Morning Commentary - 01/11/2019

CBOT Firms on Long Range Threatening South American Weather; US and China to Meet in Washington at High Gov't Level

** 6:30 AM CBOT Futures Are; Mar soybeans are up 3.50 cents at $9.105, Mar corn is up 2.50 cents at $3.7875 while Mar Chi wheat is up 5.50 cents at $5.19

** AgResource Morning CBOT Comment/Analysis: Good Morning! CBOT overnight futures are firm on news that the US/China are preparing to get back to the trade negotiating table while adverse weather looks to stay locked across South America for another 2-3 weeks. Additional crop losses appear likely. The CBOT is expected to add weather premium to price heading into the weekend.

  Chinese Vice Premier Liu He – China’s top trade official – is expected to meet his US counterparts in Washington in late January to continue the push to resolve the festering US/China trade conflict. The high-level talks set for January 30-31st with USTR head Ligthizer and US Treasury Sec Mnuchin.

  There is some risk that the US Gov’t shutdown could delay the talks, but both sides expressed a desire to keep advancing positive trade negotiations. 

  And ahead of the talks, China could secure additional US ag goods.   China has secured an estimated 5 MMTs of US soybeans for their reserve, but it’s widely expected that China’s shopping list also includes US corn, wheat, sorghum, DDGs, cotton and US pork. There were rumors late Thursday that China may have booked a few cargoes of US DDG’s, but confirmation is lacking this AM

  The CBOT will continue to monitor cash/futures activity for new Chinese buying. The hope is that at end of successful negotiations, China will pledge a huge US dollar to secure sizable amounts of US ag and energy goods annually   Overnight, China raised their 2018 corn production estimate to 257.3 MMTs – up 42.3 MMTs from last month’s 215.0 MMTs. China also raised their corn demand to 285.3 MMTs, leaving a corn deficit of 26.5 MMTs vs the prior deficit of 33.3 MMTs. China left its soybean import estimate at 83.6 MMTs with a comment that domestic soymeal demand was in decline due to African Swine Fever and falling levels of protein within animal feed. 

  The South American weather pattern shows little change over the next 2 weeks with deepening heat/dryness to impact NC Brazil while flooding rain batter the northern third of Argentina. There is no evidence of a pattern change and the EU weekly weather forecast released late Thursday showed a continuation of the existing adverse weather pattern into Feb 5th. Additional crop losses are expected amid the stagnant hot/dry Brazilian weather pattern.

  South Korea purchased 66,000 MTs of optional origin corn overnight. US export sales data is not available, but when the US Gov’t reopens its expected to be huge as 3 weeks of active demand are combined. ARC notes that the price of US HRW wheat vs Russia fob price offers is at a historically wide discount.

  It’s AgResource’s view that CBOT breaks will be short lived/shallow on adverse S American weather amid the potential for new Chinese ag demand. Don’t sell a break. 

** US Weather Forecast Looking Colder with Better Snows Across Central Areas: 


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