- Chicago corn, soybean and wheat futures are firmer in trade today. US new crop seeding estimates from the USDA Outlook Conference pulled Chicago values off their early morning highs. The big news in the marketplace remains the US/ China trade talks in Washington DC, and what it will mean for US ag demand going forward. US/China continue to meet over trade with progress reported. We look for a strong Chicago close today with the key being whether the US/China can reach a trade deal that both Presidents can bless.
- Chicago brokers estimates that funds have bought; 5,500 contracts of corn, 4,300 contracts of soybeans, and 2,100 contracts of wheat. In soy products, funds have bought 2,100 contracts of soyoil and 1,700 contracts of soymeal. The corn market has pushed back to its 50 day moving average at $3.8785 March.
- Bloomberg news is reporting that China is pledging to secure $30 billion of new US ag trade annually, on top of their pre-trade war dollar amounts. In 2017, China bought $19.7 billion of US ag commodities. If the $30 billion is added on top of that amount, the annual US ag goods to China would total be nearly $50 billion dollars. Such massive US ag demand into China has some well-placed commercials wondering whether the US can supply that demand annually. And more importantly, does the US have the logistical infrastructure available amid a booming US economy, to ship $50 billion of the US ag goods through US ports. A US/ China trade treaty that includes such US ag demand would produce a new demand led bull landscape for US ag goods.
- USDA in its Annual Outlook Meeting estimated 2019 US row crop seedings of; 92.0 million acres of corn, 85.0 million acres of soybeans, and 47.0 million acres of wheat. All US cotton acres was pegged at 14.3 million acres with rice down 10% at 2.7 million acres. The big change was WASDE increasing their 2019 US soybean acres by 2.5 million acre due to the decline in winter wheat seeding to a 110-year low. WASDE will update their 2019/20 US corn, soy and wheat balance sheets on Friday.
- FAS will release six weeks of US export sales data on Friday morning. The report will be closely watched by traders. The report should include China demand for 5 million mt of US soybeans along with improved demand for US corn and wheat. Cash traders are on alert for China demand for US corn, sorghum, DDG’s and ethanol. Gulf basis is firm awaiting new demand amid tough river logistics.
- The S American midday GFS weather forecast is slightly wetter across Argentina (different from the overnight run which was drier). The forecast models are struggling with a complicated pattern shift this weekend and where the rains will drop. The midday model places better rains across Buenos Aries which would be helpful to their parched crops. The front is extremely strong, and temperatures will drop 20-30 degrees in its wake. Brazil continues to see near to above normal rainfall with three frontal passes producing 0.75-4.50” over the next 10 days. The forecast is overall favourable to Brazilian crops.
- US/China trade negotiations are ongoing. China imported $129 billion in 2018 from the world. The US wants its share of the market to lower the US/China trade deficit. China will secure more US soybeans, grains, meats and other ag products from the US, and less from S America. Last year, China secured $33 billion of ag goods from Brazil. Their demand for Brazilian beans will decline as the US increases. If a trade deal is done, it increases US and world demand by the purchased amount. China needs to adhere to 2001 WTO pledges and book 9.0 million mt of wheat and 7.2 million mt of corn. This is more bullish grain than soy.
- Egypt’s state grain buyer GASC has been in the market again, purchasing 360,000 mt of wheat for April shipment. The purchase was made up of 180,000 mt of French wheat and 60,000 mt each of Romanian, Russian and Ukrainian origin wheat. Notably missing from the list of offers was the US, adding to concerns that the US export pace has been lagging. As a result, US Chicago wheat futures (May ‘19) continued to fall, closing yesterday at $177.91/t, down $15.34/t on the week (Wednesday to Wednesday), setting a new 2018/19 low. Although French wheat was the most competitive origin, winning half of the tender, pressure from the falling US market and the continued price competitiveness from Black Sea grain origins outweighed the potentially bullish export news. As such, Paris milling wheat futures (May ‘19) closed yesterday at €193.50/mt, down €9.25/mt on the week. UK wheat futures (May ‘19) tracked global wheat markets lower, closing at £164.35/mt yesterday, down £8.15/mt from last Wednesday. Despite the drop in UK wheat futures, physical markets appear to be resisting the fall. With concerns over lacking US wheat exports setting the bearish direction of global wheat markets, without a pickup in US exports, wheat markets could well continue to be pressured. However, some recovery has now been recorded in futures markets following over selling. Information on the volume of US exports between 3 January and 14 February will be published tomorrow.