10/11/19

Morning Commentary - 10/11/2019

CBOT Rallies Ahead of Trump/He White House Meeting - Trade Truce?; Extended Range 10-15 day Central US Forecast is Wet - Slower Harvest

** AgResource Farm Marketing Advice for Friday: 1/ Corn Producers: Hedge 20% of the 2021 corn crop at $4.24 basis Dec 2021 corn futures. This would price 60% of the 2021 corn crop.   2/ Soybean Producers: Hedge 20% of 2021 soybean production at $9.63 basis November 2021 futures.

 ** 6:30 AM CDT CBOT PricesNov soybeans are up 10.00 cents at $9.335, Dec corn is up 4.00 cents at $3.8425 with Dec Chi wheat up 2.50 cents at $4.955.

** AgResource Morning CBOT Comment/AnalysisGood Morning! Optimistic comments from President Trump regarding the state of US/China trade talks has sent world financial and commodity markets higher overnight. Moreover, the EU and the UK held constructive meetings that may lead to a Brexit pact which has rallied the UK’s currency – the sterling - to sharp gains. A calming of world financial trade/political risks is bullish across the financial markets.

The China Daily is reporting that a US/China partial trade deal would benefit both sides and that Washington should take the offer on the table.

That offer is uncertain, but it was rumored on Wednesday that the “pause pact” would likely include US ag purchases. There are rumors that the truce could demand that China secure 15-25 MMTs of US soybeans and sizeable amounts of US pork. ARC notes that the USDA confirmed the purchase of 142,000 MTs of US pork on the weekly sales report, a record one-week China purchase. No time- frame is being mentioned for the truce or when commodities must be secured?

The US & China are also likely to announce a currency pact but look to avoid a complete trade deal that would include the sticky issues such as; IP protection, opening markets, state subsidies, and China’s 2025 economic plan.

The US/China trade talks are still ongoing, but the markets will look to this morning’s meeting between US President Trump and China Vice Premier He with optimism that the US will take China’s interim “pause pact” offer.

ARC notes that if China were to secure additional US soybeans, it will just replace sales from South America. Total China soy imports are not likely to increase and will be lowered via ASF, they just will just include the US. Thus, the truce headline rally should place a temporary top in the CBOT with Brazilian premiums under pressure in coming days if a deal is reached.

If China were to secure US meats, ethanol, grains or other ag products, they would be additional and bullish. Uncertainty in what goods will be included in China’s ag purchase list will hold sway for the CBOT/CME today.

Snow is falling across the Dakotas with a wintry shock to crops with accumulations of 2-8” and lows ranging from the 25-31 degrees.

The Central US weather forecast offers additional snow for North Dakota with additional accumulations of 4-12.00” thru the weekend. A frost/freeze will impact much of the NW Midwest including MN/IA and WI. The remainder of the Midwest will frost free and crops here will continue to mature.

The forecast offers warming temps and a few days of dry weather, but the 8-14-day period is wet thereafter as another PNW storm system invades the Midwest with a deep feed of upper air moisture. Harvest progress will be slow.

The South American weather forecast offers additional Brazilian rains with time and is favorable.

Clients should be preparing to use a China CBOT rally for new sales.

** North American Weather Pattern Discussion: The EU and GFS models remain in broad agreement on Central US weather over the next 10 days. The differences in the 11-15 day period have been worked out in favor the EU model’s wet outlook for the Central US. A second strong storm system with a feed from a tropical storm system in the Pacific look to produce another round of heavy Midwest rain. This will exacerbate the slow Midwest harvest.

Snows are flying across the Dakotas as a surge of cold Canadian air has pushed south and east. The cold Canadian air mass has ended the growing season across the NW Plains with lows of 25-31 degrees. The frost/freeze will impact MN, WI and a portion of IA this weekend. The EU model 10-day snowfall forecast calls for totals of 4-18” across N Dakota. Thankfully, the snows won’t last long with warming temps/rain next week, but low-lying flooding will be an issue.

Outside of the NW Midwest, the rest of the area will stay frost free into late October. Temps will start to warm again next week but storm systems will pass eastward every 3-4 days which will keep the harvest slow in the Upper Midwest. As mentioned, the 11-15 day period looks particularly wet for the W Midwest.

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