• Holiday curtailed trade volume ended the week with soybeans finishing down for the third consecutive day. At the close, March beans were back under both $9 and the 50-day moving average for the first time in nearly a month. Funds sold close to 5,500 contracts on Friday. The Commitment of Traders report showed that as of Tuesday, funds had covered the remainder of their net soybean position and were net long 350 contracts. In the last three weeks funds have bought just over 64,000 soybean futures, the largest 3-week buying spree since March. In meal, funds covered 3,400 and were still net short 4,400 contracts, and in soyoil funds sold 1,200 and were net short 48,000 contracts. White House Trade Advisor Navarro came out after the Chicago close and commented that time is running short for a US/China trade deal and that China is trying to steal our future. His hawkish comments sent the DOW sharply lower. The US has also charged another China national for stealing US trade secrets which is likely to raise the political tensions between the US/China. US soybean prices are overvalued by $0.75-1.50/bu unless China and the US reach a trade deal. Our market stance remains bearish amid huge US stocks.

• March corn rallied 3 cents on end user pricing and a lack of new producer sales. Exporters this morning sold 222,500 mt to unknown destinations. Exporters on Thursday sold 343,500 mt to Mexico for 2018/19 arrival. Weekly sales into early January will remain large. Black Sea basis is also firming on strong demand. A neutral trend will continue. We caution against chasing breaks amid the risk that US yield is lowered 2 plus bu/acre in NASS’s January report (should it be released). This will offset reduced US ethanol production. We have also highlighted how world corn trade is record large. However, managed funds on Tuesday were long a net 128,000 contracts, the most since May. A new demand spark is needed to for speculators to add to recent long positions. Chinese demand is possible, but the favourable shift in S American weather will give the market pause. Our upside target remains; $3.90-3.95 basis March.

• US and EU wheat futures ended the day and week lower. Today’s meeting in Russia yielded no new information, though there are more questions than answers regarding Russian policy and grain shipment timing moving forward. We maintain that Russia will ship 33-34 million mt of wheat in 2018/19. A much slower pace of Russian exports lies ahead. And it is the cash market that is working to shift world trade flows. Russian fob prices are firm at $239-245. Russian interior wheat and flour prices continue to move upwards, with flour prices near 2014 and 2016’s high. Note that highs in flour in recent years have occurred in the Feb/Mar period. New high Russian flour prices are expected in the next 45-60 days. This will push Black fob offers higher yet. Gulf HRW this evening is quoted at $232 for Feb shipment, vs. EU/Black Sea origin at $242- 243. US wheat is cheap. Funds are long a combined 1,500 contracts in Chicago and KC. Seasonal trends in world cash markets are positive, with a lasting high not due until late winter. Wheat holds bullish fundamentals, but the macro-economic world is capping rallies. World wheat prices are resting at 3.5 year highs which underpins Mar Chicago below $5.00.

To download our weekly update as a PDF file please click on the link below:

Weekend summary 21 December 2018

Our weekly fund position charts can be downloaded by clicking on the link below:

Fund positions disaggregated data

• Corn, soybean and wheat futures opened higher following the overnight gains and large US corn and soybean weekly export sales. However, news that the Trump Administration was going to finger Chinese officials that were involved in US intellectual theft pulled values off their early highs. Cyber theft remains a stumbling block for the US/Chinese negotiations and the China hawks in the White House want to make sure that the next 69 days are focused on that on this issue, compared to the 3 million mt of soybeans that China has booked in recent days. China is still asking for US corn and other ag good offers this morning, and some commercials expect that China will book another 2-3 million mt of US soybeans before the Christmas holiday. We anticipate that China will secure 5 million mt of US soybeans for their reserve that will be shipped out in the 2018/19 crop year. Corn, wheat or other US ag goods could follow the soybean demand.

• Amid S American weather turning more favourable and the harvest underway in Mato Grosso, a US/China trade deal is the only way that Jan soybean futures can justify their being above $9.00. If a Chinese IT/IP protection deal cannot be worked out, a US/China trade deal won’t be completed, and the complex would hold considerable downside risk. This is a “gut check” in terms of US/China negotiations. China needs to agree to protecting IT/IP if a deal is to be worked out. Buying soybeans and reducing the US/China trade deficit was easy. We notes that PBOC (Central Bank of China) lowered their lending rate by offering a new programme to small private firms called the TMTLF which is like programs offered by the EU and Japan during times of economic contraction. China is trying to reflate its economy which could be important to world commodity valuations in 2019.

• US Weekly Export Sales for the week ending Dec 13 were; 11.5 million bu of wheat, 77.7 million bu of corn, and 104.2 million bu of US soybeans. For their respective crop years to date, the US has sold 612 million bu of wheat (down 81 million or 11%), 1,166 million bu of corn (up 169 million or 14%), with soybean sales at 1,011 million bu (down 436 million or 30%). China has booked a known 2.016 million mt of US soybeans. With this week’s daily announcements, US soy sales are pegged at just over 3.0 million mt with the US holding 4.6 million in the unknown category. US corn and soy sales were as expected, but wheat was disappointing.

• GASC booked 120,000 mt of wheat in their latest tender, Ukraine sold 60K at $263.7/mt (basis C&F), and Romania sold the remaining 60K at $264.1/mt (basis C&F) all for February. The GASC Romanian offer was up $8-14/mt from last week for a shipping period that was only one week later. Major exporters (ABCDs) did not offer Russian wheat to GASC which has some speculating that Russia may move to place an export duty on wheat in their Ag Ministry/exporter meeting tomorrow. That duty would likely not start until March, but it would shift world wheat demand to non-Russian destinations, including the US. World wheat prices have reached their highest price since 2014 amid tightening major exporter supplies.

• The midday GFS S American weather forecast is unchanged from prior runs. Strong and expansive high-pressure ridging exits NE Brazil on the weekend. Slowly this will allow meaningful rain to move out of Argentina and back into N Brazil. The rains start after Christmas and expand in coverage in the 8-15 day period. A needed period of drying lies ahead for all of Argentina.

• US/China tensions are rising on the new US Dept of Justice cybertheft cases. Soy is overvalued unless the US/China strike a trade deal. World wheat prices are the highest since 2014 and look likely to rise still higher. Wheat looks as if it will make gains on corn and soy into 2019. Headline risks remain.

• Ag markets are lower at midday in mediocre volume, driven by a bearish weekly US energy update and an otherwise lack of news. FAS announced that exporters have sold another 1.1 million mt of soybeans to China, bringing the total to over 2 million mt. Confirmation of demand since last week has triggered modest fund selling, and that is certainly the case today. We caution against chasing this break in corn and wheat amid ongoing rumors of Chinese interest and ahead of Friday’s meeting between exporters and government officials in Russia.

• Biofuel markets continue to act as a weight on rally efforts. Through the week ending last Friday, US ethanol production totalled 308 million gallons, unchanged on the week and down 4% from mid-December of last year. Margins remain negative, or very tight, and incentive to boost grind has disappeared. Ethanol stocks last week totalled 1,003 million gallons, an eight-week high and up a hefty 41 million gallons from the prior week. Ethanol stocks/use is large. And following the recent collapses in gasoline prices, even blend margins are testing multi-month lows at $.01/gal, vs. $.04/gal a year ago. US gasoline stocks were up 1.8 million barrels on the week and up 1% from a year. US crude stocks are flat, but the for the first time since mid-2017 are up on the prior year.

• The US$ is weaker ahead of this afternoon’s meeting at the Federal Reserve. Spot WTI crude is up $1.40/barrel on very oversold technical conditions. Spot crude’s Relative Strength this week was again testing 30.

• Confidence is also rising with respect to improved near term S American weather. The EU and GFS weather models have been consistent in offering wetter weather to Southern and Central Brazil beginning next week. Excessive rainfall has finally exited Argentina, and a lasting seven-day period of dryness and warming temperatures lies ahead there. However, fundamental wheat data remains supportive. Replacement costs in Australia have rallied to $317/mt ($8.60/bu), new seasonal highs. Importers’ transition to the Southern Hemisphere will be difficult amid a lack of Aussie supplies and the recent surge in Argentine cash prices.

• Weekly US export sales are expected to include 33-38 million bu of corn, 35-40 million bu of soybeans and 23-28 million bu of wheat. Wheat and corn sales have met or exceeded the pace needed to meet the USDA’s target in each of the last two weeks.

• The midday S American GFS weather forecast is wetter in pockets of Central Brazil but otherwise unchanged. Strong and expansive high pressure ridging exits Brazil altogether on the weekend. This will allow meaningful rainfall to move out of Argentina and into Brazil. The return of high pressure aloft is lacking through late December. Some damage has been done to parts of Brazil via recent dryness, but it is far too early to adjust yield from trend. Rain also returns to Southern Argentine growing areas next week, but stays absent from the wettest areas.

• We maintain a bullish wheat outlook on rising world markets and seasonal trends. Fresh demand news is needed to sustain rallies in corn and beans. Ethanol’s demand draw could be lowered further in January.

• Higher in summer row crops and slightly lower wheat has been the morning Chicago trade. Rumours have returned that China is back checking prices on a host of US ag products. Cash connected traders expect that additional US soybeans could be purchased on Wednesday or Thursday. Other US ag good purchases cannot be ruled out, but they are less certain when compared to the Sinograin or COFCO seeking US soybeans for the State Reserve. It is the headline risk that traders worry about in holiday thinned volume trade. The one point that must be made is that any new Chinese demand is not included in any of the WASDE export forecasts! If China books 4 million mt of old crop US soybeans, this would add 147 million bu to 2018/19 US soybean export totals, offsetting much of the decline from others. The point is that 2018/19 US soybean stocks might have reached their high for the season at 955 million bu.

• Chicago CBOT brokers report that funds have bought 2,200 contracts of soybeans and 3,000 contracts of corn, while selling 2,400 contracts of wheat. In soy products, funds have bought 1,900 contracts of soyoil and 2,400 soymeal.

• The US Central Bank is meeting and will likely raise rates another 0.25% on Wednesday. The market expects the increase, but it is the Fed language of future US economic forecasts and rate increases that will be scrutinized. We note that spot WTI crude oil has fallen to new lows at $47.50. Research argues that this break is crude is reaching long term value and purchases should soon be considered.

• The looming US Government shutdown is likely to push a bill for US tax extenders, including biofuels, into 2019. Amid the Democrats taking control of the House, this raises the risk for its passage. The Congress will already have a contentious debate over USMCA which are likely to fray nerves. The good news is that President Trump is expected to sign the 2018 Farm Bill on Thursday. Otherwise, be prepared for long lived political fights and lots of finger pointing by each party.

• Brazilian farmers indicate that Parana and MGDS soybeans have been hurt by weeks of below normal rainfall and rising temperatures. Some argue that 3 million mt of soy production has been lost. But the losses of NC Brazil are likely made up by N Brazil where crops look stellar. We look for CONAB to raise their 2019 Brazilian soybean crop slightly in January to 121-121.5 million mt.

• The midday S American GFS weather forecast is like the overnight forecast. The pattern does not show much sign of change until the middle of next week, some 8-9 days out. Better rains are then projected to push back into the drier areas of NC Brazil. Until then, below normal rains will prevail across NC and NE Brazil with soaking totals for the southern 1/3 of the crop area. Parana crop conditions improve with 2-4.00” of rain and locally heavier amounts. Drier Argentine weather starts on Friday which will allow for flooded fields to start drying. It’s going to take dry weather into early January before fields allow wheat harvest to resume in NC crop areas.

• China appears to have bought US soybeans from the Gulf and is now turning to the PWN. Soy purchase totals initially amount to 250-300,000 mt with orders still working. We hear that China is readying demand for US grain, but no one is hitting the buy button just yet. World wheat prices are steady/rising with the US futures decline expected to be brief. It is tough to be bearish of the world’s cheapest wheat without a decline in world fob offers.

• Mixed has been the morning trade with corn futures weaker while soybeans/wheat are firm. The volume of trade has been holiday constrained with several large traders having closed their books on 2018. Funds are heading into a flat position in wheat/soybeans by covering a modest short. Funds are long corn with last week’s buying being much larger than expected. We look for a firm close with any decline limited at least through the week.

• The US and China are making good progress on trade talks and this is offering real “headline risk”. The US and China are said to be talking daily. Traders fret that China could secure additional US soybeans (or other ag products) at any time, which offers real headline risk to short positions. Unless there is a breakdown in the ongoing US/China talks, the market risks are to the upside, with funds willing to engage a more bullish chart outlook.

• Chicago brokers report that funds have bought 2,300 contracts of wheat and 2,700 contracts of soybeans, while selling 3,000 soybeans. In soy products, funds have sold 1,600 contracts of soyoil while buying 2,000 soymeal.

• US weekly export inspections for the week ending Dec 13 included 34.8 million bu of corn, 35.8 million bu of soybeans, and 25.1 million bu of wheat. For their respective crop years to date, the US has shipped out 629 million bu of corn (up 265 million or 72%), 557 million bu of soybeans (down 394 million or 41%), and 430 million bu of wheat (down 75 million or 15%). The corn shipping pace to date is positive while soybeans/wheat data are slightly bearish. In the case of US wheat, both the sales/shipping pace are really starting to improve.

• Argentine fob wheat prices have exploded to the upside in the past ten days with bids at $236/mt and offers at $240/mt this morning. A few weeks ago, Argentine wheat was the cheapest in the world. However, the acute slowdown in farm selling amid quality/quantity issues from recent wet weather has spiked prices. Argentine farmers are worried that unharvested wheat in the northern half of the belt will be downgraded to feed. Private crop estimates have slid to 17-17.8 million mt. With Brazil needing 7-7.6 million mt of high quality of Argentine wheat for milling, the offers to others in the world could be limited. We look for recent optional origin sales of wheat to Algeria to be switched to the EU. The problem is that EU feed prices are again rising faster than milling wheat which is raising competition for export markets.

• The midday S American GFS weather forecast at midday is wetter in parts of Central Brazil but is also drier in Argentina in the 8-15 day period. High pressure aloft loses its influence somewhat in Brazil beyond the next 8 days, but a pattern of below normal rain will continue into Dec 26. Moisture deficits will widen through the period. In Argentina, excessive rain persists in northeast growing area for another 36 hours. Moderate rainfall of 0.50-2.00” returns to the wettest areas of Argentina into Christmas. Wheat quality remains the primary issue.

• Headline risk are sizeable in thin volume holiday markets. New purchase orders from China outside of soybeans could spark grain rallies. A close above $5.225 in March KC wheat sets an upside price target of $5.40 with January soybeans having upside resistance at $9.30-9.40. Our leaning is that additional Chinese demand will be in the offing, but its exact timing is uncertain.

• Chicago values are mixed in light volume trade with soybeans/Chicago wheat trading either side of unchanged. Corn and KC wheat futures have held mostly firm on the hope that China steps forward with some fresh demand. As previously stated, there have been rumours of Chinese grain interest, but we cannot confirm any sales. FAS did announce this morning that China did book additional US soybeans. Some clean up business is underway this morning and by the close today, we are willing to argue that China will have secured 2-2.5 million mt of US soybeans. The sales will help US soybean exports recover with WASDE not having any additional China demand in their export grids as of the December report. We are looking for a mixed close going home. We doubt that anyone really wants to sell a break with China buying possible in the days ahead. Corn is breaking out of the top end of its range while wheat price trends are higher.

• Chicago brokers report that funds have bought 3,900 contracts of corn and 1,200 contracts of wheat, while being on both sides of the soybean market. In soy products, funds have bought 400 contracts of soymeal while selling 2,300 contracts of soyoil. The CFTC will release their CoT report later and funds are expected to be shown as a sizeable net corn long. Funds should also hold a soybean long, their first in months, while still holding a modest net short in Chicago and KC wheat. The USDA announced that an additional 300,000 mt of US soybeans was sold to China for 2018/19 delivery along with 130,000 mt that was to an unknown destination (likely China). Also, there was 125,000 mt of US corn sold to Japan in the old crop year.

• All December Chicago and KC futures contracts expire today. Spot month futures will become March in the grains on Monday.

• Russian interior wheat prices continue to advance amid tight stocks and solid export demand. Farmers are not showing any interest in marketing their modest amounts of stored wheat/barley until the new year, which in Russia means the last half of December. The Russian exporter meeting will be closely watched by the marketplace next week to see if the Government is willing to move to any export restrictions. The Russian Government must find a means to slow exports or risk running out of supply/stocks.

• The GFS weather forecast at midday is wetter in parts of Central Brazil but is also wetter in Argentina in the 8-15 day period. High pressure aloft loses its influence somewhat in Brazil beyond the next 10 days, but a pattern of below normal rain will continue there into Dec 28. Moisture deficits will widen through the period. In Argentina, excessive rain persists in Northeast growing areas through the weekend. Moderate rainfall 0.50-2.00” returns to the wettest areas of Argentina just after Christmas. A slower pace of planting and wheat harvesting lies ahead. Wheat quality remains the primary issue.

• Grain markets in December have begun to better reflect tight major exporter stocks. Favourable S American weather is needed, and work suggests the issue of tight stocks won’t be fully solved unless Northern Hemisphere yields are at/above trend in 2019. The elimination of US-China tariffs is needed to turn US and world markets bullish on oilseeds.

• The major forecasting models hint at drier weather in Argentina and wetter weather in C Brazil beyond the next 10 days. This pattern shift will be desirable, but confidence so far out is low. Extended range forecasts will be monitored closely through the weekend. Recall 2018 has been a year of climate extremes. In the meantime, a stagnant pattern of excessive rainfall will linger across North/Northeast Argentina. Totals of 2-6” will be widespread (much of this falls in the next 4-5 days), with regional totals pegged upwards of 8-10”. Wheat harvest in some areas is 60-70% complete. Quality on the remaining bushels is in question. The world market cannot afford any more yield/quality loss, particularly as high-pro importers are just now beginning to extend coverage into late winter/spring.

• The drought in S Africa is so far rivaling that of 2015, when concern over food-quality corn was widespread. Assuming the two-week forecast verifies, Nov-Dec rainfall across S Africa’s Corn Belt will reach just 4.5”, vs. a longer term average of 7.4”. A pattern of below normal precipitation will continue into the very end of December. Without well above normal rainfall in January, rationing will be needed there. S Africa’s climate pattern so far has been tied to the recently established El Niño. Model forecasts this evening are in good agreement that a strong El Niño will be in place until at least Feb/Mar. S African corn pollinates in January, and unfortunately production and export forecasts there will be lowered further. Recall in 2015 S Africa was a net corn importer of 1.4 million mt.

• Soybeans traded weaker overnight, and then fell right from the morning open following confirmation from the USDA of exporters sales to China. Ahead of the morning open the USDA announced export sales totaling 1.13 million mt of old crop soybeans to China. However, the figure fell well short of the rumoured figures. Traders hope for additional export sales on Friday or later next week and need to see a steady stream of business. 1 million mt hardly puts a dent in the record large soybean supply that US farmers/elevators are holding. The weekly export sales report showed routine sales and shipments for last week. Total export commitments are close to 13 million mt (34%) behind last year and the slowest in 7 years. At mid-month, US farmers are anxiously awaiting news of the second tranche of payments from the Market Facilitation Program. On Thursday the Ag Secretary said that he expects the White House will approve the second payment despite recent soybean sales. The trade hopes for additional export sales announcements in the coming days. In the near term, resistance in January is near $9.40, with support expected on a correction back to $8.80.

• March corn ended flat again, and since gapping higher in early December has done very little. There is still no indication of China reaching to the US for corn and wheat just yet. Weekly US export sales were good but not great. And S American weather isn’t yet affecting corn potential like it is wheat. Weekly export sales through last Thursday totalled 36 million bu, matching the pace needed to meet the USDA’s forecast. Sales have cooled since cash basis plunged in the Black Sea. We do mention that basis in Ukraine is sharply higher this evening and, overall, world fob values are firm. US, Black Sea and S American is offered at $172-175/mt for Jan-Feb delivery. This compares to $160-165/mt in Jan a year ago. Argentina’s crop is 47% planted, vs. 40% on this week in 2017. First-crop ratings are put at 51% good/excellent, vs. 47% in late Nov. No major S American crop problems exist currently. A bearish bean market and a bullish wheat market will trigger dynamic corn trade. Longer term, above-trend yields are required to replenish exporter stocks.

• World wheat futures rallied further amid another week of solid US export, concern over Argentina quality and uncertainty ahead of next week’s meeting between Russian exporters and government officials. March Chicago has broken through major tech resistance at $5.32. A close above $5.45 turns wheat’s chart bullish. Also note that calendar spread in Europe continue to tighten, with old crop’s premium to new crop rallying to $.40/bu. US weekly export sales totaled a sizable 28 million bu, up 2 million on the previous week and clearly well above the pace needed to hit USDA’s new target. Next week’s sales will be similarly large amid recent HRW sales (7 million bu) to unknown destinations. Argentina’s harvest has reached 57% complete. This is solid progress. However, production was lowered 0.2 million mt to 19 million (USDA 19.5) and excessive rainfall of 5-7” will impact Santa Fe and Entre Rios through the weekend. There is still some 15-40% of the crop left to gather there. We estimate that 1.5-2.0 million mt of wheat is subject to quality downgrades. Argentine fob prices have rallied $10/mt ($.35/bu) since late Nov. The world market is getting more urgent in shifting trade flows.

• There is strong talk in the cash market that China is buying US soybeans this morning, with many now expecting that FAS will announce as much as 2 million mt of new US sales in coming days. The buying is mostly for the next 60 days out of the PNW which is raising cash basis. Chicago has followed the rumours as values push to new rally highs. Cash traders argue that China has additional demand to work, but it’s uncertain as to how much buying will be completed today. We note that most cash traders still expect a total of 5-8 million mt to be filled with some of that demand coming in new crop. We do not expect that China will take that slug up front. Corn and wheat are following the soybean gains with world wheat prices well up from the last GASC tender.

• Egypt’s Egypt secured 180,000 mt of Romanian and Russian origin wheat for early Feb arrival. They paid an average price of $242/mt. This compares to Egypt’s tender last week executed at $237/mt and is the highest fob price paid since 2015. Egypt still needs to source its late winter/early spring needs, and based on seasonal trends Egypt is likely to pay upwards of $245-255/mt moving forward. No US wheat was offered this morning, but most important is that fair value in the world wheat cash market is rising. Finding high quality Russian is getting more difficult. EU milling wheat futures in Paris look to settle €1.50-1.75/MT ($.05/bu) higher. We mentioned earlier in the week that calendar spreads are tightening in Europe like they are in the US.

• US ethanol production last week totaled 308 million gallons, down 7 million on the prior week and down 4% from the same week in 2017. Midwest production margins remain negative. Ethanol stocks last Friday totaled 961 million gallons, down slightly on the week but 2% higher than last. The US ethanol market is well supplied. The only positive is the recent boost in Brazilian cash prices and strong export demand to date. We do mention that crude stocks are now declining seasonally, and with stocks matching last year a range of $50-60/barrel, basis spot WTI, is most probable.

• The midday S American weather forecast is unchanged at midday and viewed as mixed to supportive. Dryness will be ongoing in Central Brazil into Dec 26, and perhaps longer based on this week’s EU long term guidance. Excessive rain will be featured across Northeast Argentina throughout the next 10 days, with accumulation there expected upwards of 5-7”. Coverage won’t include Argentina’s primary ag belt, but some 20-25% of corn/soy production will be affected. Large S American grains crops are demanded. The return of normal rain will be desired in Brazil no later than late Dec/early Jan.

• China looks to have kept its promise to buy US soybeans. It is still unknown whether sizeable quantities of corn/wheat will be secured, but it remains that market risk leans a bit positive until more is known about US-China dialogue during the 90-day truce. Egypt’s tender results confirm a tightening world wheat market.

• The USDA December Crop Report was slightly bearish corn/wheat, but neutral on soybeans. WASDE raised US 2018/19 wheat end stocks by 25 million bu and US corn stocks by 50 million bu by cutting demand. WASDE cut its US 2018/19 US corn ethanol production by 50 million bu and US wheat exports by 25 million bu based on pace analysis. WASDE made no change on US soybean exports as there has been no announcement of Chinese reserve purchases under the Argentine G20 deal. WASDE will not forecast policy changes. WASDE told the industry in November that no additional Chinese demand was included in their 2018/19 US soybean export forecast. We doubt that the impact of the December WASDE report will be long felt as traders refocus on Chinese demand for US ag products.

• The USDA raised 2018/19 US corn end stock forecasts to 1,781 million bu based on a 50 million cut in US corn ethanol production to 5,600 million bu and a 5 million cut in US corn imports. US 2018/19 corn imports are estimated at 45 million bu. The average farmgate corn price was left unchanged at $3.60/bu.

• 2018/19 world corn end stocks were raised by 1.3 million mt to 308.80 million mt. The stock increase was based on the US increase due to reduced ethanol production. WASDE left S American corn production estimates unchanged at 94.50 million mt in Brazil and 42.50 million mt in Argentina. Following last month’s sizeable Chinese stocks revisions, no changes were made. Ukraine corn production was raised to a record large 35 million mt with exports rising to 28 million mt. We note that 2018/19 world corn end stocks are down 31 million mt from last year, even with record large US, Ukraine and Chinese corn yields. A further fall in world corn stocks are projected in 2019/20 based on demand growing faster than supplies.

• US 2018/19 soybean end stocks were left at 955 million bu with no change in supplies or demand. US 2018/19 soybean exports were left at 1,900 million bu. The average cash farmgate soybean price was estimated at $8.50. World 2018/19 soybean stocks were raised to a record large 115.3 million mt based on the Brazilian soybean crop being raised to 122 million mt and the Argentine crop holding at 55.50 million. WASDE held China’s soybean imports steady at 90.0 million mt. The larger Brazilian soybean crop went right to the bottom line of stocks. We note that world total soybean demand held steady at just over 351.5 million mt.

• US 2018/19 wheat end stocks were raised 25 million bu to 974 million based on a cut in US wheat exports to 1,000 million bu based on pace analysis. US wheat exports have been slowed due to record large Russian wheat exports. WASDE raised Russian wheat exports to 36.5 million mt due to its ongoing aggressive export pace. USDA assumes that the export pace will persist with Russian wheat end stocks falling to an untenable tight 5 million mt. We doubt that Russia will export more than 34 million mt due to tightening supplies in SE Russia and the unwillingness of the Russian Government to subsidise wheat transit from Siberia.

• The midday S American weather forecast remains consistent with recent model runs with below to much below normal rainfall for N Brazil and soaking/flooding rains for portions of Argentina. Temperatures look to average near to above normal with highs ranging from the mid 80’s to the mid 90’s while cloud cover keeps Argentina cooler than normal.

• Will China keep its promise and secure large amounts of US ag goods? Our view is that Chicago values won’t be able to sustain a decline very far until China has bought US ag goods!. That demand should be close nearby. The December WASDE report held few surprises. Our view is that wheat is bottoming and soybeans are nearing a sales opportunity.

• It has been a dismal morning of trade volume with few wanting to take any new positions ahead of the USDA December Crop Report tomorrow and the ongoing uncertainty of when or if the Chinese will make cash purchases of US commodities. The US stock market is under additional pressure with the Algo traders keeping pressure on stock valuations amid the bearish position of the charts. Chicago opened lower but was unable to sustain the decline as traders debate the timing of China purchases. Algo trading is likely to push soybeans and grains to new high if Chinese cash demand is confirmed.

• Chicago brokers report that funds have sold 3,000 contracts of wheat, 1,600 contracts of soybeans, and 500 contracts of soymeal. Funds have bought 4,000 contracts of corn and 1,200 contracts of soyoil. FAS reported that Mexico purchased 1.645 million mt of US corn in a large daily sale. We have heard that it is a large Mexican corn syrup producer that likes to lock in their cost close to the end of each year. The purchase is split between 1,104,900 mt in old and 541,020 mt in the new crop corn year. FAS also reported that 125,000 mt of US soybeans were sold to an unknown destination. The US soybean sales pace has picked up considerably following the US/China trade truce in Argentina. The USDA reported that for the week ending December 6, the US exported 34.9 million bu of corn, 15.4 million bu of wheat, and 33.9 million bu of soybeans. The US corn export pace remains on pace to reach the USDA’s forecast while wheat and soybeans are lagging. EU wheat exports were revised upwards by 600,000 mt which is more in line with recent shipment data. Traders expect that additional upside adjustments will be made in coming weeks which takes EU wheat total exports near 6.8 million mt. World wheat demand is equal to last year. The EU wheat export pace argues that their domestic wheat supplies are tightening, and that demand shifts to the Americas are underway. Russian wheat offers are becoming scarce for LH January

• We understand that China has allowed a US soybean vessel to unload today which may signal a thawing in the US/China trade dispute. Chinese sources remain upbeat on their pending Government purchase of US ag and energy.

• The midday S American weather forecast remains consistent with recent model runs with below to much below normal rainfall for N Brazil and soaking/flooding rains for portions of Argentina. The model is still working out the exact details of where heavy rains should be focused in Argentina with the EU model farther south. Temperatures look to average near to above normal with highs ranging from the mid 80’s to the mid 90’s while cloud cover keeps Argentina cooler than normal. The drier than normal weather across Brazil is favourable if the rains return during the last 10 days of Dec.

• Will China keep its promise and secure large amounts of US ag goods. We doubt that the US/China can start their trade talks unless China keeps its promise on US goods. Whether China secures US grain is being debated, and our current guess is that Chicago values won’t be able to sustain a decline until China has bought US ag goods.