- Ocean freight indexes have plunged in recent weeks, breaking a longer term uptrend line that has been established since early 2016. Changes in ocean freight values are nuanced, but we suspect lower than expected Chinese growth and ongoing world trade barriers have softened demand for vessels. The global economy needs a boost.
- Chicago grain/soy prices continue their choppy action without a lasting trend. Traders are frustrated as politics battle fundamentals. US and Brazilian farmers are not willing to sell a break amid low cash basis bids and no one wants to buy a Chicago rally without knowing that the US/China have cut a deal for a specific dollar amount for US agriculture goods. Add in the uncertainty of Presidential tweets and you end up with Chicago markets that jump around in a range. Little of the range trade forecastable and all that end users can do is secure sharp breaks while farmers can sell sharp rallies (which is what keeps the Chicago in a range, with lots of noise in between).
- Chicago traders estimate that funds have sold 2,100 contracts of wheat and 6,000 contracts of corn, while buying 2,400 contracts of soybeans. In soy products, funds have bought 2,200 contracts of meal while being flat in oil.
- US weekly export sales for the week ending Dec 20 were; 19.3 million bu of US wheat, 66.9 million bu of US corn, and 87.9 million bu of US soybeans. For their respective crop years to date, the US has sold 632 million bu of US wheat (down 79 million or 11%), 1,233 million bu of corn (up 187 million or 18%), and 1,100 million bu of US soybeans (down 384 million or 26%). The sales were better than expected.
- China booked 1.466 million mt of soybeans (53.8 million bu) in the week ending Dec 20 with crop year sales expanding to 3.5 million mt. This helps confirm that the Government purchases of early January of 2.0 million mt helped push China above the 5.0 million mt of total US soybean purchases for their reserve. China had 500,000 mt of purchases on the books before the December G20 Argentine agreement.
- Egypt showed up as securing two cargoes of US HRW wheat with another cargo to an unknown destination (rumoured to be Egyptian privates). The sales confirm that US HRW wheat is working into North Africa as the Russian market continued its rally. US wheat should be working into many other world destinations. US soymeal sales were a large 427,400 mt with sales to Columbia, the Philippines and Mexico. President Trump wants to meet with Chinese President Xi in late February. The meeting is expected to finish hashing out the hard details of an IP deal. We hear that progress is being scored but getting all of the details of trade/IP protection adherence will take more work.
- The midday GFS S American weather forecast is little changed from the morning run with better rains across N and E Brazil. Mato Gross Do Sul and Paraguay remain in need of rain, but the area of concern is shrinking farther north. Better rain falls across key areas of Mato Grosso, Goias and Minas Gerais (45-50% of soy production) in the 7-15 day period. The soy harvest across the north is advancing quickly and weather will be of reduced concern after Feb 10. Argentine weather is improved and trend plus yield prospects persist. No extreme Argentine heat is foreseen, and the crop prospects here are vastly improved from last year.
- China will be asked to secure US ag and manufactured products on the back of the Washington Trade Talks. Debate rages on as to what ag products will be included. Our bet is that it will be grains as China pledged in 2001 as a new WTO member to secure 9.6 million mt of wheat and 7.20 million mt under TRQ from the world. China never made these purchases. It is time that China adhere to its promises and act like the world’s second largest economy. Hope remains for US/China trade progress.