- Limited news ahead of the holiday season had soybean futures slightly lower on Thursday.
- The US Weekly Export Sales report showed routine sales while FAS announced daily sales of 126,000 mt to China.
- The future soy outlook all comes down to politics. Commercial traders are concerned that there could be some trapdoors in the Phase One agreement that may not mandate that China reaches $40 billion. It is unlikely that China will pay up for US soybeans, especially with Brazilian export basis in decline.
- Brazilian soybeans are offered at $10.23/bu for December while US offers are at $9.98. However, Brazilian fob soybeans are $0.12-0.14 under US offers for Feb/Mar. China was rumoured to have booked another three cargos of Brazilian soybeans for March today.
- It is forecast that funds will cover their net short position by early 2020. Yet, new Chinese tariff waivers are needed to sustain January futures above $9.40 resistance. Chicago will focus on the timing of the US/China inking the Phase One Trade Agreement.
- Chicago corn futures ended unchanged in tepid volume. Funds have been active in covering shorts since last Friday but look to pause as the trade closes its books on 2019. There is still nothing concrete available with respect Chinese buying in 2020. Work suggests that total US corn consumption will benefit only modestly. Food products will be favoured.
- Export sales through the week ending Dec 12 totalled 67 million bu, near expectations. Recall this included last week’s sizeable sale to Mexico worth 45 million bu. Non-Mexican demand totalled just 22 million bu. 2019/20 commitments to destinations other than Mexico sit at 341 million bu, down 56% from mid-December a year ago. Cumulative corn sales account for just 37% of the USDA’s forecast. Pace analysis still indicates the USDA will lower its forecast by 50-100 million bu in Jan.
- Fund short covering is still expected in the weeks ahead. But with needed Argentine rainfall imminent, rallies above $3.95, March, will be laboured without confirmed S American yield loss.
- US wheat futures ended slightly lower. It remains that Chicago and KC contracts are overbought, and Gulf wheat maintains a decent premium to all other origins for delivery into late winter. Additional fuel is needed to sustain this rally, but increasingly world wheat traders will be exiting the market for the year.
- Estimates suggest that funds since last Tuesday have bought/covered a net 15,000 contracts in KC. This leaves their net short at just 9,000 contracts. It remains unlikely than an outright bear trend emerges into early 2020 as German winter seeding are estimated down 7% from last year and as ongoing Northern Hemisphere warmth is being monitored. However, a decent boost in soil moisture lies ahead across the Southern Plains next week. And following slow Russian exports to date, competition for Jan-Feb world trade will be ongoing. Clarity over potential Chinese demand is needed.