Good Morning,

Markets are neutral this morning after trading lower overnight. Corn is down 1 and soybeans are up 2 at this time.
Traders continue to monitor Chinese movements as they continue their buying spree of U.S. Ag commodities. The U.S. Trade Representative’s office stated at the end of last week that Chinese purchases to date for the current calendar year total near $23 billion, which is near two-thirds of the phase-one trade agreement for 2020. It still doesn’t mean that all those purchases will be shipped and most likely will not. But it does mean that we could still reach record levels for the current year.

Strong soybean demand is already a known factor, with the possibility of more demand in early 2021 if Brazil’s export season is delayed due to late planting. Soybean planting progress in Brazil is at 24.3% as of Friday, up from 9% the previous week, but down from 30.7% the previous year. Mato Grosso is a key production state for both soybeans and for safrinha corn to follow the soybean crop. Planting progress there reached 31% as of Friday, up from 0.5% the previous week. Soybean demand could also end up being much stronger in early 2021 if La Nina results in a hot dry summer for Argentina and southern Brazil.

But traders are also watching China’s corn market, which saw cash prices top $10 per bushel in southern areas of the country last week amid tight supplies. Farmers aren’t selling, believing that prices will go higher, but current high prices are rapidly pulling wheat into feed rations – likely displacing more than 20% of the corn feeding.

The Chinese Communist Party has been making a big deal about being self-sufficient in corn production in recent months. Allowing prices to remain high is one way of achieving that objective, while opening the floodgate to imports would make such a goal of self-sufficiency even harder to achieve.

I would not be surprised to see some fund liquidation this week heading into the month end and US elections.

Have a Safe Day!

Garry Gard