12/20/18

Morning Commentary - 12/20/2018

GASC World Wheat Offers Up $5.00 from Last Tender 10 Days Ago; South American Weather Improving

** CBOT 6:30 AM Grain Prices: Jan beans are up 2.50 cents at $9.025, Mar corn   is up .50 of a cent at $3.8225 with Mar Chi wheat up 5.25 cents at $5.2775.

 ** AgResource Morning CBOT Comment/Analysis: Good Morning! The overnight trade is mostly higher holiday reduced volume. Corn, soybeans and wheat have bounced following Wednesday’s decline as the market vacillates on Chinese demand and improving South American weather heading into the Christmas holiday.

 Egypt’s GASC is seeking world wheat for February. There were 8 offers to GASC with prices ranging from $246.40 to $255.00/MT. The cheapest offer was for a single cargo from Ukraine at $246.40/MT from Dreyfus. This price was up $5/MT from their last tender and the highest offer in 3.5 years. World wheat prices keep rising. ARC notes that there were only 2 offers of Russian wheat – Aston and one from GTCS which was the highest of all offers at $255/MT. ARC notes that none of the ABDC’s offered Russian wheat for 2nd tender in a row!

US HRW wheat was offered by Ameropa at $250.25/MT which is competitive with other world FOB offers. The cost of freight will not allow the US HRW to be included in a purchase, but as Black Sea wheat export supplies are nearly depleted, US HRW should start to work into future GASC business.

  Clients ask why US US SRW wheat was not offered as it is the cheapest wheat in the world? The problem is meeting strict GASC specs which limits the amount of US SRW that can work to the world’s largest importer. US Gulf SRW wheat at $223/MT fob is $23.40/MT below the lowest offer from Ukraine at $246.40. It’s the cheapness of US SRW to other world origins which will grow US wheat sales in coming weeks. It never pays to be short of the world’s cheapest wheat!  

  The South American weather forecast is improving with showers/storms expected to return to N Brazil mid next week while the wet areas of Argentina and S Brazil start to dry out. Rain is needed in NC Brazil after a month of dryness. Some producers claim irreversible yield losses which we would argue that these losses are offset by record yields in Mato Grosso. A record Brazilian soy crop of 121-123 MMTs is being made. 

  The Russian ag ministry and world exporters will meet on Friday AM. Russian cash wheat prices have soared on tightening supplies. 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? They will seek assurances from exporters or place duties in January.  

  Headline risk is in the forefront. China is still asking for offers on US soybeans and other ag products. The improved South American weather forecast will cap soy rallies while rising world wheat values press US wheat upwards.

 

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