By Steve Freed
Soybeans, soyoil, soymeal, corn and wheat traded higher. US stocks, Crude, coffee, sugar, cotton and hogs also traded higher. Most contribute the strength in markets to hope US and China can come to a trade deal. USTR trade office confirmed China has pledged to buy a substantial amount of US Ag, energy, manufactured goods and services from the US.
Talk of the potential for a US trade deal with China is helping prices. Talk of a lower 2019 Brazil soybean crop may also be supportive. SH needs to trade over 9.30 to push the momentum higher and add new fund longs. Most feel that China has bought 5 mmt of US soybean for their reserve. This could drop the US 2018/19 soybean carryout from 955 to 775. Some have lowered the Brazil 2019 soybean crop to 116 mmt vs USDA 122. Same group could see the crop drop to 111 if Feb weather is drier than normal. This could help erase the entire increase in the USDA 2018/19 World carryout to near 115 mmt vs 101 last year. New China export bid is helping the US domestic basis. This is also increasing demand for crusher ownership.
Corn inched higher and over key moving averages. Momentum of the market points higher. Managed funds continues to be net long futures. Commercials continue to be large net shorts in the market with US farmer a willing seller on rallies. Support may be coming from higher financial and energy markets. Talk of a potential trade deal between US and China is helping commodity prices. There is some talk that China has agreed to buy substantial amount of US Ag products that could include corn, ethanol and pork. Domestic cattle feeders have firmed their basis to get more ownership. Lack of USDA export news/data keeps the market blind to new business. US weekly ethanol production continues to drop. Stocks were unchanged to slightly higher from last week and are above last year. Margins remain negative. Dryness across parts of central and north Brazil could lower their 2019 corn crop. Wet weather in Argentina could also lower their 2019 corn crop. Market bulls may have been looking for USDA to lower US and World corn supply on their Jan report. Report is delayed due to ongoing partial shutdown of the US government.
Wheat futures traded higher. Talk of new export business to Algeria, Tunisia and Egypt may have offered support. US may have sold some HRW to Algeria. Algerian prices may have been near 3 year highs. Higher financial, energy and soft commodity trade and lower US Dollar may have also supported prices. For the most part managed funds are net even Chicago wheat. Large global wheat supply, higher US Dollar and concern over slower global economy due to trade wars has limited managed funds interest in being long wheat. Higher Russian export prices may be offering support to prices. An US and China trade deal could help global economy and trigger new fund buying of commodities. Talk that US Fed may lower interest rates in 2019 is weighing on the US Dollar and could also help commodity prices. There will be no USDA Jan 11 report but some feel US farmers may have planted a record low amount of US 2019 winter wheat acres.
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