March 22, 2019 Comments per MIDCO
Good morning. Talk that China will buy U.S. corn has lent additional support to grains overnight while soybeans have sagged a bit lower on a lack of demand. A team of U.S. negotiators is traveling to China this weekend for another round of trade negotiations next week. In a television interview aired today, President Trump said that a trade deal with China “will probably happen”. Analysts are conjecturing that China will make U.S. corn purchases as a good faith sign that they hope would cause President Trump to drop the threat of continuing tariffs on Chinese imports until it was clear that China will abide by the terms of any deal that is worked out. Thus far, there hasn’t been any confirmation of Chinese corn purchases. A news story overnight stated that 10 to 15% of U.S. ethanol production has been shut down due to flooding. The western flooding has disrupted transportation with roads and rail beds washed out in parts of Iowa and Nebraska. Spot basis levels at a number of corn and soybean plants in this region have spiked higher this week. Even through the flooding in the west is severe, it doesn’t look like the Mississippi from St Louis southward will experience major water rises (see chart below). Funds retain large short positions (currently estimated at 224,000 corn, 81,000 soybean, and 62,000 Chicago wheat). Would an announcement of corn sales spook them into a short-covering mode? We may find out over the next few days. Have a good Friday and great initial spring weekend!