1/8/19

Morning Commentary - 01/08/2019

Index Fund Roll Starts Today, US/China Trade Progress and Threatening South American Weather

** 6:30 AM CBOT Futures Are; March soybeans up 1.50 cents at $9.2575, March corn is up 1.75 cents at $3.84 and March Chi wheat is up 2.25 cents at $5.19.

 ** AgResource Morning CBOT Comment/Analysis: Good Morning! Moderate volume and mostly higher is the CBOT overnight. The market awaits news on the 2nd day of US/China trade talks while the South American weather pattern threatens to produce diminished crops in Argentina and Brazil.

  CBOT price trends are firm as traders debate as to whether China returns will secure US grain and other ag products in the wake of positive Beijing discussions? China booked some 1.0 MMTs of US soybeans yesterday and by ARC’s count, reached the long talked about target of 5.0 MMTs of Gov’t reserve buying. Rumors abound on potential US corn, wheat, cotton and US meat buying, but confirmation of the demand is awaited.

  Interesting is that China has approved 5 new varieties of GM crops including genetic material for soybeans, corn and canola.

The announcement of GM approvals comes as the US demands more agricultural imports into China amid worries about China’s prior phytosanitary barriers.     The media is reporting positive results of the US/China Beijing trade talks. However, it’s expected that USTR will offer their own press release to capsulize what was achieved in Beijing. The results of these negotiations will then be pushed up to the higher levels of each Gov’t with high hopes that a signed trade deal can be reached before March 1st

  On reducing the US trade deficit with China, ARC expects that like the trade talks back in May, China will agree to a sizable dollar amount of ag and energy to be bought annually. The list if ag products will be long, but China will have the latitude to secure what it desires. Amid the worsening African Swine Fever for its pork herd, US protein imports could be prominent.

  The Australian Bureau of Meteorology is forecasting an early demise of El Nino with cooling in the equatorial Pacific to cause neutral conditions by March or April. This means that other weather variables will drive world climate in the months ahead. This raises the US weather risk of drought.

  The South American weather pattern shows little change over the next 2 weeks with drought to impact NC Brazil while flooding rains drop across the northern third of Argentina. Crop sizes in both countries are likely to continue to decline into late January. Brazil’s CONAB will be out with their soybean and corn estimates on Thursday. ARC looks for a soy crop estimate around 118 MMTs.

  Index funds start their 5 day rebalance today and likely use TAS to limit the impact in the market. Index funds will sell moderate amounts of grain, while being modest net buyers of soybeans, but big buyers of soyoil.

  Any CBOT weakness should be short lived amid positive US/China trade talks and threatening South American weather. 

** Limited Snows and Mild Temps for the Central US into January 18th:

 

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