Morning Commentary - 12/27/2018

CBOT Firm on Recovery; Pending Trump Actions Against China Worrisome for Trade Deal

** 6:30 AM CDT CBOT Prices; March soybeans are up 4.50 cents at $8.875, March corn is up 2.00 cents at $3.7525, and March Chi wheat is up 1.00 cent at $5.11  

 ** AgResource Morning CBOT Comment/Analysis: Good Morning! The overnight CBOT markets have been firm on short covering related to the DOW surging over 1,000 points to its biggest one-day gain in history. The heady rally sparked short covering in a host of commodity markets – including the grains. The question for today is whether the CBOT rally can be sustained?

  A newswire is running a story that Mato Grosso Brazil could witness reduced soybean yield due erratic rainfall. Yet, ARC Brazil Mato Grosso producer sources are optimistic of record yields with early harvest data pointing to a record large crop. Its expected that CONAB will raise Mato Grosso soybean yield and production in their January crop report while trimming others.  

  If there is a Brazil yield drag due to December dryness its Parana and MGDS.  Rainfall here has averaged just over 60% of normal which could trim soy yield potential. However, amid the recent rainfall and the better rain in the forecast, yield losses are not expected to be substantial. Nonetheless, the regional dryness could limit the ’19 Brazilian soy crop to 122-124 MMTs.

  The overnight weather models indicate favorable weather pattern for most of Brazil with near to only slightly below normal rainfall in the next 2 weeks. The best rain chances are across the north in Mato Grosso with reduce totals over the far southern state of RGDS. Temps will be warm into the weekend before cooling with the 14-day period to average out slightly above normal.

  Argentina will endure above normal rainfall for the next 2 weeks. T-storms produced rain totals of .5-2.00” overnight. Another 3 systems are expected which will cause low level flooding and washout of newly planted soy along with producing quality concern for the 30% of the unharvested HRW wheat crop.

 The US Dow is expected to open 250-300 points lower on news that US President Trump is likely to sign an executive order in early 2019 that would declare a US National Emergency and bar US companies from using telecommunication equipment from China’s Huawei and ZTE corporations. The new US political rhetoric against China’s biggest hardware sellers is concerning for a US/ China trade deal. And time is running short before higher tariffs are enacted.

   The Russian Gov’t has decided to ONLY pay transportation costs from Siberia into other more western Russian locations for domestic grain use. No transit will be paid for wheat/barley export. The SE Russian wheat export corridor is already short of wheat, and the news likely further slows Russian exports going forward. And export phytosanitary certs are also being delayed by weeks.

 Buyers will be waiting for the New Year amid the new US/China trade concern. With a record large Brazilian soybean harvest looming, ARC doubts that March soybeans can sustain a rally. 

** US Warm East and Cold West into mid January: 

** Snows Stay Out of the Midwest Next 10 Days: 

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