- Chicago futures are mixed at midday with soybeans firm while corn and wheat sag. The volume of morning trade is abysmal with few traders wanting to take on any new risk ahead of the USDA January Report out on Friday. Most discretionary traders have not returned to trading and are awaiting both the USDA’s Friday report and US/China Phase One Deal signing a week from today before jumping back into new positions. Both events will help key price direction into the end of the month.
- Chicago brokers estimate that funds have sold 1,200 contracts of corn and 1,400 contracts of wheat, while buying 3,600 contracts of soybeans. In soy products, funds have bought 1,800 contracts of soymeal and1,300 contracts of soyoil. Fund managers are not showing much interest in taking new positions. The Index Fund roll and rebalance starts near the close and persists for 5 trading days.
- In a midmorning press conference, US President Trump indicted that Iran appears to be “standing down” and that the US was ready to embrace peace. The US will impose new sanctions on Iran, but the broad US stock indexes surged to new highs while crude oil prices fell to sharp losses on the prospect of reduced tensions. WTI March crude oil is priced at $59.60, down nearly $3.00/barrel. Gold has also fallen 1% on profit taking
- CONAB estimated a record large Brazilian soybean crop of 122.2 million mt, up 1.2 million from their December forecast. CONAB estimated the 2020 corn crop at 98.7 million mt, up slightly from their estimate of 98.4 million last month. History argues that CONAB tends to be too conservative in January and with normal weather, the Brazilian soybean crop could rise 2-6 million mt and corn 2-5 million mt. We consider the range for the 2020 Brazilian soybean crop at 123-129 million mt with corn at 99-105 million mt depending upon Mother Nature.
- Weekly US ethanol production and stocks data was slightly bearish with rising stocks and reduced blender demand. US weekly ethanol production amounted to 312 million gallons vs 313 million in the week prior. This consumed around 108 million bu of corn. US ethanol stocks grew to 944 million gallons, up 61 million gallons or 7% from last week. The stocks rise was a result of diminished blender demand. US board-based ethanol margins rest at $0.O5/gallon. A seasonal peak in US ethanol production has likely been scored with reduced production into spring. We anticipate WASDE will trim its US corn grind in coming monthly reports. US ethanol is not a bullish demand driver for US corn prices.
- GASC secured 300,000 mt of Russian, Ukraine and Romanian wheat in an overnight tender for late February shipment.
- The midday GFS weather forecast is slightly wetter for Argentina and Southern Brazil over the next 10 days with better coverage and rain amounts for N Argentina. Southern Argentina will see reduced totals while Brazil well-watered. There is no evidence of extreme heat for either country and yield potential should continue to rise. The forecast is favourable for S American crops for another 2 weeks and time is running out for a Brazilian weather problem that would drop their crop below 120 million mt.
- Friday’s USDA crop report just ahead and the fear is that NASS will release a smaller US corn and soy crop due to the latent 2019 Midwest harvest. And we expects that China will make initial US ag purchases following the Trump/He signing next week in DC. Yet, the market must prepare for record large S American soy/corn production and keen export competition beyond mid-February. An abundance of world supply is a theme returning in late January.