• Mixed has been the morning with the grains (corn/wheat) weaker while soybean futures are higher in slow volume trade. The market lacks direction and traders are not willing take on new positions amid the choppiness of recent weeks. US farmers are trying to push ahead with the summer row crop harvest while S American weather is far from perfect for planting.

• US farmers won’t sell breaks while end users won’t chase rallies. Chicago remains adrift with the November USDA Crop Report the next big fundamental event. Until then, it is difficult to get overly excited about a net long or short position. We would reiterate our “market chant” of not wanting to sell hard breaks or buy sharp rallies.

• Chicago brokers estimate that funds have bought 2,200 contracts of soybeans and sold 4,800 contracts of corn and 3,600 contracts of Chicago wheat.

• US export inspections for the week ending October 24 were; 15.0 xmv of corn, 57.6 million bu of soybeans, and 19.2 million bu of wheat. The US corn export pace remains extremely disappointing.

• For their respective crop years to date, the US has ,exported just 136.5 million bu of corn (down 206 million or 60%), 296.2 million bu of soybeans (up 16 million or 6%) and 316.5 million bu of wheat (up 73 million or 23%).The US corn export pace to date is the slowest since 2012, the last Midwest drought year when corn values were trading above $7.00/bu. China shipped out 19.7 million bu of soybeans for the week or 34% of the US weekly total.

• FAS reported 135,000 mt of US soymeal to the Philippines for the 2019/20 crop year.

• Russia appears to have planted a record amount of winter wheat estimated by private sources at 16.3 million ha (40.3 million acres) vs 15.9 million ha (39.3 million acres) last year. Assuming trend yield, the extra area should produce in a range of 78-79 million mt, up slightly from the current crop year. Ukraine’s wheat seedings look to be down slightly via autumn dryness, so the Russian gain places full focus on spring and early summer growing conditions in 2020.

• Chinese pork prices pushed to another record high to start the week with some wondering where the rally really stops. Demand for the holiday season is weeks away, but will be sizeable. Meat shortages are worsening in urban areas.

• The Argentine Peso is trading slightly stronger this morning at 59.3 to 1$. The Peso is stable following the election as new economic platforms are awaited from the Fernandez Administration .

• The midday GFS weather forecast offers more snow for portions of NW IL and SEIA with totals up to 15″. The remainder of the forecast is little changed with rains for the remainder of the E Midwest while cold air pours southward from Canada. The coldest of the air looks to reside in the Plains and Rockies. Cold air lingers into early November slowing US corn and soybean harvest.

• Trade volume is just horrible with little interest in trading at midday. The breaks won’t carry through while rallies are capped by harvest pressure. US corn exports are horribly slow while China is not showing renewed interest for US soybeans. French wheat prices sagged while Black Sea offers are steady. The cash markets are not offering any new direction. Our view heading into the November USDA report is for a choppy sideways marketplace that just won’t follow through.

• Chicago futures have been mixed this morning, and again fresh news is limited to US-China trade sentiment. This morning there was talk that China would ask for an easing of planned future, and some existing, tariffs on Chinese goods in order to secure additional US ag goods nearby. Details remain lacking, but newswires now report that the two sides are close to working out parts of the Phase One agreement. Additional calls are scheduled.

• Soybeans initially rallied on the is news but have since weakened as no new bean sales to China were announced this morning.

• The midday GFS forecast is consistent in returning dryness to Central Brazil through the next 6-7 days. A more normal pattern of Brazilian rainfall is advertised thereafter. But amid coming soil moisture declines there is less room for ongoing dryness in Nov and Dec, when the wet season is supposed to be fully established.

• We hear that producer s in Mato Grosso and Goias this weekend aim to plant 24 hours a day in an effort to match last year’s seeding pace. This makes the return of rainfall beyond Nov 3 even more important A sizeable boost in Brazilian soybean planting progress next week.

• Weekly Ukrainian corn yields continue to decline as harvest advances. Yields reported this week are down 2.5% from last year with 66% of the crop having been harvested. This suggests the USDA’s Ukrainian corn production estimate of 36 million mt is still marginally too low. The recent negative trend in Ukrainian weekly yields will be watched closely. Weekly Russian corn yields continue to exceed prior records with harvest there at 65% complete. The message is that the Black Sea crop in 2019 will be record/near record large, which will prolong competition for world trade into early 2020. It is left to adverse S American weather to trigger further world corn supply dislocation.

• Other news is lacking. All eyes will be on the Phase One agreement details when they are available in the weeks ahead, and whether the US is willing to ease tariffs on Chinese goods prior to a complete deal being signed.

• Confirmation of trade progress would give a boost to raw material markets, and US-Chinese trade remains the biggest issue for commodities in the near term.

• The midday US GFS forecast is unchanged from the morning. A weak tropical event is moving into the Delta/Southeast and combines with cool front to trigger moderate to heavy rainfall across the E Corn Belt on the weekend. Cumulative totals of 0.50-2.00″ through Monday will favour IL, IN, OH, K and TN. A pattern of complete dryness and chilly temperatures evolves Oct 29-Nov 8. Light rain returns in the 11-15 day period but soaking precipitation is not indicated.

• Ag markets continue to ebb and flow on the heels of positive/negative news regarding US-China trade progress. Work maintains that choppy trading is most probable into mid-November. Closer attention will be paid to Brazilian dryness if it persists into mid-November. And recall Argentina’s Presidential election is this weekend. A change in power there will spark discussions about higher Argentine grain export taxes.

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Weekend summary 25 October 2019

• Ag futures are again mixed at midday, with soybeans finding support on additional sales to China while grains are slightly lower on another week of disappointing export demand. Talk that China is committed to buying $20 billion of US ag products is being met with mixed sentiment. Most of the trade understands that this value is in line with pre-tariff Chinese buying, and still details of the proposed $20 billion are not available. There is talk that China scaling into purchase of $40 billion would require an elimination of tariffs on Chinese goods. All eyes will be on November’s APEC summit in Chile.

• US export sales through the week ending Oct 17 included 19 million bu of corn, vs. 15 million the prior week; 10 million bu of wheat, vs. 15 million the prior week; and 17 million bu of soybeans, vs. 58 million the prior week. Recall US corn sales need to average 39 million per week to meet the UDSA’s forecast.

• Only Mexico is buying US corn in bulk. Large soybean cancellations worth 21 million bu were made by unknown destinations.

• Weekly US pork sales totalled just 19,000 mt, with no new Chinese demand recorded. CME hog futures have extended this week’s correction amid the overhang of a nearby oversupplied market.

• For their respective marketing years to date, the US has sold 427 million bu of corn, down 49% from a year ago; 517 million bu of wheat, up 13%; and 678 million bu of soybeans, down 12% from mid-October a year ago. FAS did announce another US bean sale to China worth 264,000 mt. Yet, pace analysis suggests even more Chinese demand is needed to meet the USDA’s annual 1,775 million bu soybean export projection.

• Australian wheat crop estimates continue to shrink. Contacts suggests a sizeable amount of wheat in the East will be harvested for hay. This will aid feed supplies there, but will work to lower actual wheat for grain production. There is also a growing concern over autumn plantings as the Australian sorghum crop needs to be completed by December. The two-week Australian weather forecast remains dry. Longer term climate guidance maintains a pattern of below normal precipitation in primary grain areas into late November.

• The midday GFS forecast is wetter in Cordoba and Buenos Aires in Argentina this weekend but is drier in Central Brazil over the next two weeks. The EU model has been favourably wetter in Brazil, but closer attention will be paid to Brazilian precipitation forecasts moving forward. The wet season there is supposed to begin in earnest by November.

• The midday US GFS weather forecast is drier in IL but otherwise unchanged. Heavy precipitation into early November will be confined to the Delta/Southeast and far Eastern Corn Belt. A deep low pressure trough will sink into the N Plains/Great Lakes. This will block meaningful precipitation but will send Central US temperatures to levels 6-20 degrees below normal. Freezing overnight lows will be widespread across the US Ag Belt Oct 30-31. Harvest progress accelerates.

• The lack of details regarding US-China’s partial trade agreement have capped new raw material buying . Drier extended range Brazilian forecasts give the bears pause. Ag markets lack direction into the USDA’s November WASDE release.

• The morning has been mixed in Chicago, with corn, wheat and soybean markets trading narrowly around unchanged. FAS this morning announced another 128,000 of US beans sold to unknown destinations. Otherwise, there is little new for either the bulls or the bears to sink their teeth into. EU grain futures have followed Chicago to modest losses.

• This week’s EIA report featured US ethanol production still well below year-ago levels, but also a further tightening US ethanol supply and demand. Ethanol production through the week ending Oct 18 totalled 293 million gallons. This is up 6 million on the prior week but down 3% from the same week in 2018. Weekly ethanol stocks last Friday fell 30 million gallons to 897 million, down 11% from mid-October a year ago. Exports continue to lag, but there is a growing need for enlarged US ethanol production. Margins are profitable.

• EIA also pegged US crude stocks last week (less reserves) at 433 million barrels, down 1.7 Mil from the prior week. A modest build in stocks was expected, and spot WTI crude is up $0.70/barrel at midday. Spot WTI is now $4/barrel off seasonal lows scored in early September.

• The Brazilian Real continues its recovery from lows scored last week. Long-awaited pension reform has cleared Brazil’s Senate on Tuesday and now only awaits signature by President Bolsonaro in November. This bill looks to reduce Brazilian public spending by some $200 billion over the next decade, and is viewed as a crucial step in stabilising Brazilian finances. The Real looks set to continue to strengthen in the weeks ahead.

• Markets will be paying close attention to this weekend’s Presidential election in Argentina. Argentina’s Peso has inched to a 7-week low at 58.9 to 1 $US. Argentina inflation will persist for some time, but key nearby is whether grain/soy export taxes are raised in late 2019/early 2020. Polls continue to suggest Kirchner-based Alberto Fernandez will take power, and a boost in export duties is a real possibility. The additional cost to export will raise Argentine fob prices as well as work to lower farmgate prices. Argentine exporters have enjoyed reduced export taxes since 2015.

• The midday S American forecast is unchanged from prior runs. Needed rain will impact S Cordoba and Buenos Aires into the weekend. Brazilian rainfall will favour Mato Grosso, Parana and RGDS in the South.

• The transition to Brazil’s wet season remains, but totals of 1.0-1.5″ will favour 60-65% of Brazil’s Soy Belt in the next 5 days.

• The midday GFS weather forecast is slightly wetter in southern IL and IN early next week but is otherwise unchanged. A cold/dry pattern will be intact throughout the next 10 days across Plains and Western Corn Belt. This will allow harvesting to accelerate, with soils firming due to cold temperatures there. Moderate rains impact the E Corn Belt Sun-Tues. No additional precipitation is forecast Oct 30-Nov 8. 16 to 30-day guidance maintains a drier than normal trend into late November. A warming of temperatures is also due beyond November 2.

• Research maintains that direction will stay lacking into November amid a rising world wheat market, pitiful US corn export demand and uncertainty over near-term Chinese buying. S American drought is unlikely into late year.

• Chicago grains are easier with soybeans holding in the green in mixed midday action. An overnight rally failed to gain any bullish euphoria with the Midwest harvest to restart in the west on Tuesday. The US soybean harvest will surpass 50% sometime this week with corn to reach that same level during the closing days of October. US corn harvest progress will be much slower than soybeans with farmers waiting for the crop to dry down. Otherwise, no Chinese sales announcements produced selling from some of the faster moving bulls. A mixed Chicago close is expected in an overall sideways marketplace.

• Chicago brokers report that funds have sold; 3,200 contracts of wheat, 4,100 contracts of corn, and 3,000 contracts of soybeans. The funds are on the sell side of the marketplace this morning in all Chicago grains except soyoil, where they are flat.

• US Export Inspections for the week ending October 17 were; 20.9 million bu of corn, 47.6 million bu of soybeans, and 20.7 million bu of US wheat. The soybean export total was in line with trade expectations while wheat was better and corn less.

• For their respective crop years to date, US corn shipments are 119 million bu (down 194 million bu or 62%), US soybean shipments are 237 million bu (up 16 million or 7%), while US wheat exports at 370 million bu (up 68 million or 22%). China shipped out just 2.6 million bu from the PNW, so the soy shipments were largely from others.

• Black Sea wheat prices have been rising on short covering, tight fisted farmer holding and some unusual Russian cross border trade into Kazakhstan. The combination has forced a rally in world wheat prices as end users stepped up their forward coverage. However, with just Algeria in the world market on Tuesday, the outlook for world wheat export demand has subsided and a correction appears to be under way. Moreover, it is doubtful that Black Sea wheat can rise too far above $210/mt or just a few dollars above current levels. As rain helps the Argentine wheat crop finish, future wheat rallies will depend on the finding of new demand to China.

• The GFS forecast calls for near normal rains for Brazil into November 1. There is no evidence of any lasting dryness for either Argentina or Brazil over the next 10 days. The building El Niño favors Brazilian 2020 yields.

• As a Central Midwest storm system pulls eastward, the forecast is drier for the remainder of the Central US over the next 10 days. The forecast aids the harvest for the N Plains and the W Midwest as colder Canadian air filters southward. Following a few warm days, temperatures turn chilly into November. The midday model maintains the trend of below normal temperatures and rainfall for much of the Plains and the Midwest.

• China has an acute need for red meat imports, but their interest in US soybeans and grains is said to be slowing. Amid a US soy harvest that will speed ahead later this week, it will be difficult to sustain a further bull rally. Short of a S American drought, world grain markets are oversupplied. But amid the US/China political uncertainty we would suggest some caution.

• Chicago prices are higher at midday on fund buying and the hope that China is securing US soybeans and grain. China confirmed overnight that it will buy US ag commodities, but as you can expect, it did not provide tonnages or the timing of shipments. The purchase confirmation by China is a step forward to the US/China ratifying the Phase 1 Trade Pact. We would note that this trade pact is expected to include China ramping up its ag purchases to $40-50 billion dollars by 2021. Nearby, we expect that China will secure what China needs in terms of foodstuffs. On its nearby shopping list is; US pork, soybeans and cotton with some exporters hinting that China could also secure US HRW wheat.

• We look for a firm Chicago close with traders eying whether March corn can reach above $4.10 and March soybeans above $9.75. March Chicago wheat is trading at $5.25 and could rise another $).05-).15 depending on China buying interest. The hard part of the China rumours is trying to decipher just what they will secure on this purchase round. We hold a view that much of China’s purchasing will be completed by early November, before the APEC Meeting.

• Chicago traders estimate that funds have bought 5,200 contracts of soybeans, 4,900 contracts of corn, and 3,600 contracts of Chicago wheat. In soy products, funds have bought an estimated 3,100 contracts of soymeal and 2,700 contracts of soyoil.

• Tyson Fresh Foods is banning the feed additive ractopamine in market hogs that it buys from its farmers beginning in February of 2020. The move is likely related to Chinese demand for US pork. It is estimated that eliminating the feed additive will trim US pork production by 90-120 million pounds annually either by slowing feed conversions or keeping pigs on feed longer (thereby slowing movement through production facilities). Friday’s weekly FAS export sales report is expected to show additional demand by China for US pork. South Korea and Mexico have been slower buyers of US pork, but the ongoing rally in cash hogs amid record large kills argues for a demand led bull for now.

• The USDA will resurvey harvested acres in MN and North Dakota to gauge if farmers have changed their plans. Snow and cold hit the region last week and the resurvey will likely to produce a modest reduction in harvested acres. We would argue that regional yield will be impacted more than harvested acres. Our estimate is that the weekend cold /snows reduced US corn production by 140 million bu of corn and upwards of 20-30 million bu of soybeans.

• US White House Economist Kudlow indicated a lot of cooperation over the Phase 1 US/China Trade Pact. However, tech transfer may be pushed into Phase 2.

• CME Livestock futures are pressure from comments from China’s Veterinary Bureau forecasting a return to normal pig numbers in 2020. We are extremely doubtful of this forecast with ASF uncontrolled and China’s pig herd in sharp decline. We argue that it will be years before China’s pig herd returns to anything close to the size when it was discovered in June 2018. Cold Canadian air follows with a frost/freeze into the Central US.

• A tropical storm in the Gulf of Mexico has reduced the chances of Central US rain this weekend. Only limited totals are expected through Sunday with improved rain chances for the N Midwest starting Monday through Wednesday. Dry weather follows with the next chance of rain starting on Friday Oct 25. This rain looks to impact the E Midwest with totals of 0.25-1.00″. Dry /cool weather follows. The Central US harvest pace should advance normally in coming weeks.

• It is a firm day, but before any trader chases a rally, they will want confirmation of China buying. Our advice stays the same, don’t chase rallies or breaks. Political markets do not follow through.

• The morning has been mixed with US wheat futures firmer while summer row crop futures hang with losses. Soybean futures have been able to trade on both sides, but corn values are firmly the red amid slowing US corn export demand and the expanding Midwest harvest. We look for a mixed close as Chicago grains remain rangebound awaiting the confirmation of Chinese demand for US grain and other ag products.

• Chinese sources report that a meeting between the Chinese Government and State Owned Enterprises (SEO’s) was held in Beijing. The meeting was to discuss US ag purchases following last week’s US/China verbal trade pact.  The meeting ended without resolution for new US ag demand. Sources suggest the irritant of Hong Kong and a House Bill in support of the protesters produced today’s “no decision”. This could quickly change depending on the politics, but uncertainty of large/new Chinese ag demand persists at least for today.

• It is the constantly changing US/China politics and flow of daily media news which makes US ag markets so difficult. Note that yesterday, CME hog futures posted limit gains amid the rumour of China demand with these markets sharply lower today on US/China political concern. One must be careful in chasing Chicago/CME rallies and/or selling breaks.

• Chicago brokers estimate that funds have sold 4,400 corn and 2,900 contracts of soybeans, while buying 2,400 wheat. In soy products, funds have sold 3,200 contracts of soymeal while buying 1,100 contracts of soyoil.

• Egypt’s GASC secured 405,000 mt of Russian, French and Ukraine wheat. The breakdown is 285,000 mt of Russian and 60,000 mt each of Ukraine and French. The price is said to be $7-8/mt higher than their tender of just 10 days ago. This is confirming the Russian wheat rally in the interior and at port.

• US President Trump stated that the Phase One of the US/China trade deal is being papered and won’t likely be signed until he meets with Xi in Chile.

• However, China is angered by the House Bill favouring Hong Kong protesters and have threatening retaliation. Trump just stated again that China is already starting purchases of sizeable amounts of US ag goods and that “good feelings” persist. In the past, the US/China have been able to keep “other” politics out of the trade negotiations and Washington sources expect that will occur again. If China is making large US purchases, they should include; pork, soybeans and cotton. The US weekly export sales report is released Friday.

• Mexico was confirmed as buying 228,600 mt of US corn today. No new Chinese soybean or grain purchases were noted.

• The midday GFS weather forecast is like the overnight run with any heavy rains pushed into the east and SE US. Temperatures will be variable with a frost likely for the E Midwest by the closing days of October. Dryness is noted through Friday with rains on the weekend followed by dryness during the 9-15 day period. The rains on the weekend look to range from 0.15-0.85”. The US corn and soybean harvest will gain speed in the coming weeks across the Plains and W Midwest. US soybean harvest is becoming active in most areas.

• Midwest cash basis levels are starting to leak as farmers move their recently harvested crops against existing cash contracts or make new sales. And Brazilian farmers are also active sellers amid the Real vs the US$ at 4.16:1. The weakening S American currencies will to spur additional spring seedings. The Brazilian weather forecast features better rainfall.

• Mixed in diminished volume are Chicago values at midday with corn/wheat slightly lower while soy futures trade into the green. Few traders have any conviction on being bullish or bearish amid uncertain trade details between the US and China. And the weekly NASS Crop Progress/Condition report is likely to reflect limited harvest progress and a decline in ratings following last week’s wet weather and snows across the Dakotas. Traders want to see enlarged Chinese demand to have comfort in Trump’s promise that US farmers would see China scale up to $40-50 billion of ag purchases in several years.

• Chicago traders estimate that funds have sold 1,100 contracts of Chicago wheat and 4,600 contracts of corn, while buying 3,100 contracts of soybeans. In soy products, funds have bought 4,200 contracts of soyoil while selling 1,900 contracts of meal. Soyoil futures have pushed to their best levels since March on rumours of new US export demand amid rising tropical oil values.

• US weekly export inspections for the week ending October 10 were 18.5 million bu of corn, 35.1 million bu of soybeans, and 17.0 million bu of wheat.

• For their respective crop years to date, the US has shipped out 347.7 million bu of wheat (up 59.9 million or 21%), 98.3 million bu of corn (down 174 million or 64%), while US soybean exports at 189.6 million bu are up 13.1 million or 7%. China shipped out 5 million bu of US soybeans accounting for 28% of the weekly US total. We believe that WASDE is likely to reduce their 2019/20 corn export estimate by another 100-150 million bu based on the sales/export pace to date.

• The International Research Institute forecast that S American will see spotty dryness for NE Brazil with temperatures above normal throughout most of Brazil and Argentina during the October-November-December time frame. Any above normal precipitation is forecast to occur across Central Argentina. The point is that if there is a place to monitor for weather problems, it is NE Brazil!

• Multi-National exporters report that they are seeing Chinese buying interest but we cannot confirm any actual new US sales, but at least the ‘phone has been ringing. Based on existing Chinese tariff levels, it is the primary state buyers of Sino/Cofco which must be securing US commodities. There has been no indication that China is ready to drop their retaliatory tariffs (as the US won’t drop theirs) which is needed to allow private Chinese importers to fully return. The USDA announced another sale of soybeans to an unknown destination, rumoured to be China for 142,579 mt.

• Argentine corn bids for November/December are trading at a sharp discounts to the US Gulf. Nov Argentine corn is offered at -$0.10 with Dec at -$0.03. This compares the US Gulf at $0.52 over and December at $0.58 over. Argentine corn is $0.62/bu cheaper for November and $0.61 for December, how does the US compete until late January. US corn export estimates continue to retreat.

• The midday GFS weather forecast is drier for the entire Midwest with no additional snow into November. Temperatures will be variable with a frost likely for the E Midwest by the closing days of October. Dryness is noted through Friday with rains on the weekend followed by dryness during the 9-15 day period. The rains on the weekend look to range from 0.15-0.85”. The US corn and soybean harvest will gain speed in the coming weeks.

• Traders want evidence of Chinese demand before making new Chicago purchases. Pork, cotton and soybeans will be in the top of their shopping list. Beyond the political trade, US/S American weather is improving with US Gulf corn prices too high to stir any export demand. US demand rationing is domestic.

• Chicago futures are sharply higher at midday with the US DOW soaring over 400 points on hope that the US/China will sign a truce that includes US agricultural purchases. The corn market has recovered all of Thursday’s losses with November soybeans and Chicago wheat pushing to new seasonal highs. Funds are active on the buy side of the marketplace in the grains as they cover shorts. Rumours abound that China could secure US corn/wheat/ethanol in a mini trade pact, but as with other recent US/China rumours, it is either they secure everything or nothing. Neither view is right, and this is not a final deal, just a side step for China to avoid higher tariffs on Tuesday (October 15).

• We look for a sharply higher close with all eyes on what Trump/He offer in terms of a truce in their (post Chicago close) press briefing in the White House Oval Office. Traders are hopeful of large US purchases of US soybeans and pork, with the potential of including US grain. We would note that CME pork futures are NOT rising sharply, which theoretically should be the most bullish commodity.

• Chicago floor brokers report that funds are net buyers of 10,400 contracts of wheat, 23,000 contracts of corn, and 5,600 contracts of soybeans. In soy products, funds have bought 3,500 contracts of soymeal and are flat in soyoil. The biggest fund buying is in commodities where they are short, corn and wheat. In soybeans, it is estimated that funds are long 23-27,00 contracts including their buying of recent days.

• Brazilian farmers have been big sellers of the Chicago soybean rally as new crop prices reach levels not seen in years. The combination of the fall in the value of the Real (Brazilian currency) and Chicago recovery is enticing Brazilian farmers to step up their 2020 seeding amid fat margins. Brazilian farmers are pricing an increasing percentage of their crop worried that the US/China could do a mini deal that could cause their fob soybean premiums to fall. In the wake of a deal, we look for Brazilian farmers to be active soybean sellers.

• Brazil has confirmed a case of swine fever (not African) that will cause regional problems for their domestic pork production. The move does change their export opportunities to China or to other world importers.

• Snows are falling across the Dakotas with rains slowing harvest elsewhere. The Midwest farmer will concentrate their harvest efforts on soybeans and then pivot to corn. This tells us that cash corn basis will stay strong for the remainder of October, and potentially into early November. We do not see the strong cash basis as telling anything about the 2019 US corn crop size.

• There is no correlation (as far as we can establish) between the amount of crop harvested (ears pulled or pods weighed) for the October NASS report and November or final yield totals in corn or soybeans.

• The midday GFS weather forecast is slightly drier with less snow for the Northern Plains. Snows have been accumulating in the Dakotas with totals of 4-12” so far. Additional totals look to range from 2-8” with the winds helping to lodge crops through the weekend. The cold has ended the growing season in the N Plains and the NW Midwest.

• The S American forecast continues to add rain for Brazil and Argentina over the next two weeks. All signs point to improved S American weather going forward.

• Making sales ahead of a US/China Oval Office Meeting is difficult but we fear the market may well be disappointed by the mini deal. This is about a trade truce, not a completed final US/China deal. If the Chicago rally that continues into early next week, we would see it as a selling opportunity. S American weather forecasts offer better rains, and that is what is important longer term. Don’t chase the Chicago rally would be our advice.

• US President Trump and Chinese Vice Premier He announced a Phase 1 Deal on US/China trade that included a verbal agreement for China would ramp up US ag purchases to $40-50 billion in the next two years. The deal is agreed to in principle and has not been written down/signed. This is to be worked out over the next 4-6 weeks and potentially signed by Trump/Xi in the APEC meeting in Chile. We suspect that this is the first US major trade deal that has been announced in some totality, but not written down/signed. There was no breakdown of what US ag goods that China would secure and when. Moreover, if China has 2 years to reach $40-50 bilion of US ag purchases. And no one knows when the US/China start reducing their existing tariffs. The US will not raise tariffs in October, but the December hike is still on the table.

• The $40-50 billion of Chinese demand in 2 years could be great news for American Agriculture. But this is a President to President agreement and not a US/China trade treaty. What would happen when either Trump or Xi is no longer President. The US ag markets will watch for “deal confirmation” from China on the weekend and when their retaliatory tariffs on US ag goods will be dropped. A higher ag opening is expected on Sunday, but deal confirmation then the key.

• Soybean futures rallied to end the week on fund buying/short covering on hopes that the US and China could reach a trade truce. Other news was limited for the day, but harvest remains slow as an early winter blizzard moves across the N Plains and Midwest states, while rain has limited progress across other parts of the Midwest. The Commitment of Traders report showed that for the week ending Oct 8, funds were net long soybeans. Managed Money long positions totalled 101,103 (+10,489), short positions were at 94,602 (-4,742), for a net position of long 6,504 contracts (+15,231). Harvest progress will again be limited over the weekend, but a drier forecast is offered for next week. We anticipate harvest progress through Sunday to reach 19-21% complete. News of a China trade deal is viewed as supportive of US soy prices. Ultimately it is record large stocks and large S American production that looks to cap Chicago soybean prices. A S American drought is needed to support spot futures over $9.50.

• Chicago corn futures ended sharply higher with Dec rallying 18 cents. Details surrounding US-China ag purchases are absent, but US Sec of Treasury said that China would ramp up US ag purchases to $40-50 billion in 2 years after a Phase 1 Deal is signed. There will be 4-6 weeks of US/China ag negotiations before the deal can be written and signed. There are no assurances today of when China will secure US corn. Chicago could rally early next week, but no one will want to chase the market until actual commodity purchases are realised. This is a de-escalation of US/China trade tensions. Managed funds as of Tuesday were short a net 91,000 contracts. Funds were active in buying corn on Friday with purchases pegged at over 25,000 contracts. Dec corn above $4.10 will slow US export/ethanol demand further. More important longer term is the arrival of rainfall to Argentina and much-improved forecast in Central Brazil beginning October 19. Don’t chase this rally would be our advice.

• US wheat futures rallied 13-18 cents led by KC. There is no wheat-specific news available, but European wheat futures followed. Managed funds on Tuesday were short 19,000 contracts of wheat in Chicago and a more sizeable 35,000 in KC. This KC position is logical as HRW stocks rise and exports lag. Yet, without knowing details of the partial US-Chinese deal, shorts are being covered. Future wheat export potential remains bleak. EU futures today rallied $.09/bu, and so Gulf HRW’s premium to other origins will widen further. Yield-stabilising rain falls across Cordoba, northern Buenos Aires and Santa Fe in Argentina this weekend. Additional short covering is possible early next week, but until major exporter balance sheets tighten significantly, spot Chicago is overvalued above $5.10. If China secures US wheat in the next year, it likely would be HRW wheat, not SRW. China has 2 years to ramp up purchases to $40-50 billion. No immediate purchases are foreseen.

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Weekend summary 11 October 2019

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Fund positions disaggregated data