- It has been a mixed morning in Chicago with traders positioning for the coming index fund re-balance/roll that starts tomorrow. The roll is expected to cause the selling in corn/wheat and modest buying in soybeans. Traders expect that the rebalance will pressure the grains, and are positioning accordingly. Soybeans are holding on threatening S American weather. However, in the background is talk of considerable progress being scored in the US/China trade talks in Beijing. Rumours have the US/China reaching some sort of an agreement on the protection of intellectual/industrial property, and that the easy part of cutting the US/China trade deficit to be on Tuesday’s agenda. If the US/China can agree on the dollar amounts to be cut in the deficit (opening of Chinese markets to US goods), the stage could be set for higher level talks of the US/Chinese Government to reach a deal. Both sides seem to be working to reaching a trade deal to be inked by March 1.
- China is said to be checking US corn/soybean fob offers this morning. No corn has traded, but commercial traders report that the US could sell 15-20 cargoes of US soybeans to COFCO or SinoGrain (900,000-1.1 million mt). Like last week, we hear that cash sales are occurring, but that confirmation will be lacking from the USDA with the Government partially closed (no USDA reporting). We maintain that China is near done working to book 5.0 million mt of US soybeans for their Government reserve. What is different today is that China is rumoured to be checking prices for US FOB corn. Rumours abound in corn, cotton and other US grains, but we cannot confirm any sale. Traders will be watching to see if China books a US grain other than soybeans this week.
- US export inspections for the week ending January 3 were; 19.7 million bu of corn, 24.7 million bu of soybeans, and 9.6 million bu of wheat. US corn/wheat shipments were less than expected, while soybeans were near trade hopes. We note that China did ship out 2.7 million bu of US soybeans last week with new vessels showing up in the vessel line-up nearly daily. US exporters report that US corn and wheat shipments will pick up in the post-holiday period.
- Algeria is tendering for optional origin wheat for 50,000 mt of milling wheat (but is likely to secure 400-600,000 mt) for late February and March shipment. The results of the tender will be Jan 8 with offers good into Jan 9. US, French and Argentine wheat are in contention for the Algerian demand with freight rates determining who will book the tender. We also expect that Egypt’s GASC could tender for wheat in the next week for late February needs.
- The midday GFS S American weather forecast is similar to the overnight run with below normal rain for NC and NE Brazil. A few showers develop early next week across Mato Grosso, Goias and MGDS, but most amounts will be less than 1.00”. Drier weather follows next week. The best rains will drop across S Brazil/northern third of Argentina. Soaking rains of 6-10.00” impact the northern third of Argentina with flooding to become widespread. Below to much below normal temperatures will persist across Argentina amid considerable cloud cover. Temperatures average above normal through the next 10 days with heat centered on NE Brazil with highs in the 90’s to the lower 100’s. There is no indication of a lasting pattern shift.
- Sell the rumour trading is occurring in US soybean futures as cash traders discuss the sale of another 1.0 million mt of US soybeans to China. And grains are weak on selling ahead of index fund re-balancing which starts on Tuesday. However, US wheat prices are not expected to drop too far amid strong world prices and rising demand (Algeria/Ethiopia). If China purchases US corn/wheat it would be a big deal. S American weather is supportive with a lower soy/corn estimates due out of CONAB on Thursday.