- Chicago Ag markets are mixed at midday with soybean and wheat futures higher while the corn market is slightly lower. US corn export sales have yet to recover and the window for new sales is narrowing to make up lost ground. We look for a mixed close with the potential that Argentina raises grain and soy export taxes on Friday with the installation of Fernandez as the new President of Argentina.
- Rumours abound that a large Argentine crusher is having financial difficulties and had to liquidate existing short hedges in soymeal. The covering started late Wednesday and was sizeable after the opening with trade sources suggesting that the crusher bought close to 3,000 contracts over several minutes of time. The GMO order (Get Me Out) added about $3/ton on the price of March soymeal futures. The uncertainty of currency and politics are colliding in Argentina.
- Based on the political and economic uncertainties within Argentina and the likely hike of export taxes, we would anticipate that Argentine exporters and crushers will move to doing business on more of a spot basis, compared to offering product months in advance as has been the case in recent years. This will not change the tonnages of ag products that Argentina sells/exports, just the visibility of future price offers.
- Chicago brokers estimate that funds have been net sellers of 3,000 contracts of corn, but buyers of 4,200 contracts of soybeans and 1,800 contracts of Chicago wheat. In the soy products, funds have bought 3,500 contracts of soybean meal and 900 contracts of soybean oil.
- US export sales for the week ending November 28 were; 8.4 million bu of wheat, 21.4 million bu of corn, and 25.1 million bu of soybeans. All sales were at the lower end of expectations with some traders citing the US Thanksgiving Holiday for the shortfall. We suspect that US export demand is still lacklustre.
- The USDA announced the sale of 245,000 mt of US soybeans sold to an unknown destination. The sale was split into 120,000 mt for 2019/20 and 125,000 mt for 2020/21. The buyer is rumoured to be Mexico or an EU crusher. No China crusher will secure US soybeans out into 2021 amid US/China trade uncertainty in our opinion. 10 million mt of US soybean duty free licences into China have been largely used. In the weekly export sales report, China took 298,000 mt of US soybeans, were mostly switches from unknown destinations. This is not new Chinese demand.
- The midday GFS weather forecast remains arid for nearly the entirety of Argentina while Brazil stays well-watered. No extreme heat is noted. The key corn producing areas of Argentina look to remain concerningly dry into next week. Another 10-15 days needs to pass before a yellow flag is raised for the soon to pollinate initial corn crop. The drying soil moisture profile has to be monitored. Brazilian soybean crop estimates are rising and totals of 123-125 million mt of soybeans should not be ruled out.
- Chicago values are rising on fund short covering following the Argentine crusher that exited a meal hedge. Chicago values are still chopping back and forth and we do not expect this trend to change unless a US/China trade deal is completed or the dryness in Argentina becomes more entrenched. US export demand remains disappointing and US exporters fear that strong world demand from August into November sapped some forward business. Research holds a view that the downside price risk is limited for now.