Morning Commentary - 01/14/2019

Markets Start Weak Lower on Moderate Rain in Brazil

6:30 AM CBOT Futures: Mar soybeans are down 6.25 cents at $9.04, Mar corn is down 1.0 cent at $3.7725 while Mar Chi wheat is down 4.0 cents at $5.155.

Good Morning! CBOT markets begin the week lower on another round of raw material selling and as the major forecasting models add scattered showers to Central Brazil next week. Most commodity markets are a bit weaker, with crude down $.40/barrel and European grain futures trading €.75-1.25/MT lower.

China’s total exports in December total $221 Bil, a surprising decline on the month and down 4% on Dec of last year. This was not at all expected by the marketplace, with industry estimates placing China’s Dec exports up 2% on the prior year. China’s trade surplus remains large, but the slowing of key economic data suggests the trade spat is having an impact and the lack of Chinese growth is weighing on the world economy as a whole.

China’s Vice President Liu is scheduled to visit DC on Jan 30-31. China’s Lunar New Year holiday begins Feb 5th. It’s hoped that concrete progress will be revealed prior to the holiday, as China will but shutdown into mid-Feb.  

The US government remains partially closed. Both sides over weekend seem firmly entrenched on funding the border wall. Recall the USDA in December stated that when funding resumes, it would then announce when key January data would be released. As such, it’s likely very late Jan at the earliest when the market will have access to US stocks, yield and export data. The lack of export news is frustrating for grain markets. US wheat and corn have both been offered at highly competitive levels. We suspect demand has been elevated, but how it compares to the pace needed to meet USDA forecasts is unknown?

The EU and GFS operational models have added moderate – but scattered – showers to Mato Grosso do Sul, Mato Grosso and Goias in the 6-10 day period. Totals there look to range from .50-1.50”. Any rain is welcome, but whether this forecast verifies is most important. Bias-corrected forecasts maintain near complete dryness in C Brazil over the next 10 days. We also mention that expansive high pressure Ridging will stay intact aloft Brazil, and so the general upper air pattern will go unchanged through much of January. Some weather premium may be extracted, but the forecast still implies net soil moisture loss in the near term.

The US is wetter and potentially much colder Jan 20-23. A major snows storm is forecast to impact the E Plains and bulk of the Midwest. Snow accumulation upwards of 15+” is offered to IL, IN, OH and PA.

Choppy trade continues without gov’t data. Don’t chase breaks amid ongoing US-China trade talks and the need for soaking rainfall in Brazil.

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