- Chicago ag futures are mixed at midday in a reversal of Wednesday’s action, summer row crop futures are weaker while the Chicago wheat market bounces. The volume of Chicago trade is subsiding as traders deal with the extreme volatility of world equity markets and the unknown economic impact of coronavirus.
- The DOW fell to 800-point losses early today but is crawling back to just 500 point loss on the hope that China workers are slowly returning to work with the supply chain to normalise in 2-3 weeks. We look for a mixed Chicago close as traders start to think ahead to next week’s USDA March 10 Crop Report and the March Stocks/Seeding Report on March 31. US corn, soybean and wheat export demand is sliding as world importers turn to cheaper prices offered by Brazil, Argentina and Russia for grain/soy.
- Chicago brokers estimate that funds have sold 2,600 contracts of corn, 3,600 contracts of soybeans, while buying 2,400 contracts of wheat. In soy products, funds have sold 1,900 contracts of soyoil and 2,800 contracts of soymeal. Fund activity is having an oversized impact on Chicago values with end users and importer unwilling to chase a rally.
- The Brazilian Real and the Argentine Peso continued their decline to record lows against the US$. The Brazilian Real has fallen to a new low of 4.65:1 US$ with the Argentine Peso at a new low of 62.5:1. The decline of these key S American currencies is raising prices to domestic farmers just as harvest is gaining speed. We note that the Russian Ruble is testing its one year high at 67.1:1 US$. The sliding value of the key ag currencies will enhance their export aggressiveness and steal future US export chances.
- FAS reported for the week ending February 27 that the US sold 19.9 million bu of wheat, 30.3 million bu of corn, and 12.7 million bu of soybeans. The soybean and corn sales pace were disappointing, while wheat was slightly bullish.
- For their respective crop years to date, the US has sold 852 Xmas of wheat (up 22 million or 3%), 1,049 million bu of corn (down 546 million or 34%), and 1,251 million bu of soybeans (down 188 million or 13%). The US corn and soybean export sales pace remain disappointing and call for fresh trade reductions for USDA in their March report. Research argues that US 2019/20 corn exports are overstated by at least 100 million bu with US 2019/20 soybean exports overstated by at least 150 million bu. Both will add to WASDE end stock projections.
- China is releasing reduced duty import licenses for US ag goods that are good for a year. The news is not surprising as China is moving ahead with promises to accept applications and issue licenses (online) after March 2. Chinese importers must report actual purchases and prices back to their Government.
- China is not expected to turn to the US for ag purchases until US price offers are competitive with non-US suppliers. China has been an active buyer of June Brazilian soybeans with European exporters reporting that China has also booked small tonnages of South African corn. US Gulf/ PNW corn, soybeans and wheat are noncompetitive with other suppliers which will cause Chinese buyers to wait on lower US offers. They have a year to use newly issued licenses.
- The midday GFS weather forecast is like the overnight run. Daily showers will continue across Northern Brazil while dryness persists across Argentina, Paraguay and Southern Brazil. Rain chances return to Central Argentina early next week. The 11-15 day forecast calls for improving rain chances for Central and Southern Brazil.
- Chicago traders are starting to think that WASDE may be overstating US 2019/20 US corn and soybean exports (without an immediate return of Chinese interest) with a new crop production cycle is around the corner for the Northern Hemisphere in 30 days. The US 10-year note has fallen to a record low 0.92% arguing for a US recession.