#Grain #Futures Comments

-US/China trade negotiations may be in the home stretch
-Canadian canola planted area in question amid Chinese dispute
-South Korea continues aggressive corn buying
-No USDA sales announcements
-Brazilian cane processing expected to remain strongly for ethanol
-Corn belt rains remain regular, but drier Northern Plains outlook favorable

Ag markets were generally firm overnight on continued US/China trade talk optimism. The Financial Times reported officials apparently have “resolved†most issues needed for a trade deal, but are still hung up over issues related to implementation and enforcement of an agreement. Top officials begin meetings again today in Washington. Precip ideas over the coming 10-day period remain the lightest across far western belt locations, which is a favorable development for Northern Plains planting prospects. The EIA’s weekly energy report is out this morning.

 

 Canadian officials reported the Chinese customs office notified a third Canadian canola exporter of non-compliance issues, but has not yet officially suspended their ability to export canola to China at this time. Given the expected sharp reduction in canola exports to China, and recent notable weakness in prices, there is increasing concern Canadian farmers may notably reduce canola area this year, with Richardson International’s CEO telling Canadian ag officials there is risk area could decline by 10% or more this year. If that proves to be the case, farmers would likely seek alternative crops to plant, with a logical response being to increase spring wheat area as planting timeframes and locations are very similar to those of canola.

ï‚· Three South Korean feedmills bought a combined 202k tonnes of corn overnight, priced from $188.40-$191.25/tonne c&f for LH Oct-FH Nov arrival periods. These purchases brought total South Korean purchases over the last two weeks to around 600k tonnes, the vast majority expected to be South American (Argentine) origin, as they extend coverage amid the recent price weakness.

ï‚· Algeria is believed to have bought a minimum 120k tonnes of milling wheat at $235.50/tonne c&f for May 16-31 shipment following their recent tender.

ï‚· There were no USDA sales announcements this morning.

ï‚· A Brazilian ag consultant sees Brazil’s center south sugarcane processing region allocating 36% of processing capacity this year to sugar production, only marginally above last year’s record low of 35%, indicating their expectation for a historically high portion of processing to remain allocated to ethanol. Market consensual appears to be for a bit more of an increase in processing for sugar this year to around 39-40%, but clearly remaining on the low side and favoring ethanol for another year. Brazilian ethanol exports in the first 3 months of 2019 were up 47% from last year.