** CBOT Midday Market Comment:
** Mixed with improved volume has been the AM CBOT trade with corn, soybeans and wheat trading either side of unchanged. Early selling was noted in soybeans and soyoil with end users taking a more proactive position on covering their forward soymeal needs. And fund managers – staring at record short corn and wheat positions – are also starting to bank profits with new tax legislation ahead. Fund managers tell ARC that they are more willing to take profits on net short commodity positions with so much uncertainty surrounding how the Trump Tax will impact US economic and emerging market growth rates? ARC looks for a mostly firm CBOT close with funds likely to continue exiting their large net short grain positions into the New Year.
** CBOT brokers estimate that funds have bought; 2,100 contracts of corn and 1,400 contracts of wheat, while selling 1,900 contracts of soybeans. In soy products, funds have sold 2,400 contracts of soyoil & 900 contracts of meal.
** This week’s Texas Fed Cattle Exchange trade started at $120.00/cwt, which is basically steady. Sharply lower CME cattle trade is likely to cause cattleman to exit short hedges and try to sell cattle at steady values ahead of the holiday – if they can?
** The rumors continue to grow that US Biodiesel Tax credit may be reinstalled and retroactive for 2017. Sen Grassley continues to push the case for a biodiesel tax credit, and we give the odds at better than 50% that such a credit could be achieved in early 2018.
** There has been considerable talk in recent days about China wanting to assure soybean cargoes contain 1% or less foreign matter (FM). This talk actually started late last week. The demand for soybean cargoes (from any destination) with less than 1% FM is not new. The less FM, the better the crush margin and return. China’s Gov’t does not see a pyhto-sanitary issue with FM, it’s just that China is able to flex its muscle when it’s the world’s largest importer and it serves them. Often times, South American soy cargoes have as much or more than FM than the US, we doubt China’s demand for cargoes less than 1% FM has much CBOT market impact.
** US export sales for the week ending December 14th are estimated in a range of 500-575,000 MTs of US wheat, 1-1.3 MMTs of US corn, and 1.1-1.4 MMTs of US soybeans. US soyoil sales are pegged at 5-15,000 MTs and soymeal sales at 175-225,000 MTs. The US should enjoy a week of solid US grain/soy demand!
** Midday GFS Weather Forecast Discussion: The midday GFS is slightly drier than the overnight run, and again, continues to look a little more like the drier EU model solution. Notice that the US model is trying to form a T storm complex over Cordoba, which we suspect is in error this weekend. The model has difficulty in getting the exact intensity/location of these T storm clusters.
Our forecast focus remains the often more correct EU model for South America and a drier outlook for Argentina and S Brazil into the closing days of 2017. ARC notes that the January outlook is key with the bloom and pod formation period for the Brazilian soy crop taking place from early January into early March. Argentina is in more immediate need of rain and the weekend system offers the next best chance.
** AgResource Market Comment: US export demand is improving with US Gulf corn, soybeans and wheat now the cheapest in the world! ARC does not understand the soyoil price decline with the cash market firm and bio diesel demand expanding with the potential for a return of the $1/gallon tax credit? This is no place to make sales or turn bearish. CBOT downside price risk is limited and can be measured.
