11/15/18

Morning Commentary - 11/15/2018

Soy Leads Overnight Rally; US, China Show Hints of Negotiation

6:30 AM CDT CBOT Prices: Jan beans are up 10.25 cents at $8.9375, Dec corn is up 2.25 cents at $3.6925 while Dec Chi wheat is up 5.0 cents at $5.08.

Good Morning! Ag markets are higher, with soybeans taking the lead on talk of more US-China trade dialogue. There are reports that China has submitted in writing a response to US demands on trade. This has occurred in the context of US Treasury Secretary Mnuchin talking to Chinese officials recently, and of course Trump’s planned meeting with President Xi at this month’s G20 meeting. Rhetoric is improving, but assigning probability to an actual deal is difficult.

There are also reports indicating US Treasury Undersecretary talked with lower ranking Chinese officials on Tuesday. 

Saudi Arabia this morning is seeking 475,000 MTs of high protein milling wheat for Jan-Mar delivery. US wheat is competitive on a fob basis, and is nearing parity with Black Sea origin on a C&F basis for Feb/Mar. The real issue for Saudi Arabia if it chooses Black Sea origin is the risk of Russian government intervention. It’s also getting more and more difficult to source high quality interior wheat in Russia. Saudi Arabia’s tender closes Friday.

There’s an otherwise lack of fresh input. The Argentine forecast is favorably drier through the next two weeks. Spotty showers will at times impact Cordoba and Buenos Aires. Excessive totals are not indicated and a lack of rain is noted between now and the middle of next week. The Buenos Aires Grain Exchange this afternoon will update planting/harvest progress and crop condition ratings. The response to recent flooding in N/NE Argentina will be most important in today’s release.

The EU & GFS models remain at odds in the Black Sea. The GFS is still much wetter in key winter wheat areas there, with potentially heavy snow to fall in the 8-15 day period. The EU model keeps rain/snow limited to trace amounts through the end of the month. The GFS expects this wetter to begin Nov 22-23, and so forecasts early next week will be important.

Spot crude is up $.10/barrel ahead of this morning’s weekly EIA report. Dow futures are up 50 points. EU milling futures are flat.

NOPA should reveal a record Oct crush rate later this AM. Whether corn & wheat export sales improve again will be key Friday.

It’s tough to be bearish until there’s clarity on US-China trade and following fund liquidation in KC wheat. 

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