CBOT Weakens on Fund Selling; Concern for US/China Trade Talks

Jan 29, 11:13 am | Mid-day Commentary | Share this:

** Lower has been the CBOT theme this AM. Corn/wheat failed to sustain overnight gains while the soy complex tries to push lower without conviction. Private Brazilian soy crop estimates are in decline and hedge fund managers argue that if the US/China can continue to make progress on trade and IP/IT issues, that China’s Gov’t could return for the purchase of US soybeans.   ARC argues that it would be US grains/other ag products that would be on top of China’s shopping list. The key here is that the US/China need to score enough progress to keep the talks going beyond March 1st. It’s the US/China trade talks and hope for progress that will determine late week CBOT prices.

 ** CBOT brokers report that funds have sold 4,900 contracts of wheat, 7,200 contracts of corn and 3,000 contracts of soybeans. In soy products, funds have sold 1,300 contracts of soyoil and 600 contracts of soymeal. 

** Bitter cold across the Central US and minimum temps of 0 to -15 degrees will produce winterkill risks for HRW/SWR wheat in the southern half of the Midwest, the eastern half of Nebraska and NE Kansas. The dramatic cold followed by and equally dramatic warm-up this the weekend, and secondary cold surge in early February looks to stress US winter wheat. Amid US winter wheat seedings at a 110 year low with crop condition ratings well under average heading into dormancy, the outlook for US ‘19 winter wheat yield is questioned 

** Jordan finally booked 120,000 MTs of HRW optional wheat for April at a price of $271.50/MT. The price allows for US HRW wheat to be a source of supply, while rising Russian wheat prices makes their wheat doubtful. Russian fob price offers are tough to uncover beyond March, but April offers range between $255-258/MT. Russian forward offers takes Russia out of the world market and makes their export estimates of 36-37 MMTs doubtful

** Argentine fob corn offers have fallen below the US through June which is likely to end the US’s hold on world corn trade. US June FOB corn is offered at $170/MT with the US Gulf at $176/MT. On a spot basis, Argentine corn is offered $1/MT cheaper at $173.00. The Argentine export competition will make it difficult for WASDE to raise 2018/19 US corn exports.

** GASC purchased a combination of Romanian and French wheat in their latest tender for March shipment. The Romanian sale cleans up their old crop offers.

** Freight offers to GASC were down sharply from their last tender which masked the gain in fob price offers. The world wheat market keeps rising while Chicago has held unchanged or is lower. The rising world wheat market limits the downside price risk in US futures –  the AM break is a wheat bear trap.  

 ** Midday GFS South American Weather Discussion: The forecast is wetter than the overnight run. The pattern of a high-pressure Ridge across NC Brazil and a low-pressure vortex across Argentina persists this week. However, a weakening and eastward progression of the Ridge offers a pattern change on the weekend. The jet stream lifts northward and confidence in normal N Brazilian rainfall and less Argentine rain is growing. The attached rainfall map shows that better rains seep into EC Brazil beyond the next 6 days. This drier trend for Argentine weather is welcomed.


** AgResource Market Analysis: Russian interior and export wheat offers keep rising which has pulled this key supplier out of world trade. Corn is a follower while improving South American weather looks to cap soybean rallies. ARC favors the purchase of KC March wheat and corn on fresh weakness.