10/19/18

Morning Commentary - 10/19/2018

Nov soybeans are up 1.25 cents at $8.65, Dec corn is down 0.75 cents at $3.70 and Dec Chi wheat is down 1.0 cent at $5.12.

Good Morning! Markets have stabilized overnight as macro markets recover. Dow futures are up 100 points so far this AM, crude is up $.60/barrel at $69.25, and EU ag futures are all modestly stronger. The macro recovery has occurred in spite of weaker than expected Chinese economic data. A steady session is expected with funds leaning short corn, beans and Chicago wheat. On the week, corn is down 3 cents, CME wheat is down 6 and soybeans are down 2.

Chinese GDP in the third quarter grew by 6.5%. This compares to estimates of 6.6% and is the weakest growth since early 2009. China’s stock markets plunged initially overnight, but stabilized into the close. Still, the Shanghai index rests at a 4-year low. All indications point to US-China barriers remaining intact indefinitely, but the market will be watching to see if a slowing Chinese economy pressures officials there to resume trade negotiations?

The Central US forecast is wetter in the extended period. Confidence in the details is low, but the GFS this AM advertises another round of soaking rainfall across area east of the MS River beyond Nov 2. And the issue at hand in the near term is the lack of drying in beans fields. Cooler than normal temps are keeping moisture levels high. Bean harvest will be a slow process this year, with progress likely to reach only 45-47%. On average bean harvest is 75% by late October.

We also mention Brazilian soybean maintain a 26% premium to Gulf beans for Nov/Dec arrival. Current valuations thus fully account for China’s tariff.

Ukrainian corn is now the world’s cheapest for November following the recent plunge in basis there. Deferred Ukrainian offers are at/above US. Black Sea feed wheat prices have soared to new seasonal highs. But competition for nearby world corn trade has returned.

The EU/Black Sea forecast keeps meaningful rainfall into early Nov confined to a rather narrow band of far E Ukraine and far W Russia. Drought continues elsewhere in the Black Sea and in Western Europe. The South American forecast remains favorable wet in W Argentina the whole of Central Brazil.

Fresh input this week has been bearish on the margin, but we maintain a broadly neutral outlook. World wheat prices are firm.

EU/Black Sea Precip:

South American Precip: 

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