Markets Little Changed, Await News From Beijing

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

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.