1/3/19

Morning Commentary - 01/03/2019

CBOT Focus on South American Weather and US/China Trade; Macro Market Worry

** 6:30 AM CBOT Futures Are; March soybeans down 1.25 cents at $9.0575, March corn up 1.50 cents at $3.7725 and March Chi wheat up 1.75 cents at $5.0875.

 ** AgResource Morning CBOT Comment/Analysis: Good Morning! CBOT futures are mixed overnight as the struggle between the bearish macro financial markets and bullish South American weather forecasts persist. The volume of overnight trade remains holiday reduced with traders slow to return to trading amid volatile and political markets in the New Year.

  The maker of IPhones – Apple – announced disappointing quarterly earnings and blamed a good portion of their performance on the slumping Chinese economy and the US/China trade skirmish. This caused an immediate slide of 8% in their (AAPL) stock price which pressured the DOW to a 300-350 point loss.

  The concern for a deepening economic China slide initially pressured a host of world commodity markets – including the energy, metal and the grain markets. The concern over global economic health is a real worry.  

The South American weather forecast offers an extended period of dryness for NC Brazil and too much rain for the northern half of Argentina. Both are concerning for South American crop sizes and further crop falls are expected.

  The Brazilian weather forecast is arid for 2/3 of their crop production area with rains of just .25-1.50” which is just 10-50% of normal. The areas impacted are; Goais, MGDS, Southern Mato Grosso, Sao Paulo and MGDS. Daily high temps will be above normal amid the drying soils with highs ranging from the upper 80’s to the upper 90’s. A Ridge of High Pressure across the area will limit rain potential through at least the next 2 weeks.

  A deep Trough of Low Pressure will produce flooding rains across Argentina with fresh totals of 4-10.00”. Such rain is falling on saturated fields will aggravate flooding concern. The heavy rain is forecast to be farther south this AM which will impact Southern Santa Fe and Northern Buenos Aires. The concern for Argentine crops will be rising over the next 2 weeks.

  ARC would also include North African wheat areas to monitor amid their lack of rain from late November thru December. The forecasts are arid into mid-January and wheat here is in need of rain as their reproductive phase nears.

  Active cash rumors that China booked another 1.4-1.8 MMTs of US soybeans will not be confirmed by USDA this AM. However, discussions are underway as to whether China will book other US ag goods including grains, rice or dairy?

  US fob corn/US fob SRW wheat are the cheapest in the world which should be bolstering export demand? Russian wheat fob offers for February is at $245/MT ($6.67/Bu) at a new high. US Gulf HRW wheat is $11/MT or $.30/Bu cheaper.

 There may be some macro selling amid the US stock market fall, but our bet is that any weakness will be short lived amid threatening South American weather.

** Warm with Limited Snows for the Central US For Another 2 Weeks: 

 

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