Morning Commentary - 12/19/2018

CBOT Mixed In Holiday Thin Volume; Waiting for China Demand News

** CBOT 6:30 AM Grain Prices: Jan beans are up 1.00 cent at $9.0875, Mar corn   is down 1.0 cent at $3.845 with Mar Chi wheat down 5.75 cents at $5.27.

 ** AgResource Morning CBOT Comment/Analysis: Good Morning! Mixed and low volume has been the overnight CBOT trade with corn, soybeans and wheat trading either side of unchanged. Wheat has come under selling pressure this AM amid chart-based considerations while the soybean market awaits announcements of additional US soybean sales to China. Corn is caught in between.

  Cash traders report that China was back as a significant buyer of US soybeans on Tuesday with new interest being noted this AM. USDA has confirmed US soybean sales of 1.5 MMTs to date, with many still expecting that China’s total purchase package for their soybean reserve will reach at least 5.0 MMTs before March 1st. A mixture of old & new crop soybean purchases is expected.   China is also expected to be buyers of US grains at some future point.

The US Central Bank is expected to raise the fed funds rate this afternoon with a .25% bump to 2.5%. The key to the markets will be the “fed speak” that follows and how many more times the Fed will raise US interest rates in 2019?

  The South American weather forecast is improving with showers/storms expected to return to N Brazil next week while the wet areas of Argentina and S Brazil start to dry out. The December NC Brazilian dryness has halted the talk of an ever larger 2019 soybean crop. CONAB estimates for their January report are likely to range from 121-123 MMTs which is still a record large crop, but not the 125-129 MMTs that was talked about in November.

  Russian cash wheat prices have soared as record large July-December exports and a smaller 2018 harvest collide. The Russian Govt have asked exporters to pledge that they will not exceed preordained individual export tonnage levels that collectively amount to 33-34 MMTs. The key question for the Russian Gov’t is whether they trust this new program will work, or do they need to place some sort of restriction on exports like they did in December of 2014 in a duty? Russia has to publish any export restriction in their register for 30 days so if a decision is to be made it likely will develop on Friday or in the January meeting.The weak ruble makes the Russia Gov’t decision more important!

  FAS will release their weekly export sales report on Thursday. The report is expected to feature large US soybean sales with US corn/wheat sales also being solid. ARC sees the report as being supportive to the CBOT later today.

  Headline risk remains in the forefront. ARC doubts that the wheat bears will be rewarded on this break amid rising world FOB prices. The improved South American weather forecast will cap soybean rallies, while the corn market awaits likely buying of US corn by China. Don’t chase rallies or sell breaks!


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