1/2/19

Morning Commentary - 01/02/2019

CBOT Starts 2019 Steady/Firm Watching China and South Amerrican Weather; US Wheat is Cheap

** 8:30 Pre Opening CBOT Calls Are; Soybeans 1 cent lower to 3 cents higher, corn steady to 1 cent higher with wheat called 1 cent lower to 1 cent higher.   

** AgResource Morning CBOT Comment/Analysis: Good Morning! CBOT futures are called mixed to higher to start the New Year. Concerning South American weather will battle the macro financial markets on the opening.

  The DOW is off over 250 points with crude oil lower on weakening world economic growth prospects. China announced new manufacturing data which suggests that their economic outlook continues to cool. This has allowed the start of 2019 to be similarly weak to prior weeks in terms of financials.  

  Commercial traders are on alert for China demand as the US delegation heads to Beijing. Rumored demand is for 2 MMTs of soybeans (to get to 5 MMTs) and may also include US corn and wheat. Grain tonnages are not known, but everyone is watching cash market with the USDA shuttered by the US Gov’t closure. The odds are high that the USDA January Crop report will be delayed.

  World wheat fob offers are returning in the New Year. Most are steady to firm from where they ended trading prior to Christmas. US Gulf wheat offers have fallen sharply during the holiday on fund selling. Russian February wheat is offered at $242/MT vs the US Gulf $232/MT for HRW. The $10.00 discount of US Gulf HRW wheat to Russian offers is at its weakest level in 4 years.

  US SRW wheat at $222/MT is the cheapest wheat in the world by a wide margin. French wheat at $240/MT is $18/MT more expensive. The cheapness of US wheat relative to the world marketplace is expected to underpin US wheat futures.

  Brazilian weather forecasts have shifted to a much drier profile over the past 48 hours as the mid December pattern returning. The forecast models for Brazilian rain have been underperforming and crop concern for Central Brazilian corn/soybeans is real. Brazilian soybean and corn crop prospects are in decline and one has to be thinking about seeding their winter corn crop in less than ideal soil moisture (should the dry pattern persist into February).

  The other weather extreme is Argentina. The northern third of Argentina is expected to see flooding rains of 4-9.00” over the next 10 days. Soils are already saturated and the new upcoming rain is going to produce low lying flooding. The pattern shows no sign of change with additional heavy rain offered during the 11-15 day period.   

 India lowered their crude palmoil import tax from 40 to 44% with refined palm products cut to 45% from 54%. The import duties are still high and won’t allow a substantial recovery in India’s import pace.

 Ethiopia has announced a tender for 400,000 MTs of wheat for February/March.

 ARC’s concern for South American weather increased over the holiday with too little rain for Brazil and too much for Argentina. This will underpin the CBOT. And traders are watchful for Chinese demand that could develop either right before or during the US/China Beijing summit. 

** Warm Central US into Late January; Snows Limited for the Central US: 

 

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