- Ag markets found buying interest at the traditional open, with volume weaker than in prior days. Estimates suggest that since Friday morning, funds have bought/covered a net 45,000 contracts of corn, 30,00 contracts of beans and 25,000 contracts of Chicago wheat. Our thesis into early 2020 is that large fund shorts in corn/soy continued to be pared down, but rallies moving forward, into the Phase One’s signing, will be more laboured amid improved S American weather forecasts. The midday GFS forecast is slightly wetter across the driest areas of Argentine’s southern ag belt in the next 10 days. Soaking Argentine is still hinted at during the final days of December.
- Macro markets are firm. The Dow is up 90 points. Spot WTI crude is up another $0.60/barrel at $60.80. Falling US rig counts and elevated exports implies a steady/bull ish trend for energy markets into Q1 2020.
- And the leader of the ag space today has been Chicago soy oil, which has found a new two-year high, basis spot. There is talk that US legislators have tentatively agreed to re-instate a $1/gallon tax credit to biodiesel blending as part of the broader tax credit extension plan. The biodiesel credit will be re-instated retroactively and be extended through to the end of 2020. US biodiesel production has faltered in recent months, but on the margin will improve if the tax credit is extended.
- Malaysian palm oil futures overnight remain perched at multi-year highs. EU rapeseed futures have rallied to newer multi-year highs amid rising competing veg oil markets. Veg oils will find ample support on breaks.
- The Argentine government’s plan to boost grain/soy export taxes is being fine-tuned with higher rates. The new proposal puts the tax on corn/wheat exports at 15%, vs. a prior target of 12%. The cap on soybean export taxes will be raised to 33%, vs. 30% previously. We doubt 2019/20 seedings will be affected, with corn planting to reach 56-57% complete this week and soybeans to reach 64-65% complete. We also mention that it is margin that will drive future acreage rather than the rate of export tax exclusively.
- lnforma this morning pegged final US corn production at 13,568 million bu, vs. USDA’s 13,661. Final US soybean production is estimated at 3,540 million bu, down 10 million from USDA.
- lnforma also puts 2020 corn seeding at 94.1 million acres, up 4.2 million from 2019. New crop soy seeding is forecast at 86.2 million acres, up 10.6 million from final acres in 2019. However, we note that lnforma’s corn estimate is up just 1.3 million from intentions a year ago, with their soy forecast up 1.6 million. 2020 wheat acres are projected to decline another 900,000 to 44.3 million, a new record low.
- The midday GFS weather forecast has added another round of regionally heavy rainfall to Cordoba and Buenos Aires in Argentina Dec 25-27. Similar totals are expected across Argentina’s southern crop belt on the weekend. This brings the GFS’s projected 10-day totals there to 2.0-2.5″, which will boost soil moisture significantly. Rain is still forecast to expand into Northern Brazil beyond Dec 24.
- The path of least resistance remains higher into the opening of 2020 as shorts exit the market. Measuring potential upside risk will be difficult until more is known about the scale and timing of Chinese buying.