- Chicago ag futures are mixed at midday. The US DOW recovered following its two day lashing on bargain hunting and the expectation that US President Trump will calm nerves regarding the spread of coronavirus in a speech this evening.
- The unknown for traders is whether coronavirus will spread more broadly across the US thereby sparking a sharp decline in consumer spending. Like other infected countries, the US population would likely avoid public gatherings including dining, entertainment and education. The impact would be brutal for the US economy and likely spark a spring recession.
- In early February, we noted that if China could ringfence and control the spread of coronavirus, the US and world could breath a collective sigh of relief. However, that all changed late last week with the rapid global spread which raised the stakes that coronavirus could become a pandemic.
- The WHO says that such a pandemic is not here yet, but the ongoing spread of incidence is globally concerning. Amid the softening globally economic outlook, it will be key to limit future coronavirus incidents in the US, Europe, Turkey, Russia and Japan.
- Chicago floor brokers estimate that funds have been net buyers of 2,200 contracts of corn, 1,900 contracts of soybeans while being flat in wheat. In soy products, funds are net sellers of 3,700 contracts of soyoil while buying 1,900 soymeal.
- Black Sea wheat fob offers continued their decline with offers at $217/mt for March. This is down $3-4/mt from Friday’s close with aggressive offers noted from Russia and Romania. Exporters report that Russian silos have been filling in recent weeks and that sellers are more anxious in looking for world demand. The slowing seasonal demand for world wheat is underway with key importers like Egypt, Saudi, and much of North Africa having their import needs covered into their local harvest. The world wheat market has entered a softer seasonal trend into the new harvest that starts in May.
- Australian farmers express glee as the rains continue to drop across paddocks that will soon turn green with new crop wheat seeding. Farmers in New South Wales and Victoria report that following 3 years of devastating drought, they will plant fence row to fence row with the Australian$ at $0.66:1 US$. We would initially peg 2020 Australian wheat production at 23-26 million mt vs this year’s 14.2 million. The Australian wheat production should help offset losses in the EU due to acute wetness last autumn.
- USDA announced the sale of 123,000 mt of US corn to South Korea. The sales announcement was one of the first in weeks. US gulf corn is losing its competitive position against S American offers in April/May
- The US$ is surging with the Brazilian Real trading lightly at a new record low 4.39, the Argentine Peso at a record low 62:1 and the Russian Ruble at 65:1. The US is in the best position to control coronavirus due to its geographical position of having a vast ocean between Europe/Asia.
- Argentina has suspended export registrations in a move that is likely to add 3% to its soy export tax. The current soybean export tax is 30% with the additional tax making it 33%. No word was offered whether Argentina would also increase grain export taxes by 3%. Chicago soybean futures rallied on the news.
- The GFS weather forecast is consistent with the overnight run with general Argentine dryness and above normal rainfall for Brazil.
- Soy futures rallied strongly on the news that Argentina was likely to raise their export taxes another 3%. Yet with the monthly S&P chart forging a key reversal down, it is hard to be bullish of commodities.