All Members: Mid-day

CBOT Recovering into US 3 Day Weekend; US/China Trade Optimism Gaining Traction

Feb 15, 12:16 pm | Mid-day Commentary

** Wheat fund selling has produced new contract lows in KC March futures. Paris wheat started the Chicago decline with March Paris wheat down $3.25 euros/MT at $195.00/MT. March Chi is back to its initial starting point at the beginning of the year at $5.01. This week’s wheat decline started on weakening Russian fob prices which has spread to the EU and US. 

  The wheat selling tugged corn/soybean futures off their opening highs. Most of the AM selling has been chart and fund related. Cash selling from US and South American producers has dried up on the CBOT decline.

  The US stock market has rallied sharply amid China/US trade optimism. The US/China delegation will be arriving early next week for a new round of talks. Its expected that if enough progress can be reached, that US President Trump and Chinese President Xi will be holding a trade summit in the US in March. President Trump offered that he may invite Democratic leadership to join.

** US President Trump indicated that US/China are making progress on trade, but it will be up Trump to decide if final pact can be achieved in face-to-face presidential negotiations – likely sometime in March. The President hinted that this would be this would be the “biggest trade deal ever”. No exact numbers were offered, but we all need to remember that China pledged $1 Trillion dollars in US purchases into 2024 back in mid-January.

 ** CBOT brokers report that funds have sold 5,000 contracts of wheat, 2,200 contracts of corn, while being flat in soybeans.   

 ** FAS reported that 205,744 MTs of US corn was sold to an unknown destination during the 2018/19 crop year.  

 ** Above normal temps and below normal rainfall has some raising their winter wheat crop concern for SW Russia. The forecast is warm/dry for another 2 weeks

 ** Seasonal trends for corn/soybeans normally bottom in mid-February and turn upwards heading into May. Amid the need for additional US corn acres, ARC suspects that this trend will be at work again this year. South American crops (outside of winter corn production in Brazil) are largely known. US farmers needing to raise cash flow for spring inputs have largely completed those sales. New sellers will be needed to push values substantially lower from current levels. A new Northern Hemisphere growing season and enlarged US export demand to China are mentioned as the bull catalysts.

** South American Weather Discussion: The midday GFS is drier across Southern Brazil and Argentina when compared to the overnight forecast solutions into February 25th. The GFS backed down on the coverage and totals of Argentine rainfall during the 8-10 day period. The GFS’s outlook is generally favorable for Brazil with widespread soil moisture improvement. Weather watchers are eyeing developing dryness in S Argentina and can this dryness march northward into Central Argentina by early March?

 

** AgResource Market Analysis: Our advice has been to avoid selling CBOT breaks or chasing rallies in this political marketplace. The corn market continues to hold the most bullish fundamentals, soybeans the most bearish with wheat caught in between. The lack of volume on the push to new wheat lows tells ARC the break is a bear trap.

  The 3-week weather forecasts for the Central US calls for considerable rain across the Delta and S Midwest. This wet trend shows no sign of abating, which could pose a March corn seeding concern.    

  The big US ag market unknown is the US/China trade deal and its impact on US demand looking forward? The potential of China pledging to reduce a good portion of the US/China trade deficit is enticing to every US ag market bull.  

 

 

Fund Sell Stops Triggered at CBOT; China Soybean Sales Cancellations Debated; China Trade News Awaited Overnight

Feb 14, 12:09 pm | Mid-day Commentary

** CBOT corn, soy and wheat futures have spent the morning weakening on fund selling amid a disappointing US export sales report from FAS. The report showed net US soybean sales cancellations and paltry US corn and wheat sales for the week ending January 3rd. This week occurred over the New Year’s holiday, but the market took the sales news as bearish amid the surprising China cancellations. Fund sell stops were triggered in wheat with soybeans testing Monday’s low. The back and forth of the political markets continue. 

  Traders argue that the Bloomberg story that the US/China Trade Tariff hike (due on March 2nd) will be delayed by 60 days is bearish as potential new US ag demand is pushed backwards. But other media sources are awaiting an announcement following the US/China Beijing negotiations could produce a March US/China Presidential Summit in Florida. US/China trade talks will continue overnight (Friday China time), with announcements by to follow.   

 ** ARC hears positive US/China Trade talk progress. Like the December and January meetings, the US could ask China to secure additional US ag goods as a payment for the tariff delays and for progress with the talks. The big debate is whether China will secure soybeans or US corn. ARC leans in favor of corn.

** US weekly export sales for the week ending January 3rd were; 4.8 Mil Bu of wheat, 18.1 Mil Bu of corn with net cancellations of 22.5 Mil Bu of soybean. The sales were below recent weeks and trade expectations. Traders are trying to understand why China canceled soybeans, but it might have been China privates had purchases on the books before the China Gov’t purchased of 10 MMTs in the weeks following? Next week’s combined weekly soybean sales will include sizeable Chinese purchases that will act as a counter.

** For their respective crop years to date, the US has sold 658 Mil Bu of US wheat (down 60 Mil Bu or 8%), US corn sales are 1,271 Mil Bu (up 204 Mil Bu or 19% from last year), with soybeans at 1,116 Mil Bu (down 404 Mil Bu or 26%). 

** In May, China offered to secure $35 Bil dollars of US ag goods and $35-40 Bil of US energy to cut a trade deal and lower the US/China trade deficit. The Trump Administration said yes (mid-May) and then no (day after Memorial Day) which caused the application of US tariffs and retaliatory China tariffs in June. It would be a big disappointment in any US/China trade deal if US ag did not see at least $35-40 Bil of pledged demand annually. ARC remains confident that any US/China trade deal involves sizable purchases of US meats/grains.

** CBOT brokers report that funds have sold 11,000 contracts of wheat, 7,000 contracts of corn, 8,000 contracts of soybeans, 5,000 contracts of soymeal and 2,000 contracts of soyoil. A Chi wheat order sparked a 1-minute sale of 6,700 contracts as March fell below $5.1075. 

** South American Weather Discussion: The is wetter in Southern Brazil next week and drier in Argentina. The GFS backed down on the coverage and totals of Argentine rainfall in the 8-10 day period. The GFS’s outlook is favorable in Brazil, with widespread soil moisture improvement expected during and just after safrinha corn seeding ends. Weather watchers are eyeing developing dryness in Argentina.

 

** AgResource Market Analysis: The CBOT marketplace hit chart-based selling in wheat/soy amid tepid US export sales totals of Jan 3rd. In political markets, the track record of selling sharp breaks is horrible. Amid the positive trade talk, our stance is to use breaks to secure call options. ARC sees value in spot CBOT corn below $3.73. US and world wheat prices have the Northern Hemisphere growing season ahead and will not fall into a lasting bearish trend.   

 

 

Markets Little Changed, Await News From Beijing

Feb 13, 12:17 pm | Mid-day Commentary

It’s been a mixed and duller session in Chicago and elsewhere. All markets are near unchanged at midday, with European wheat eyeing a similar settlement. US-Chinese negotiations will be ongoing this week, and comments from Treasury Secretary Mnuchin indicate that so far things are going well. USDA Deputy Secretary Censky commented that Presidents Trump and Xi are expected to meet in March. It remains tough to be overly short ag futures ahead potential large-scale Chinese buying.

Other news this morning is mostly positive. US ethanol production through the week ending last Friday totaled 303 Mil Gal, up a solid 18 Mil from the prior week and even above the previous year’s level for the first time since early November. We’ve highlighted this week the rapid improvement in margins.

US ethanol inventories last week totaled 985 Mil Gal, down 20 Mil from the prior week. Weekly ethanol stocks/use fell sharply. Crude at midday is up $1.15/barrel to $54.25. Gasoline and ethanol prices are in tow, with spot RBOB testing recent highs.

No new export sales were announced this AM, but there’s been more discussion over the recent plunge in ocean freight. This favors Argentine origin corn into Asia beginning in late spring, but will also help US wheat find non-traditional markets, including North Africa.

Weekly export sales on Thursday are expected to include 30-35 Mil Bu of corn, 38-45 Mil Bu of soybeans and 22-27 Mil Bu of wheat, the lion’s share of which should be HRW. Corn sales tend to stay seasonally slow during the Christmas and New Year holidays. Note too that FAS plans to be fully caught up with its sales reporting in next Friday’s release.

There’s no sign that the US weather pattern will change by the end of February. Additional heavy snow will impact the PNW and Midwest into early next week. Temps lean cool, with frigid readings to persist across the N Plains & Upper Midwest.

We also mention that Australia is entering its third year of extreme drought. 30-day Aussie precip ranges from 0-40% of normal in the West and Northeast crop belts. Little/no rain is forecast in the next two weeks. New crop Aussie wheat planting begins in April. 

South American Weather Discussion: The South American forecast is wetter in Central Brazil next week and hints of needed rainfall in Central Argentina beyond February 22nd. The GFS’s outlook is rather favorable in Brazil, with widespread soil moisture improvement expected during and just after safrinha corn seeding ends. Weather watchers are eyeing developing dryness in Argentina, and recall later planted corn pollinates in late Feb and March. Whether the EU model follows this wetter outlook will be watched closely.

AgResource Market Analysis: Ag future are caught in long established ranges, and the waiting game will continue. Several weeks of US export demand will be released next Friday. The USDA’s Outlook Conference is scheduled for Feb 21-22. This will be followed by US-Chinese talks and a potential extension in the trade truce. Grains remain fundamentally supported, but too many crosscurrents will keep the spec community from establishing large positions. We do estimate that managed fund length in corn has been pared down to near zero.

CBOT Rallies on Technical Buying and Hope that US/China Are Making Progress on Trade

Feb 12, 10:59 am | Mid-day Commentary

** The morning has been mixed at the CBOT in diminished volume. Corn, soybeans and wheat prices tested their lower end of their recent range yesterday and bounced. But, today’s recovery lacks conviction. Traders are focusing on the prospect of a US/China trade deal and waiting to hear if US President Trump will accept a budget proposal from the Congress that prevents a second Gov’t closure this Friday?

  There is optimism that the US/China can reach a trade deal, but fresh news is absent and won’t be available until the high-level ministerial meetings begin on Thursday. President Trump and President XI both need a political win, and our bet is that new and more substantial progress that will be scored that allows for some sort of Presidential Trade Summit in March. The potential for US/China trade progress should place a bid under CBOT values.   

** CBOT brokers estimate that funds have sold 1,600 contracts of wheat, while buying 2,500 contracts of corn and 2,300 contracts of soybeans. In soy products, funds have bought 1,200 contracts of meal while being flat in soyoil

 ** FAS reported that the US sold 122,376 MTs of US corn to an unknown destination in its daily sales report.

 ** The EPA made additional comments this AM that it is working at a very expeditious pace on drafting E15 rules to expand the use of E15 to year-round.The ethanol marketplace is excited by the new domestic demand increase. 

** Following the CONAB report, Brazil’s ag policy secretary estimated that Brazil’s soybean crop would continue to decline based on adverse late January and early February weather. Most in the trade now see the 2019 Brazilian soybean crop at 113-115 MMTs. No further declines in the crop are expected as the weather pattern has improved and stabilized the crop.

 ** Jordan passed on wheat tender for 120,000 MTs. A retender is expected amid the slide in world wheat prices of recent days. Russian fob March wheat finished at $248-249/MT, which is down from last week’s $253/MT. 

 ** European River levels are at their lowest levels in years amid the disappointing moisture that has fallen so far this winter. The forecast calls for largely dry weather with warming temps over the next 10-14 days.

** South American Weather Discussion: The midday GFS forecast has reduced rainfall for Argentina in its 10-day forecast with limited totals outside of a narrow swath of Buenos Aries. No extreme heat is noted, but soil moisture levels are in fast decline which will mandate that better rains in March.  

  The Brazilian weather forecast offers near to above normal rain which should help replenish soil moisture. The Brazilian rains are adequate for winter corn and late planted soybeans. The Brazilian forecast is like the overnight forecast which raises our confidence in its correctness.  

** AgResource Report Analysis: It’s a waiting game for the results of US/China trade negotiations in Beijing. If the US can reach a deal on reducing China’s trade deficit with the US, it will include sizeable purchase pledges of US ag and energy goods. One does not want to be short of the CBOT when those pledges are announced and agreed to.   Seasonal lows tend to occur in late January or by mid-February. The cash markets are firm and new crop Northern Hemisphere weather will become more closely monitored in several weeks.  

 

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CBOT Lower on Fund Selling Tied to Friday’s USDA Report; Russian Ag Minister Stays the Course for 2018/19 Wheat

Feb 11, 12:09 pm | Mid-day Commentary

** Lower prices have dominated the CBOT this AM with corn, soybean and wheat futures down on technical and fund related selling. The bearish hangover from Friday’s USDA February report along with down trending charts has left the market with a void of buyers. US/China trade negotiations have not offered any new developments (its overnight in China), but the US dollar has shot upwards this morning which is creating a bearish landscape for a host of raw material markets. The USD has reached its best levels since mid-December with values trying to fill an open chart gap. The CBOT volume has been good on the break with funds shedding length and adding to their net short positions. Our view remains one that a bottom in the CBOT should be scored early this week as traders await developments in the US/China trade negotiations. Its US/China trade that will drive the CBOT in coming months.

** CBOT brokers estimate that funds have sold 1,900 contracts of wheat, 3,100 contracts of corn, and 7,000 contracts of soybeans. In soy products, funds have sold 4,600 contracts of soymeal and 4,100 contracts of soyoil. Funds have been sizeable sellers across the complex this AM.

 ** US weekly export inspections for the week ending Feb 7th were; 29.3 Mil Bu of corn, 39.1 Mil Bu of soybeans, and 20.7 Mil Bu of wheat. For their respective crop years to date, the US has sold 914 Mil Bu of corn (up 295 Mil Bu or 47%), 831 Mil Bu of soybeans (down 493 Mil Bu or 37%), and 565 Mil Bu of wheat (down 64 Mil Bu or 10%). China shipped 17.9 Mil Bu of US soybeans last week or 46% of the total. Non-US Chinese buyers are lagging well behind normal which would argue that WASDE is still too high with their 2018/19 US soybean export estimate by 75-100 Mil Bu.    

 ** FAS announced the sale of 128,000 MTs of US HRW wheat to Nigeria and 120,000 MTs of US SRW wheat to Egypt during the 2018/19 crop year. Moreover, private exporters sold 120,000 MTs of US soymeal to Ecuador.

 ** The Russian Ag ministry met with exporters and held the same line as the December/January meetings. No restrictions are expected to be placed on old crop grain/wheat exports as the ministry is keeping its wheat export estimate at 37 MMTs and total grain at 42 MMTs. However, the Ag Ministry will seek to form a new exporters’ union that will help it control the pace of exports much like Ukraine. Each exporter will be allocated a hard quota for grain/wheat.

The new Russian export structure will prevent the front loading of exports that occurred this year when the Russian wheat crop declined as exporters feared trade restrictions. ARC would note that interior wheat/flour prices rallied on the Russian news amid tight supplies and limited farm selling.


** South American Weather Discussion: The midday GFS forecast reduced rainfall for Argentina in its 10-day forecast with limited rains of .15-.75” expected over the next 10 days. This is about a third of what is normal. No extreme heat is noted which will help preserve soil moisture.

  The Brazilian weather forecast offers near to above normal rainfall which should help replenish soil moisture. The Brazilian rains are more than adequate for the final weeks of the soybean and establishment of winter corn.  

 

** AgResource Report Analysis: CONAB is out in the AM with their February Brazilian Crop estimates. CBOT corn/ wheat are back testing the lower end of their trading ranges which should hold. March soybeans could test their early 2019 lows at $8.91 as the Brazilian harvest advances. ARC expects positive news from US/China trade discussions to support late week CBOT rally. This is no place to sell grains.

Long Awaited USDA Report Fails to Offer Inspiration: CBOT Mixed with Trade Eyes Turning to US/China Talks Next Week

Feb 8, 12:06 pm | Mid-day Commentary

** USDA February Crop Analysis: The February report will not alter prevailing range bound price trends at the CBOT with traders turning their attention to the coming US/China trade negotiations. ARC sees the report as positive for corn and soybeans, and neutral to wheat.

** Corn: NASS lowered their US corn production by 206 Mil Bu due to a reduction in yield to 176.4 BPA (down 2.5 BPA) and a fractional reduction in harvested area. 2018 US corn production ended up at 14.420 Mil Bu.

  2018/19 world corn production held steady (from December) at 1,099 MMTs, with Argentina’s crop raised 3.5 MMTs to 46 MMTs while Brazil’s held steady at 94.50 MMTs. US corn production was reduced 5 MMTs, while the FSU corn crop was raised by .5 MMTs.   2018/19 world corn end stocks were pegged at 209.8 MMTs, up 1 MMTs from Dec.

** US 2018/19 corn end stocks were forecast at 1,735 Mil Bu, down 46 Mil Bu from December. WASDE cut feed/residual use by 125 Mil Bu via the smaller US crop and corn use to produce ethanol by 25 Mil Bu. Total US 2018/19 US corn demand is pegged at 14,865 Mil Bu – or some 445 Mil Bu more than production.

** 1st quarter US corn feed use was estimated at 2,289 Mil Bu with Dec 1st stocks at 11,952 Mil Bu, down 604 Mil Bu from last year. These stocks were the lowest in years and raises the need for the 2019 US corn crop to exceed 15,000 Mil Bu. The corn market has no room in its supply profile for China to secure 8-12 MMTs of US corn if a trade deal is agreed to. Corn holds the most bullish fundamental and the market demands an additional 2-3 Mil of new crop seedings.

** US December 1st wheat stocks at 1,999 Mil Bu were up 126 Mil Bu from last year. 2nd quarter feed use is forecast at a -76 Mil Bu which is 20 Mil Bu more than last year. US wheat stocks were some 40 Mil Bu larger than what analysts were forecasting and considered slightly bearish.

** US 2019 Winter wheat seeding was a 110 year low at 31.3 Mil acres, down 4% or 1,200 Mil acres from last year. HRW wheat seedings totaled 22.2 Mil acres which was down 4%, while 5.66 Mil SRW wheat was seeded which is down 7%, and soft white was down 3% at 3.44 Mil acres. The wheat seedings data confirms above trendline yields are needed to prevent an important drop in 2019/20 US wheat end stocks. Condition ratings heading into dormancy were below the 5 year average suggesting the need for favorable spring weather.

** 2018 US soybean production fell 56 Mil Bu based on a decline of 200,000 of harvested acres and a .5 BPA fall in yield. The 2018 US soybean crop was 4,544 Mil Bu, some 132 Mil Bu larger than last year.

 ** US 2018/19 soybean end stocks were lowered to 910 Mil Bu with crush being elevated by 10 Mil Bu to 2,090 Mil Bu while exports were reduced by 25 Mil Bu to 1,875 Mil Bu. ARC questions the increase in US crush amid a much larger Argentine harvest and we estimate another 75 Mil Bu cut in US soybean exports.

ARC’s 2018/19 soybean end stocks are closer to 1,000 Mil Bu. The 1st quarter US soybean residual was a surprising large 234 Mil Bu! This is just below the record set in 2014/15 at 247 Mil Bu.

 ** WASDE went back and revised South American soybean stocks for numerous years due to Brazil’s large 2018/19 exports and the 2018 Argentine drought. The Brazilian ‘19 crop was cut 5 MMTs to 117 MMTs while Argentina was dropped 500,000 MTS to 55 MMTs. 2018/19 world soybean end stocks fell 8.6 MMTs to 106.7 MMTs. China 2018/19 soybean imports were cut 2 MMTs to 88 MMTs.

 ** AgResource Report Analysis: There is nothing in the USDA February report that will dramatically alter prevailing trends. ARC argues that new cuts are demanded in China’s 2018/19 soybean imports. However, its spot CBOT corn that holds a bullish story below $3.70, while spot soybeans are a sale above $9.25 while Chi wheat should hold $5.00 heading into spring. The CBOT markets are  political and await new trade developments with China. 

US/China Trade Comments From US Trump Economic Czar Kudlow Pressures CBOT Values; USDA Report Just 24 Hours Away

Feb 7, 11:16 am | Mid-day Commentary

** Fund short covering was the theme of recent days as CBOT values bumped up against the top end of a range. However, fund liquidation is pressuring values this morning as the bulls adjust their positions (down) ahead of Friday’s USDA February Crop Report amid bearish news on US/China trade negotiations. 

  Funds/small traders are long of corn, Chi wheat and soyoil. Selling in wheat/corn paced the decline with soybeans in tow. FAS did not announce any new US soybean sales to China, suggesting that China has finished pricing 5.0 MMTs of US soybeans. This leaves the CBOT nervously bearish with traders doubting that the USDA February crop report would start a new bull phase.   

  More important to the marketplace is the US/China trade negotiations and whether China is willing to drop their retaliatory 25% tariffs on US ag goods this winter or spring? A structural agreement or breakdown in negotiations in US/China ag trade are the biggest fundamentals that will sustain a CBOT price trend.

** About US/China trade, Trump Economic Adviser Kudlow indicated that the US/China had a sizable distance to go to reach a deal. This tough talk was different from late last week and suggests that a considerable amount of work yet needs to be completed. Yet, ARC would caution about reading too much into US Administration comments – which are always hawkish heading into each new round of US/China negotiations.

 ** A Trump official is also stating that it’s unlikely that US President Trump and Chinese President Xi will meet before March 1st. This does not mean that US tariffs will double, just that the best that the market can expect is a continuation of the current 25% tariffs.

 ** CBOT brokers estimate that funds have sold 4,400 contracts of soybeans, 3,500 contracts of corn and 4,000 contracts of wheat. In soy products, funds have bought 1,900 contracts soyoil while selling 2,200 contracts of soymeal.

 ** US weekly export sales for the week ending Dec 27th were; 21.8 Mil Bu of wheat, 19.8 Mil Bu of corn, and 38.6 Mil Bu of soybeans. Roughly half of the US wheat sales were HRW, with HRS and SWW accounting for the remainder. US SRW wheat sales were just 900,000 bushels. US soymeal sales were just 40,600 MTs with soyoil sales of 16,000 MTs. The meal sales were a marketing year low, down 91% from the week prior, and disappointing with South America starting to ramp up its new crop crush. Brazil and Argentina are offering fob soymeal $13-20/MT below the US Gulf thru June – the US soy crush rate should decline.

** Private Argentine corn crop estimates are rising with producer sources arguing that this year’s harvest could be like Ukraine during 2018! WASDE pegged the Argy crop at 42.5 MMTs in their December report, with private sources putting the crop today at 45-47 MMTs. With normal weather, some hint that the ’19 Argy corn crop could reach 49 MMTs! Last year, Argentina cut a drought reduced corn crop of just 32.0 MMTs.    

 ** Midday GFS South American Weather Discussion: The midday GFS is little changed from the overnight run. Northern Brazil has 10-day rain totals of 3-7.00”. The solid rains will finish off the soy crop and aid winter corn  establishment. A slightly wetter forecast is offered for Argentina which is helpful to soybeans. Argentine corn is filling and the sunny/cool weather aids yield. The overall forecast is favorable and leans bearish in the marketplace.  

 

** AgResource Market Analysis: US/China trade remains the big fundamental for CBOT prices and negative comments from US political leaders is pressuring CBOT prices at midday. Delays in a US/China trade deal would allow South America will pick increasing amounts of world soy/corn export demand as 25% tariffs against US goods remain in place. The USDA February report is 24 hours off , which is taking a backseat to negative US/China political talk. 

US Corn Ethanol Production Lowest in Years; China Demand for US Soybeans Nearly Filled

Feb 6, 11:28 am | Mid-day Commentary

** Dull has been the morning with the summer row crops slightly lower while wheat futures are firm on tightening cash supplies. AM trading volume is low and the ranges are tight as few want to position ahead of Friday’s volatile USDA Crop Report. ARC notes that the trade is positioned for bullish corn/ wheat reports, and while expecting slightly bearish data on soybeans.

  The big surprise in the report would be a US corn yield that does not drop more than 2 BPA! Remember that WASDE is expected to cut US corn use to produce ethanol by 100 Mil Bu and feed/residual by 50 Mil Bu which mandates that US corn yield must decline by more than 2 BPA for the report to be bullish.

 The difficult aspect for WASDE analysts is their void of current US corn, soy and wheat sales data. USDA analysts are aware that China has secured 10 MMTs of US soybeans, but they (like the trade) are in the dark in terms of demand from other non-Chinese buyers and whether US wheat sales have recovered?

** CBOT brokers estimate that funds have bought 2,100 contracts of soybeans, 1,100 contracts of corn and 3,500 contracts of wheat. In soy products, funds have bought 4,700 contracts soyoil while selling 500 contracts of soymeal.

 ** USDA reported that China secured another 786,000 MTs of US soybeans. The sales were split between 586,000 MTs to China and 182,000 MTs to an unknown destination (widely rumored to be China). Known Chinese soy purchases amount to 4.6-4.7 MMTs. Pricing in the CBOT has been dramatically diminished from prior trading sessions. Now that 5 MMTs of China pricing is completed, US traders are starting to wonder who is going to be the next substantial buyer of US soybeans until China removes their 25% retaliatory tariffs? This tariff reduction is not expected to occur until a US/China trade deal is signed. 

** The average trade estimate for Friday’s report is looking for a US corn yield of 177.8 BPA (down 1.1 BPA from November), a soybean yield of 51.7 BPA (down .4 BPA from November) with US all winter wheat seeding at 31.97 Mil acres (down 600,000 acres). In talking to traders, ARC gets the impression that their US corn yield estimate is even lower than published expectations.

 ** 967,000 barrels of US ethanol were produced in the week ending Feb 1st, down 45,000 barrels from the prior week, the lowest since Oct 2017! US ethanol stocks fell slightly to 23.9 Mil barrels. The use of US corn to produce ethanol is holding in a bearish trend based on marginal margins. ARC looks for WASDE to cut its US 2018/19 corn use for ethanol by 75-100 Mil Bu on Friday.   

** Midday GFS South American Weather Discussion: The midday GFS is drier with diminished rain chances for the southern third of Brazil. Northern Brazil has solid rain chances with 10-day totals of 3-7.00”. The rains will finish off the crop and aid winter corn crop establishment. A slightly wetter forecast is offered for Argentina which is helpful to crops. No heat is expected across Argentina which will help preserve soil moisture. The Argentine corn crop is filling, and soybeans are blooming. The South American weather forecast is favorable for the next several weeks.  

 

** AgResource Market Analysis: Friday’s USDA crop report is highly important to short term CBOT price direction. However, ARC doubts that any strong rally can be sustained as US/S American farmers sell any 8-15 cent rally in corn and soybeans.US/China trade negotiations are far more important to long term CBOT price determination with March 1st just a few weeks away. Brazilian soy yields are variable and not a disaster with CONAB expected to come out around 116-117 MMTs soy crop estimate on Friday. Our trading bias is to buy corn on breaks and sell soybeans on rallies.   

 

 

CBOT Recovers at Midday Following Sell the Fact Profit Taking on China Soybean Demand

Feb 5, 12:14 pm | Mid-day Commentary

** Confirmation that China has secured 2.6 MMTs of US soybeans with another 274,000 MTs going to an unknown destination caused profit taking on CBOT longs amid “sell the fact” trading. The bulls wanted to trim their market risk ahead of Friday’s USDA Crop report. Including Monday’s USDA sales announcement that China bought 612,000 MTs, total China soybean purchases in recent days are pegged at 3.6 MMTs. Commercial sources argue that another 500-750,000 MTs will be announced on Wednesday which means that China has virtually completed its 5 MMTs purchase program that was offered as negotiation plum to President Trump.

  Amid limited news and light volume, the grains followed the soybean market lower without any conviction. The market has clawed back some of its losses on the expectation of reduced US corn/soybean yields in Friday’s USDA report. Old vs new crop wheat spreads are gaining on tightening world supplies and rising fob values. US cash basis bids for SRW/HRW are firm.

** CBOT brokers estimate that funds have sold; 2,400 contracts of soybeans, 3,200 contracts of corn and 2,100 contracts of wheat. In soy products, funds have sold 1,400 contracts of soymeal and bought 1,900 contracts of soyoil.

 ** The Brazilian soybean export line up is record large for early February. However, most export sources argue that its based on the early maturation of the Brazilian crop. Yet, cash basis bids are weak and likely to weaken farther as the harvest advances. For most Brazilian farmers its tough to find a good cash bid for spot shipment. This is likely due to US soybeans being pushed into China which is reducing demand in Brazil. Brazil is anxious to get more sales on the books amid step Argentine discounts for LH March/April.  Argentine soybeans for April are offered $.36/Bu cheaper than the US Gulf, and $.50/Bu cheaper than Brazil!

 ** Dryness questions are starting to redevelop for portions of Eastern Europe and Western Russia. Winter crops are uncovered as prior snows have melted which raises the risk of winterkill. However, the crop is still in dormancy, but the forecasts offer continued dry weather thru February, which will make March rainfall/snows important. Remember that the 2019 winter wheat crop did not properly get established due to a lingering drought.

 ** Canada Dec 31 canola stocks were 14.6 MMTs, up 5% from last year with wheat stocks equal to last year at 23.2 MMTs. Oat stocks were down 20% at 2.9 MMTs.  The December 31st oat data was bullish with canola slightly bearish.

** Midday GFS South American Weather Discussion: The midday GFS is a tad drier with diminished rain chances across the southern 1/3 of Brazil. Northern Brazil has solid rain chances with 10-day totals of 3-7.00”. The rains should help finish off the soy crop and aid winter corn crop establishment. A drier forecast is offered for Argentina which is initially helpful to crops. No heat is expected across Argentina which will help preserve soil moisture. The Argentine corn crop is filling, and soybeans are blooming. ARC looks for the Brazilian soybean harvest to reach 25-28% through the weekend. The South American weather forecast is favorable for the next 2 weeks.

** 10 Day GFS Rainfall Forecast: 

** AgResource Market Analysis: Friday’s USDA Crop report will produce considerable market volatility with the focus on US corn/soybean yield, and 2019 winter wheat seeding. ARC looks for a positive report with the US corn yield being down 2-3 BPA and soybeans down .4-.6 BPA, while US winter wheat seeding is at a 110-year low – down 600-900,000 acres from 2018. The State of the Union address from President Trump will feature US Trade progress and a call for a new US infrastructure program. Good for raw material prices.

 

 

CBOT Mixed At Midday With China Booking Additional US Soybeans; Grains Try to Follow

Feb 4, 12:15 pm | Mid-day Commentary

** Sharply lower energy prices and a continued decline in world freight rates initially pressured CBOT futures amid a concern of weakening world economic landscape. However, news that China was back securing US cash soybeans at the Gulf/PNW rallied the CBOT at mid-morning. Wheat/corn followed to the upside.

  It should not be a surprise that China is back booking US cash soybeans with ARC hearing that China has purchased another 2-2.5 MMTs for June-September. This should be close to completing their Thursday promised purchase of 5 MMTs.

  The shipping period is later than Friday’s with the sales slated for the June-September time frame. And the sale is being split between the Gulf and PNW with the September purchases coming off the PNW. The Chinese cash demand is rallying CBOT and offering support to basis.  

  The grains are following the rally in the complex awaiting fresh export demand. Short covering heading into Friday’s USDA report is expected.

** CBOT brokers estimate that funds have bought; 3,200 contracts of soybeans, 1,200 contracts of corn while being flat in wheat. In soy products, funds have bought 2,000 contracts of soymeal and 2,700 contracts of soyoil.

 ** US weekly export inspections for the week ending January 31st were; 35.5 Mil Bu of corn, 35.8 Mil Bu of soybeans, and 16.2 Mil Bu of wheat. US corn and wheat exports were a tad disappointing. For their respective crop years to date, the US has shipped out 884 Mil Bu of corn (up 298 Mil Bu or 51%), 788 Mil Bu of soybeans (down 487 Mil Bu or 38%), and 545 Mil Bu of wheat (down 67 Mil Bu or 11%). The US soybean export pace is well below the WASDE forecast.

 ** Brazil has harvested 19% of its soy crop with variable yields amid the reduction of rain during December/January. This compares to 6% last year. Winter corn seeding has reached 35% and the area planted to corn is expected to expand via the earlier seeding date.

 ** USDA reported that 612,000 MTs of soybeans were sold to China during the current crop year. This sale reflects the cash buying that occurred on Friday.

 ** EU wheat exports of 9.4 MMT is down 27% vs last year’s 12.8 MMTs as exports continue to badly lag USDA’s forecast. The current pace of EU wheat exports argues for an annual total of 17.25 MMTs vs the WASDE forecast of 22.0 MMTs. With world wheat trade steady with the WASDE December forecast of 176 MMTs, the EU wheat export losses will have to be pushed to other destinations.

** Midday GFS South American Weather Discussion: The midday GFS is a tad drier with diminished rain chances across the southern 1/3 of Brazil. Northern Brazil has better rain chances with 10-day totals of 3-7.00”. The new N Brazilian rain should help finish off the soy crop and aid winter corn seeding. A drier forecast is offered for Argentina which is initially helpful to crops. Any heat will be centered on Northern Brazil where high temps reach the mid to upper 90’s. No extreme Argentine heat is foreseen, and the crop prospects here are vastly improved from last year’s dire drought. Confidence on a 55 MMTs plus Argentine soy crop is increasing.  

 

** AgResource Market Analysis: China has secured some 2-2.50 MMTs of US soybeans (this AM) which should take their total purchases since Friday near 5 MMTs. US soybean export inspections are abysmal and WASDE should cut the 18/19 US soy export estimate on Friday. Notice that March KC wheat is gaining on July as the spread narrows to 15.50 cents. US cash bids for HRW wheat are improving in the Plains. A close above $5.17 (100 day moving average) March KC is needed to confirm a new demand led bull market.