Morning Commentary - 12/21/2018

CBOT is Mixed on Improving South American Weather; Will the US Gov't be Shut Down on the Budget Dispute?

** CBOT 6:30 AM Grain Prices: Jan beans are down 2.00 cents at $8.915, Mar corn is up 1.50 cents at $3.7675 with Mar Chi wheat down 4.50 cents at $5.1875 

** AgResource Morning CBOT Comment/Analysis: Good Morning! Mixed in rather average volume are CBOT prices overnight. Corn has been firm following Thursday’s lashing while wheat and soybeans retreat. The South American weather looks much improved while traders await the exact details of a meeting of the Russian ag ministry and exporters.

  China indicated overnight that the US was “selfish and arrogant” after it charged 2 Chinese citizens for hacking and stealing sensitive information from the American Gov’t and other corporations. China indicated that it had no relationship to the individuals and they did not campaign on behalf of China’s main intelligence agency.  

  At the same time, China promised lower taxes for small manufacturing business and entrepreneurs to support faster economic growth. China’s GDP for the past quarter was only 6.5% and the govt is trying to boost economic sediment amid the global rout in US/world equity prices. 

  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. AgResource would argue that these losses are offset by record yields in Mato Grosso. A record South American soy crop is in the making amid the favorable weather outlook.  

  The trade is awaiting details of a Russian ag ministry meeting. Traders expect that the Ag ministry will make sure that exporters are following their pledges to limit export tonnage sales to a fixed total. Russian interior wheat prices continue to rise and are reaching levels that the Gov’t views as inflationary. The declining Russian ruble is only making matters worse. The Russian Gov’t has the structural means to slow wheat exports via interior logistics or the slowing the issuance of phytosanitary certs to make sure that it exports no more than 33-34 MMTs.

  The US Gov’t is careening to a shutdown following President Trump’s demand that Congress fund “The Wall”. The House included funds for over $5 Bil while the Senate will take up the issue today. If the US Gov’t is shuttered, there is a risk that daily/weekly export sales reports will not be released. And if the shutdown lasts, it could impact the release of the January Crop Report.

  ARC looks for a two-sided session with improved weather capping rallies in soybeans while KC March wheat holds against $5.00-5.05 on rising world prices.

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