KC wheat has been the upside CBOT leader with double digit gains tied to historically low crop ratings and ongoing forecasts of dry S Plains weather. Corn and soybeans have followed with volume in retreat at midday.
Funds have returned to the buy side of the CBOT with trade worries lessened this AM as the Trump Administration is calling for an early settlement of NAFTA. Most ARC sources have no knowledge of how NAFTA can be completed in just 2 weeks and why the rumored location of the talks would be in Peru?
There is still a lot of ground to cover on NAFTA and although hope is high that a deal can be cut, the political antics of involving the US President in negotiations could prove risky.
ARC continues to be concerned about the US’s more protectionist trade policy and the retaliatory impact on US agriculture. China has yet to announce retaliatory measures for the proposed $50 Bil of US trade tariffs (tied to China’s theft of US intellectual property). ARC notes that China has a history of making US retaliatory trade announcements on the weekend. The US is expected to release its Chinese product tariff list on the weekend.
CBOT brokers report that funds have brought 4,000 contracts of corn, 6,000 contracts of soybeans, and 4,000 contracts of wheat. In KC wheat, funds have added to a record long position by 4,000 contracts. ARC notes that KC wheat has blown above its 50 and 200 day moving average which triggered the strong fund buying. Also, funds have bought 3,400 contracts of soyoil and 2,200 contracts of meal. May soyoil has pushed above its 50 day moving average.
The South American midday forecast offers soaking rains to portions of the Argentine ag areas that have been besieged by drought for months. Rains of .5-2.50” are offered over the next 10 days, which is likely the start to a return of a wetter pattern going forward. The rain comes too late to help summer row crops, but it would help re-moisten soils ahead of winter wheat seeding.
There is much discussion on delays in Midwest corn seeding due to cold/wet weather. However, it’s too early to make any broad calls on either a reduction of US corn yield or planted area. Such a call for either can’t be made until early May. ARC would remind clients that US farmers have been able to plant as much as 40% of the US corn crop in a single week. One should closely watch Central US weather, but it’s far too early to discuss a cut in 2018 US corn production on weather.
Black Sea wheat traders are wondering what is up in Chicago as their prices seasonally slide. The US Plains drought is back in focus and the AM rally is more about fund demand as key technical resistance has been exceeded.
Midday GFS Weather Model Update: The forecast is little changed from the overnight run with cold fronts passing through the Central US with regularity producing moderate rains for the Delta and the Tennessee Valley, and below normal temperatures. The midday GFS is slightly farther north with rain when compared to the EU model, and cooler in the 11-15 day period. There could be a few days of warmer temperatures during mid April, but the overall trend one of below normal temps with a NW upper air flow. Any spring seeding effort will be delayed due to the chill and frequent rains east of the Miss River. It’s too early for any undue concern for US corn and soybean seeding, but the trend of cold temps and dry west and wet east (Central US) is worrisome.
AgResource Market Comment: It’s a wheat day with futures sharply higher on chart buying. Trade concerns will cap CBOT rallies later in the week while Central US weather supports breaks. Our view is to look to buy the break in soymeal, corn and KC wheat. There is no meaningful rainfall offered to the Western Plains wheat over the next 2 weeks.
