12/12/18

Morning Commentary - 12/12/2018

US President Trump Exclaims that China is Buying Massive Amounts of US Soybeans: World Wheat Prices Rise

** AgResource Morning CBOT Comment/Analysis: Good Morning! CBOT corn, soybean and wheat futures are higher this AM as optimism expands that China is either buying or close to securing large amounts (5-8 MMTs) of US soybeans – and other ag products. US President Trump late Tuesday indicated that China was securing large amounts of US soybeans again. No cash confirmation is offered, but CBOT soybeans lead a rally with the grains in tow in moderate volume.

  And media sources indicate that China will also be securing not only soybeans, but also US grain. Traders assume that this implies US corn and wheat but no tonnage estimates are available.   

  CBOT traders are hungry to see actual cash demand from China and will be looking to cash market basis and/or sales announcements from FAS to confirm.

  The Trump Administration was willing to intervene for the release of Huawei CFO Meng should it become disruptive to the US/China trade talks. However, Canada released Ms Meng late yesterday under bail to China’s delight. Ms Meng’s release likely helps push ahead China’s purchase of US ag goods.  

  Egypt’s GASC was offered wheat this AM in a tender for Feb 1-10 shipment. The lowest offer was for one cargo of Romanian wheat at $241.26/MT with 6 cargoes of Russian wheat offered with prices ranging from $242.00-248.86/MT. One cargo of US HRW wheat was offered by Ameropa ex Houston at $254.50/MT.

  Interesting is that no US SRW wheat was offered which suggests that prior sellers are having trouble making the strict grade that Egypt’s GASC demands.

ARC notes that the GASC tender reflects that world wheat prices have risen $5-8/MT compared to their last tender of just 5 days ago! The tightening of world exporter supplies is starting to really have an impact on world wheat pricing.

  South American weather offers a drier forecast for the northern half of Brazil and heavy rain for Argentina/S Brazil over the next 10 days. Flooding rains have started to fall across Argentina which could produce low lying flooding. The excessive water could wash out some newly planted soybeans and produce quality/quantity issues for wheat. Argentine HRW wheat price offers are rising amid the quality concerns.

  The White House is said to be delaying the 2nd tranche of US Farm Trade Aid waiting to see the market impact of China soybean buying. ARC expects that the farm aid will be offered in the days leading up to the end of the year.

 When China is confirmed as buying US soybeans a market top should form. However, the wheat market has a bull story on firming fob prices and tightening supplies into new crop. 

** 15 Day Temperature Deviation and Limited Snows for the Central US into Christmas:

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