• Chicago futures are mixed at midday in thinning volume. Long soybean/short corn spreads are being unwound which is rallying corn and pressuring soy futures. Chicago corn open interest has increased sharply in the past few trading session with a gain of over 21,147 contracts recorded on Friday. We note that much of the increase has occurred in July-December corn futures which argues that someone is pricing back end demand. This would counter the idea of soybean/corn spread liquidation. Moreover, March corn is leading the rally on spreads and it is taking aim at $3.92-3.95 resistance. A record large 2020 Brazilian crop looms with harvest reaching 2% through Friday.

• We look for a mixed/firm close in Chicago as few sellers will want to take on the risk of being overly short ahead of the US/China Phase One Trade Deal signing on Wednesday. The US has stated it will remove China from the list of being a currency manipulator ahead of the Phase One Deal. We continue to hear talk of China making goodwill US ag purchases following the signing of the Phase One Deal. US meats, grains and soybeans are likely to be included.

• US export inspections for the week ending January 9 were; 18.1 million bu of corn, 41.7 million bu of soybeans, and 17.4 million bu of wheat. Soybeans inspections were better than analysts expected with China shipping out 15.2 million bu.

• Crop Year to date US export inspections are; 356.7 million bu of corn (down 410 million or 53%), 843.5 million bu of US soybeans (up 167 million or 25%), with wheat at 565.7 million bu (up 70 million or 14%). The US corn export and sales pace argues for another 75-125 million bu cut in the US 2019/20 corn export forecast. Our forecast assumes that China secures 2-2.5 million mt of old crop US corn.

• Chicago brokers estimate that funds have bought 6,000 contracts of corn, while selling 2,000 contracts of wheat and 3,200 contracts of soybeans. In soy products, funds are flat of soymeal while selling 4,600 contracts of soyoil.

• New crop Brazilian winter corn price bids reached 40 Reals/bag for July-August delivery, a record. The incentive for Brazilian farmers to plant record acres of winter corn are extremely high following first crop soybeans.

• The GFS weather forecast is consistent with the overnight forecast solution with below normal rains to fall across Southern Argentina. Otherwise, the outlook shows near to above normal rainfall for the remainder of S America and crop prospects remain bright. There is no indication of any excessive or lasting heat that would pose a yield risk. The chances for improved Southern Argentine rain should return in late January as the jet stream migrates northward. The midday S American weather forecast leans crop positive.

• The marketplace is doubting that China will show up with new ag purchases following the Phase One signed agreement this Wednesday. Traders are doubtful that China will make any large US grain or soybean purchases nearby. And the lingering bearish supply effect of the January USDA Crop report is being felt with a record large Brazilian soy crop looming. Large soy supplies abound. However, the lack of volume argues that the Chicago break won’t be able to garner much downside momentum.

• USDA January Crop Report Analysis: Market Fireworks were absent in the USDA January report as NASS trimmed 2019 US corn and soybean harvested acres by 900,000, while yield rose 0.5 bushels/acre in soybeans tov47.4 bushels/acre and corn by 1.0 bushels/acre to 168.0 bushels/acre. The increase in US corn and soybean yield was not expected.

• The bulls will argue that smaller US corn stocks argue for a corn yield reduction, but the point is that US 2019 supply is not going to be a bullish driver going forward. Rather, China demand remains the last bastion of bullishness for US grain/soy beans amid the Phase One signing next week. Record large S American crops loom thereafter to pressure Chicago into spring.

• NASS’s US corn data this morning leans neutral short-term but failed to spark a new structural trend in the market. Final US production was raised 31 million bu to 13,692 million. Harvested area was cut 300,000 acres, while yield was raised 1.0 bushels/acre to 168.

• Dec 1 corn stocks were pegged at 11,389 million bu, down 548 million from last year but very close to the trade’s average guess of 11,415 million. However, using known export and ethanol consumption, this does imply record Sep-Nov feed/residual disappearance of 2,433 million bu. WASDE incorporated strong feed consumption in its annual balance sheet, with feed raised 250 million to 5,525 million. The biggest year-over-year changes in Dec 1 corn stocks occurred in IL, IN, OH and SD, where basis will stay strong well into spring.

• US 2019/20 corn stocks were lowered a modest 18 million bu to 1,892 million as enlarged feed/ residual more than offset higher production and a 75 million bu cut to projected 2019/20 exports. Our main concern is that, barring nearby Chinese demand, US exports will be lowered another 50 million bu. Amid ongoing favourable weather in S America into late Jan, concern over US corn stocks is now focused solely on tonnages shipped to China in 2020.

• US soy yield was raised 0.5 bushels/acre to 47.4. Harvested area was lowered 600,000 acres. A net 8 million bu gain in production was offset completely by reduced imports and a 4 million bu decline in carry-in stocks. 2019/20 soy end stocks are unchanged at 475 million bu.

• Dec 1 US soy stocks totalled 3,252 million bu, vs. the market’s guess of 3,179 million. WASDE opted not to adjust its soy residual forecast. Dec 1 wheat stocks totalled 1,834 million bu, right at the low end of trade guesses. This also implies larger than expected Sep-Nov feed/residual disappearance, with WASDE raising its annual wheat feed use forecast 10 million bu to 150 million. US wheat end stocks fell 9 million to 965 million bu.

• However, 2020 winter wheat seeding was pegged at 30.8 million acres, down just 355,000 from last year and roughly 100,000 above expectations. 2020 HRW seedings are estimated at 21.8 million acres, down 660,000 from a year ago; SRW seedings are estimated at 5.64 million, up 440,000 from last year. Initial seedings data implies another 60 million bu drawdown in HRW stocks in 2020 but a modest build in SRW stocks of 8-10 million with normal weather.

• Global balance sheets were left mostly unchanged. World wheat stocks less China were lowered 1.4 million mt amid higher projected global trade, a 1 million mt cut to Russia’s final crop size and another 500,000 mt cut in Australia. Chinese soy imports in 2019/20 were left untouched at 85 million mt. Chinese corn imports were also unchanged at 7 million mt.

• The midday S American forecast maintains rainfall in S Brazil as well as Buenos Aires early next week. Weekly export sales were crop-year lows in corn and wheat.

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Weekend summary 10 January 2020

• 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.

• Chicago futures are slightly weaker at midday as US and world crude markets ease and fresh bullish ag specific news is lacking. Next week’s signing of the US and China’s Phase One agreement will offer support to soybeans and meats on breaks. But the USDA’s looming January crop/WASDE report is unlikely to feature a meaningful tightening of major crop balance sheets. S American weather forecasts remain broadly favourable as rainfall moves southward in Brazil. And the elimination of large net short positions in soybeans and KC wheat last week is noteworthy.

• The US$ is up sharply and has recovered well from late December’s 5-month low.

• Spot WTI crude is down $0.60/barrel at midday as world energy markets debate futures production, trade and logistics.

• All eyes will be on the Strait of Hormuz, which is cared for by Iran and which accommodates roughly one-fifth of global oil movement. Yet, the trade is also aware of the US’s newfound position as a major crude exporter, with the US becoming a net exporter of petroleum products in late 2019. Just last week, the US exported a record 31 million barrels of raw crude. Net US crude imports in late Dec fall to just 13 million barrels, which compares to 40-50 million in 2018. Any lasting rally in WTI will be met by greater US production.

• US ethanol futures are flirting with 3-month lows. Futures-based ethanol margins have fallen to $0.07/gallon, vs. $0.35 in early Dec. Midwest cash ethanol margins have followed, with spot revenue in the W Midwest just barely above variable costs.

• Needed soaking rain will fall across New South Wales and Queensland in eastern Australia Jan 16-22. This is too far out to place much confidence in forecast details, but the EU and GFS models have been consistent in projecting precipitation of 1-2″ to Australia’s Eastern Ag Belt. Coming rain won’t alter Australia’s 2020 grain supply and demand, but will aid in firefighting as well as begin to replenish soil moisture. A series of additional rain events are desired between now and wheat planting, which occurs in late March/early April.

• The midday GFS weather forecast is wetter in South-Central Brazil and drier in RGDS in the far south of the country. Cumulative 10-day totals across Mato Grosso do Sul, Goias and Sao Paulo have been raised to 4-7″, or some 150-200% of normal. Daily showers continue in Mato Grosso. However, far Southern Brazil will be left arid and vegetation health in RGDS already indicates noticeable yield declines there. Whether the EU model follows this drier trend in Southern Brazil will be monitored. But Brazil’s overall climate pattern will be conducive to above-trend national soy yield. Moderate rain returns to Central Argentina Jan 13-14.

• Managing risk over the next several months amid heightened geopolitical and trade uncertainty will be key. Our thoughts remains to sell strong rallies as a meaningful cut to current and future global crop stocks is needed to turn outright bullish.

• Chicago futures are mixed at midday with soybeans recovering while the grains sag. The corn market ran into fund selling as March fell below the 20 and 50 day moving averages and broke out to the downside on the charts. Funds are heavily long wheat which makes this market vulnerable to profit taking, while the soybean market rallies on the strong prospect of a US/China Phase One Deal signing next week at the White House. Soybeans will be on top of the Chinese grocery list to reach $80 billion over the next 2 years. March soybeans are back challenging resistance at $9.50-9.60. The morning Chicago trade volume is disappointing as the DOW and other financial markets snap back from early losses. The slowing volume trend is likely to keep the Chicago choppy ahead of Friday’s key USDA Report. We look for a mixed close with the range likely in for the day.

• Chicago brokers report that funds have sold; 3,000 contracts of wheat, 5,500 contracts of corn, while buying 3,200 contracts of soybeans. In the products, funds have sold 4,200 contracts of soyoil while buying 2,900 contracts of soymeal. The volume of trade has really slowed at midday.

• US Export Inspections for the week ending January 2 were; 21.7 million bu of corn, 12.7 million bu of wheat,and 35.4 million bu of soybeans. The soybean and corn exports were near trade expectations, while wheat was light.

• For their respective crop years to date, the US has shipped out 339 million bu of corn (down 389 million or 53%), 799 million bu of soybeans (up 162 million or 25%), and 545 million bu of wheat (up 70 million or 15%). We look for WASDE to cut 2019/20 US corn exports by 50-100 million bu and soybeans by 10-25 million bu in Friday’s USDA report. China shipped out 13 million bu of US soybeans through the Gulf and PNW last week.

• Argentina’s new Government is in talk with producers to modify export taxes for those farmers far away from key export ports. The shift in policy is being argued to more fairly apply export taxes since they harm those that are the farthest away. Talks are fluid and the grains, corn and wheat has placed a hold on the 3% export tax that was approved by Congress. Argentina wants to maintain its role as being a primary exporter of world ag products to obtain US$, and the Government is trying to find a favourable mixture of tax vs transportation cost. For now the tax on corn/wheat is 15% while soybeans are being taxed at 33%.

• The midday GFS weather forecast is drier for extreme S Brazil and Argentina into January 16. There is no evidence of any extreme heat, but the GFS model has flipped back and forth between dry and wet forecasts for Argentina and S Brazil. The often more correct EU model offers better rain chances for Argentina/S Brazil, but the midday GFS is something that must be monitored. The remainder of Brazil will see near to above normal rain which will aid crop prospects. The early harvest in Northern Brazil will be starting in 10-14 days.

• A back-and-forth Chicago trade is expected heading into Friday’s USDA Crop Report. We look for a modest 1-2 bushels/acre decline in US corn and 0.5 bushels/acre decline in US soybean yield due to the delayed 2019 Midwest harvest. Brazil’s CONAB will be out Wednesday with its January crop estimate with the US/China to sign the Phase One Trade Deal on Jan 15. With the index fund rebalance starting Wednesday, we look for funds to sell soyoil and KC wheat.

• Chicago futures are sharply lower at midday in a risk off session. The fund flows are in the direction to reduce risk relative to the US strike against a key Iranian General and the promised retaliation by Iran. Crude oil has rallied sharply, but the US$ has retreated from a sharp early gain.

• It is unlikely that US/Iran are entering a long military conflict, but tensions are high and Chicago grain markets have enjoyed a multiweek rally. As such, traders are cutting their risk and banking profits. We look for funds to continue with their selling ways into today’s close.

• Chicago brokers report that funds have sold; 7,000 contracts of soybeans, 5,550 contracts of corn, and 4,300 contracts of wheat. In soy products, funds have sold 3,500 contracts of soyoil and 4,100 contracts of soymeal. Normally, rising crude oil would be bullish for the biofuel crops of corn and soyoil.

• US Export Sales for the Week Ending December 26 were; 11.5 million bu of wheat, 20.9 million bu of corn, and 12.1 million bu of soybeans. The sales were below expectations, but it was a holiday week. Please note that there were 1.9 mt of US soyoil sales cancellations while US weekly meal sales were just 94,700 mt. China booked just 160,200 mt of US soybeans while exporting 419,000 mt last week. In the 2019/20 crop year, China has booked 11.1 million mt of US soybeans which includes/exceeds their promise to take 10 million mt made in October.

• For their respective crop years to date, the US has sold 693 million bu of wheat (up 40 million or 6%), 723 million bu of corn (down 530 million or 42%), and soybean sales of 1,084 million bu (down 54 million or 5%). Mexico has taken 9.0 million mt of US corn or some 50% of the total with sales to others at a record low. If not for Mexico, US corn sales would be below the pace of 2012, when US corn exports dramatically sank due to sky high corn prices of $7-8/bu.

• lnforma estimated the 2020 Brazilian soybean crop at 125.6 million mt with Argentina at 54.0 million mt. The lnforma Brazilian soybean crop estimate would be a record large by some 5 million mt.

• US ethanol production likely reached a seasonal high before Christmas with last week’s total falling to 1,066 barrels/day or 313 million gallons per week vs 318 million in the prior week. US ethanol stocks were down to 884 million gallons vs 902 million last year. US ethanol stocks are down 9% on last year. US crude oil stocks fell below last year (down 3%) at 430 million gallons.

• The midday GFS weather forecast is wetter for S Brazil and Argentina into January 13. There is no evidence of any extreme heat and the coming rainfall should be adequate to maintain strong S American crop production. And near normal rainfall is indicated for Argentina and S Brazil in the 10-15 day period. S American crops are in good to excellent condition which should translate into above trend line yields should favourable weather persist for another 3-6 weeks. The early harvest in Northern Brazil will be starting in 10-14 days. Some early cutting is already under way as farmers defoliate a modest portion of their September seeded soybean crop.

• It is hard to say whether Thursday’s Chicago rally amounted to a seasonal top. That potential exists, but there should be a retest rally that offers another sales chance. US corn, wheat and soy export interest remains modest and S American weather forecasts are favourable. The US export opportunity is in retreat. Yet, the USDA Jan 10 Crop Report lies ahead and US President Trump looks to sign the Phase One Trade Deal on January 15.

• Chicago futures are higher at midday as funds continue to close out their net short positions in corn/soybeans ahead of the Jan 10 USDA crop report and the Jan 15 signing of the US/China Phase One trade pact. S American weather and crop discussions have not had much impact on Chicago price in recent weeks, but that could change following the mid-January Trump Phase One Trade Pact signing.

• We would note that China has yet to confirm the Trump Presidential signing (from their side) on Jan15 or the timing of the arrival of Liu He, China’s Vice President in charge of the trade negotiations to Washington DC. The Phase One Deal appears to be completed, but China is not bragging about the outcome

• Traders report that new money was put to work shortly after today’s opening with large volume noted on the buy side. We suspect that additional inflows will be seen in coming days which will be price supportive. Any market correction should be shallow/short lived until later in the month.

• Chicago brokers estimate that funds have bought 5,000 contracts of wheat, 6,200 contracts of corn, and 2,000 contracts of soybeans. In soy products, funds have bought 5,300 contracts of soyoil while being flat in soymeal.

• FAS will release their weekly export sales report on Friday morning at 7:30 am CST. We look for weekly export sales of; 300-375,000 mt of US wheat, 650-850,000 mt of corn and 600-700,000 mt of US soybeans. The Christmas Holiday likely reduced sales for the week. Traders will not pay too much attention to the weak totals. However, note that Argentine corn is cheaper than the US Gulf beyond February while Brazilian soybeans are 20 cents cheaper/bu than the US Gulf beyond mid-February. The point is that the widow for US corn or soybean export demand is rapidly closing.

• The Baltic Ocean Freight index posted its largest one-day loss in nearly 6 years to start 2020. The Index is now at it’s lowest in 7 months and posted a large 10.5% decline today. The dry bulk index has fallen 61% since posting a top in September of at 2,518.00. The decline in freight bemoans the slowing demand for grain charters, something that we have remarked upon recent times. Research argues that world grain buyers front loaded their demand from August through October, and their demand is now in retreat.

• Chicago soybean/soy product deliveries against January futures have been large with today’s total of; 1,485 contracts of meal, 597 soybeans and 605 contracts of soyoil tendered. No strong stoppers have emerged suggesting cash abundance.

• The midday GFS weather forecast is slightly drier for S Brazil and slightly wetter for Central and Northern Brazil over the next 10 days. There is no evidence of any extreme heat, in fact, below normal temperatures are expected over the next 2 weeks across much of Argentina and the southern third of Brazil. Better rains are indicated for Argentina in the 10-15 day period which should maintain favourable growing conditions. S American crops are in good to excellent condition which should translate into above trend line yields should favourable weather persist for another six weeks.

• Research back in mid-December indicated that Chicago corn, soy and wheat markets would likely “melt up” to a first half January high. Our upside targets have been reached in March soybeans at $9.60-9.75, March Chicago wheat at $5.60 with corn just a few cents from our $3.95-4.05 (March futures) target. Our view now is that the upside is becoming limited. A sideways trade is forecast for next week as traders position for the Jan 10 USDA report and Trump Jan 15 trade signing.

• Chicago futures are higher at midday with corn, soybeans and wheat all trading in the green on fund short covering amid the hope that the US/China will sign a Phase One Trade agreement in early 2020. Since the US announced that a deal had been reached some 10 days ago, the theme of Chicago trading has shifted from selling rallies to buying breaks.

• Funds need to flatten out their short corn/soybean position amid the return of a large buyer (China) of US ag products which include; grains, soybeans, meats and dairy. The potential for China to be a large US ag buyer is the highest in soybeans/ pork, but also include the grain and grain products.

• We look to the first half of January as time when emotion will boil over in terms of China’s Phase One importance for US agriculture. As a deal is signed and the January Crop Report is released, Chicago’s focus will shift to a record large Brazilian soybean crop and enlarged US corn/soy 2020 seeding.

• January should produce a seasonal top with prices to then ease heading into spring amid an abundance of world supply. We look for a higher Chicago close and mixed trade Tuesday heading into the Christmas holiday. Chicago closes at noon on Tuesday.

• Chicago brokers report that funds have bought 4,100 contracts of soybeans, 3,200 contacts of corn, and 2,600 contracts of wheat. In soy products, funds have bought 3,100 contacts of soymeal while being flat in soyoil.

• US Export Inspections for the week ending December 19 were; 15.2 million bu of corn, 39.8 million bu of soybeans, and 21.2 million bu of wheat. The wheat exports were above trade expectations, while corn and soybeans were disappointing.

• For their respective crop years to date, the US has shipped out 300.2 million bu of corn (down 370 million or 55%), 727 million bu of soybeans (up 144 million or 25%), and 520.2 million bu of wheat (up 69 million or 15%).China shipped out 15.4 million bu of US soybeans last week rep resenting 39% of the total. We note that China continues to secure Brazilian soybeans beyond mid-February with sources estimating that China has already purchased more than 21 million mt from Brazil for late January through March. Those sales are not expected to be shifted to the US, so any future Chinese demand is likely to be focused on the July-November timeframe in 2020.

• NASS will release the Quarterly December Hog Report at 2 pm CST. The NASS Hog Report is expected to show a December stockand breeding herd that is up 3%, a new record. Considering the kill rate being up 5-6% in recent weeks, a kill that is only up 3% going forward will be bullish.

• The midday GFS weather forecast is wetter for NE Brazil with better rains during the 6-10 day period. More limited rain is offered for Southern Brazil with totals of 0.5-1.25″ while Argentina sees normal rain. There is no indication of any lasting heat with highs ranging from the upper 70′s to the mid 90′s. The 11-15 day period calls for near to above normal rainfall for S Brazil and Argentina which would be ideal. We see nothing at this time that would argue against a record Brazilian soybean crop in 2020.

• Funds have shorts left to cover in corn/soybeans in the days heading into 2020. Breaks will be short/shallow. Once the US/China Phase One Deal is announced and the January 10 USDA Crop Report has released, the potential for a record large S American crop and expanded 2020 US corn/soybean seeding will take centre stage. Our bias remains one of being cautiously bullish into early 2020.

• Limited news ahead of the holiday season had soybean futures slightly lower on Thursday.

• The US Weekly Export Sales report showed routine sales while FAS announced daily sales of 126,000 mt to China.

• The future soy outlook all comes down to politics. Commercial traders are concerned that there could be some trapdoors in the Phase One agreement that may not mandate that China reaches $40 billion. It is unlikely that China will pay up for US soybeans, especially with Brazilian export basis in decline.

• Brazilian soybeans are offered at $10.23/bu for December while US offers are at $9.98. However, Brazilian fob soybeans are $0.12-0.14 under US offers for Feb/Mar. China was rumoured to have booked another three cargos of Brazilian soybeans for March today.

• It is forecast that funds will cover their net short position by early 2020. Yet, new Chinese tariff waivers are needed to sustain January futures above $9.40 resistance. Chicago will focus on the timing of the US/China inking the Phase One Trade Agreement.

• Chicago corn futures ended unchanged in tepid volume. Funds have been active in covering shorts since last Friday but look to pause as the trade closes its books on 2019. There is still nothing concrete available with respect Chinese buying in 2020. Work suggests that total US corn consumption will benefit only modestly. Food products will be favoured.

• Export sales through the week ending Dec 12 totalled 67 million bu, near expectations. Recall this included last week’s sizeable sale to Mexico worth 45 million bu. Non-Mexican demand totalled just 22 million bu. 2019/20 commitments to destinations other than Mexico sit at 341 million bu, down 56% from mid-December a year ago. Cumulative corn sales account for just 37% of the USDA’s forecast. Pace analysis still indicates the USDA will lower its forecast by 50-100 million bu in Jan.

• Fund short covering is still expected in the weeks ahead. But with needed Argentine rainfall imminent, rallies above $3.95, March, will be laboured without confirmed S American yield loss.

• US wheat futures ended slightly lower. It remains that Chicago and KC contracts are overbought, and Gulf wheat maintains a decent premium to all other origins for delivery into late winter. Additional fuel is needed to sustain this rally, but increasingly world wheat traders will be exiting the market for the year.

• Estimates suggest that funds since last Tuesday have bought/covered a net 15,000 contracts in KC. This leaves their net short at just 9,000 contracts. It remains unlikely than an outright bear trend emerges into early 2020 as German winter seeding are estimated down 7% from last year and as ongoing Northern Hemisphere warmth is being monitored. However, a decent boost in soil moisture lies ahead across the Southern Plains next week. And following slow Russian exports to date, competition for Jan-Feb world trade will be ongoing. Clarity over potential Chinese demand is needed.

• Chicago futures opened lower and recovered in morning trade as funds returned to their short covering ways. Fund buying returned after the traditional opening which is becoming commonplace until their short corn/soy position is covered. There can always be a modest correction or pause, but the arrival of sizeable new demand (China) is welcomed. Looming China demand limits the downside in Chicago heading into the January Crop Report. S America and the US MUST produce big crops in 2020 to reignite a sustained bearish decline. The complexion of the Chicago/CME price action has changed amid the return of China to the US marketplace as a big ag product buyer.

• Chicago brokers estimate that funds have bought 3,000 contracts of corn and 4,000 contracts of soybeans, while being flat in wheat. In soy products, funds have sold 2,000 contracts of soyoil and bought 2,000 contracts of soymeal.

• The complexion of US trade disputes changed last week with the US/China principle agreement, the coming vote on USMCA and the fast track for US/EU and a hard Brexit turning the UK to the US on trade. Chicago/CME can correct, but amid the better demand for US ag products in coming months, the ag markets will have levity and producers must be more patient to reward rallies. For the next 4-8 weeks, a bullish rather than bearish outlook should be embraced.

• Egypt is signalling that it will resume checks of wheat cargoes at port of origin. This will hopefully reduce the CIF wheat cost for GASC amid rising world wheat prices. The “sellers” premium for wheat sales to GASC should fall and it is hoped that any cargoes found not to comply will be rejected far earlier in the process. The change has exporters wondering if the next few GASC tenders could be pushed forward as coverage now extends into February 7.

• Argentina will likely raise their export taxes on corn, soybeans, wheat and other ag products by another 3%, or 8% for row crops, following the weekend Presidential Decree of a new 5% tax. FOB trading has dramatically slowed on the tax news, and traders are waiting for Government clarification on what the exact tax rate will be. Research indicates that the tax will not have much if any impact on Argentine 2020/21 production plans. The Argentine currency exchange, The ROFEX, is pricing the Argentine Peso at 84:1 US$ or another 42% decline from today’s rate. This fall in the Peso more than offsets the 8%increase in grain taxes. Argentine farmers report that they will expand wheat and soybean seeding in 2020. Corn acres will decline in cost.

• The midday GFS weather forecast is like the overnight, with the exception being that the midday has pulled out 0.5-1.00″ of rain for Southern Argentina. The dryness across NE Brazil remains intact, it is the reduction in rainfall totals for S Argentina that must be closely followed. The extended range forecast offers improved rainfall chances for S Argentina and much of the Brazilian crop areas. Overall, the 2-week forecast is non-threatening. A record Brazilian soybean crop is being made.

• Chicago corrections/breaks will be short and shallow as values push higher into early 2020. The return a big buyer of US ag products will keep the bears dancing. US grain and soy fob offers are expected to push well above the rest of the world. At some point, imports of S American corn/soy beans are expected as their 2020 harvest gets underway February and March. Spot China demand nearby will be for US pork and soybeans. Other US ag goods such as DDGs, ethanol, corn and wheat will have to wait until the US/China Phase One Agreement is signed and 30-45 days has passed for its installation.