Morning Commentary - 01/04/2019

CBOT Adding Weather Premium For South America Amid US/China Trade Hope

** 6:30 AM CBOT Futures Are; March soybeans up 3.25 cents at $9.16, March corn up .75 of a cent at $3.805 and March Chi wheat up 4.00 cents at $5.1675.                                                           

** AgResource Morning CBOT Comment/Analysis: Good Morning! CBOT futures are higher overnight as world equity markets try to mount a recovery and South American weather worries grow. The USTR delegation will be heading to China on the weekend for trade meetings with China in Beijing next week. A firm day is expected heading to the weekend as the CBOT adds risk premium to price.

  The long-range EU weekly weather forecast models that came out late Thursday afternoon offered no change in the existing pattern of dryness for NC and NE Brazil while excessive wet weather persists across Argentina for the next 3 weeks. South American corn/soy crop sizes are in decline in this “stagnant” weather pattern.

  The 10-day EU and GFS weather models offer a lingering Ridge of high pressure Ridge across NC Brazil with a low pressure vortex across Argentina.

Rainfall totals will range from just .50” over NE Brazilian crop production areas to 2.50” to S Mato Grosso over the next 10 days. This is equating to a general 7-55% of normal rainfall, which along with 90-degree temps will accelerate the decline in NC and NE Brazilian soy moisture.

  The best Brazilian rains will drop across RGDS and crop areas south of Central Parana. Crops here are well watered and will enjoy seasonal temps.

 A deep Trough of Low Pressure will produce flooding rains across the northern third of Argentina with totals of 6-10.00”. Such rain is falling on saturated fields and will aggravate low lying flooding. Potential flooded crop areas include the northern half of Santa Fe, Entre Rios and Northern Cordoba.

  South American crop sizes are in decline and traders will be closely watching to gauge if there is any change in the weather pattern? The adverse S American forecast will place a bid under the CBOT on any intraday weakness.

  China’s Central Bank lowered their bank lending reserve overnight to allow their banking system to lend an additional $116 Billion. This was the 5th cut in the past year as China tries to bolster support for its economy.

  China’s Commerce Ministry confirmed that it would hold trade talks with the US in Beijing on Jan 7-8th in the first face-to-face trade discussions since June. The Chinese announcement fanned a recovery in Asian equity and energy markets. US traders continue to speculate on China will make additional US energy or ag purchases ahead of the meeting as a goodwill gesture.     

  The US Labor Dept will be releasing its Dec Jobs Report this AM (+177,000 jobs expected) with Fed Chairman Powell speaking later today in Atlanta. Macro financial markets will have lots to news to chew on into the weekend.

  ARC looks for a firm Friday as grain trends shift to a more bullish chart posture.

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