- Chicago values are lower at midday with soybeans pacing the decline on fund long liquidation. March soybean futures are back to testing key support at $10.40-10.50 with March corn’s support noted below $4.15. KC March wheat has support below $5.35. Buying has been limited to short covering, but commercial expectations are that China will make new purchases before yearend to pad their Phase One purchase pace heading into 2021. China remain intent on being a “good actor” of the Phase One agreement, not so much for political reasons, but due to strong economic growth and the dramatic increase in their hog herd. Research sees soybeans, corn and wheat as nearing strong support (value) with the further downside potential with call options offering value. US and S American farmers have halted cash sales which is starting to firm basis bids.
- Chicago brokers report that funds have sold 9,000 contracts of corn, 7,200 contracts of soybeans, and 3,200 contracts of wheat. In the soy products, funds have sold 3,200 contracts of soymeal and 5,500 contracts of soyoil.
- The USDA/FAS did not make any new sales announcements this morning.
- The Brazilian Real is trading at 5.09 vs. 1 US$ at midday. The Real has slid from 5.50 just a few weeks ago. The decline in Chicago and the rally in the Real has harmed farm cash soybean bids by as much as 16-19% depending on the location. The dramatic cash bid price fall along with less rain than desired has shut down Brazilian farm selling of both soybeans and corn. The Real is expected to keep rising which longer term will diminish Brazilian farm expansion if Chicago does not keep rising. The rise in the Real and the Russian Ruble are going to make it more difficult to stimulate cash selling.
- China has vowed like retaliation against the US for its travel ban against the 14 key Chinese Government officials in its law-making body. China criticised the move and summoned the US Ambassador to protest. The Trump diplomatic financial sanctions are not expected to impact US/China trade. The US continues to condemn China’s National Security Law over Hong Kong, which China will openly criticise, but it is unlikely to cause major trade harm.
- The average end stock forecast by analysts is for US 2020/21 corn end stocks of 1,691 million bu (down 9 million) with soybean stocks at 168 million bu (down 22 million). No change is expected in US wheat end stocks at 877 million bu. We suspect that the US 2020/21 soybean end stock total could be lower with an export increase of at least 50 million bu which would drop US soybean stocks to just 140 million bu.
- The 10-day forecast is drier than the overnight run for NW Brazil and slightly drier for Argentina. The 10-day rainfall map reflects that rainfall will be less than normal! The midday forecast has cut some 0.25-1.50″ from the NW Brazilian forecast which is going to leave the area short of soil moisture with heat/dryness returning by the weekend and then continuing for at least another week. This is concerning.
- N Brazilian temperatures are forecast to be seasonal with highs ranging from the 80′s to the mid 90′s. Argentina and S Brazil temperatures will range from the 70′s to the 90′s. Our concern for S American weather is rising (again) amid the ongoing “deficient” rainfall pattern for N Brazil/Argentina.
- The Chicago decline is about bearish chart patterns and fund liquidation ahead of the USDA December Report on Thursday. We see the break as engendering new end user/importer buying with China said to be looking for high value US ag goods before year end. Our concern over hot/dry S American weather is increasing.