverage in the 8-15 day period. A needed period of drying lies ahead for all of Argentina.
- US/China tensions are rising on the new US Dept of Justice cybertheft cases. Soy is overvalued unless the US/China strike a trade deal. World wheat prices are the highest since 2014 and look likely to rise still higher. Wheat looks as if it will make gains on corn and soy into 2019. Headline risks remain.