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Soy rally continues on report that US/PRC on path to resolving trade battle while wheat back and fills as traders take a more measured look at reports that Russia may curb wheat exports. Corn caught between soy strength and wheat weakness as trade monitors CZ 20 DAMA at $3.78. 

 
Weather leans negative with better than expected weekend rains followed up by 65% 5 day Midwest precip coverage trimming dry regions to 15% of crop growing area.  Uptick in E Australia moisture will be followed by reversion to dry pattern. 6-15 Midwest temps warming but average day time highs late Aug are declining.  
 
Highlights of weekly crop roundup include: o Uptick in crop ratings for IL, OH, IN and NE, stable IA and lower MN/Dakotas o Mid-Aug rains boosting soy yield more than corn o Skepticism over USDA’s optimistic Aug CN/BN yield forecasts but prospects still above last year and average o Old crop corn moving to make space for large fall harvest; farmers will hold as much new crop as possible o Some commentators believe low soy basis will trigger more harvest corn sales than soy while others believe farmers will sell soy and hold corn (more N/C soy on contract than corn). o OH reporter reports SRW seed dealers sold out—higher 2019 wheat area assured o C IL CN/BN harvest basis already 15-20 cents wider than normal: Delta soy basis wide also  o Disease pressure increasing as crops near maturity but overall drag from drown out, disease & wind damage below normal except for portions of S MN/N IA/SE SD. o PNW unit train loaders in Dakotas post unusually wide soy basis—$1.30-$1.40 under o Early Delta yields highly variable –150-250 BPA corn and 45-85 BPA soy   Soy rally loses steam post-biscuit as traders ponder trade-off between higher export prospects if US/PRC trade issues resolved vs. higher soy supply from yield boosting Aug rains.  
 Outside Markets: 
 
• (JPM on overnight) There weren’t any major headlines out over the weekend or Mon morning although the tenor of China news has improved since Thurs evening – in addition to the trade 

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 reports (the WSJ Fri afternoon said the US and China are aiming to have a trade compromise framework in place by the time Trump and Xi meet at the G20 Leader’s Summit at the end of Nov), it looks like Chinese state-run funds intervened and made stock purchases (according to Bloomberg) while the gov’t is holding meetings w/economists and strategists to discuss the domestic stock market. A continued cessation in trade-related risks would obviously benefit the SPX but EMs should have more upside (esp. if trade tape bombs fade in conjunction with dollar weakness). 
 â€¢ (WSJ) Chinese and U.S. negotiators are reportedly working on a plan to hold talks to end a trade dispute that would result in meetings between President Donald Trump and Chinese leader Xi Jinping at a summit in November, according to Dow Jones. A nine-member delegation from Beijing, led by Vice Commerce Minister Wang Shouwen, will hold meetings with U.S. officials led by the Treasury undersecretary, David Malpass, on Aug. 22 and Aug. 23, the report said, citing officials from both countries. 
 
• (JPM on macro) The SPX still has solid support at ~2800 level owing to the ~$178 2019 EPS consensus but the index around ~2850 becomes less appealing in the present environment (esp. if tech’s leadership continues to falter). To the extent relief comes on the USD and trade, emerging markets, and more specifically mainland China, are likely to have more upside than the SPX). The “max pain†move from here seems like would be a sharp break up through 2850 in the SPX coupled with continued underperformance in tech. Emerging markets/China – more levered to USD weakness and a US-China trade settlement – the USD suffered its largest one-day decline in several weeks on Fri. 
 
• (Reuters) China seeks out views on the domestic stock market – media reports suggest the CSRC held a closed-door meeting w/some brokerage economists and strategists to hear views on the domestic stock market. 
 
• (FT) China has ordered its banks to boost lending to exporters and infrastructure projects as the gov’t aims to bolster growth 
 
• FT) US consumer spending red flags – the FT notes that US credit card companies are growing slightly more cautious as delinquencies and charge-offs tick higher while industry competition heats up. 
 
• (Reuters) Internet slump in China and the US raises worries that a key pillar of market support may be headed for a prolonged period of underperformance. 
 
• (Bloomberg Opinion) Chinese GDP will be unaffected by a trade war with the U.S., no matter how severe, because the government will do whatever it takes to meet its growth targets, Michael Pettis writes for Bloomberg Opinion. “As long as China has debt capacity, and the government is willing to use it, China can achieve any GDP growth target it wants.” 
 
• (Washington Post) Another economic collapse is coming – an economic downturn will eventually come but when it does America’s fiscal capacity to counter it will be materially reduced. The F19 deficit is forecast to hit $1.085T, an extremely large number for a period of peak employment and relative peace. 
 
• (Bloomberg) US gov’t spending – Mulvaney says a gov’t shutdown looks like it will be avoided in Sept. 
 
• (Reuters) Turkey – both Moody’s and S&P downgraded Turkey’s credit rating deeper into nonIG territory on Friday. 
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 â€¢ (WSJ) Trump + coal – the White House will soon unveil plans aimed at rolling back Obamaera\regulations on coal power plants by ceding important powers to the states. Thankfully, plunging prices for renewable power sources have already significantly crimped demand for coal 
 â€¢ (Bloomberg)  Russia – The US congress may tweak a Russian sanctions bill to lessen somewhat its severity so as to avoid inflicting damage on the global financial system. 
 â€¢ (Reuters) Two of the world’s largest energy-focused hedge funds, Andurand Capital and BBL Commodities, suffered double-digit percentage losses in July as oil prices plunged by the most in two years, sources familiar with the matter told Reuters on Friday. BBL Commodities Value Fund, run by former Goldman Sachs oil trader Jonathan Goldberg, lost 14.2 percent in July. 
 
• (Reuters) U.S. energy companies kept the oil rig count unchanged this week amid a steady decline in crude prices, which hit a near two-month low earlier this week. The rig count, an early indicator of future output, held at 869 in the week to Aug. 17, General Electric Co’s Baker Hughes energy services firm said in its closely followed report on Friday. 
 
• (Reuters) Middle East light crude oil cargoes loading in October have sold in Asia at the widest discounts since 2015 as sellers try to clear a backlog of supplies from the previous month, several trade sources said. Spot discounts for crude grades such as Abu Dhabi’s Murban and Das as well as Qatar Land have dropped to about 70 cents a barrel against their respective official selling prices (OSPs), they said 
 
• (Reuters) Saudi state oil giant Saudi Aramco remains committed to meeting future oil demand through continued investments, the kingdom’s Energy Minister Khalid Al Falih said in a company report on Friday. Aramco, which is slated for a public share sale, “continued to prepare itself for the listing of its shares, a landmark event the company and its board anticipate with excitement,” Al Falih, who is also chairman of Saudi Aramco, said. 
 
• (Reuters) Hedge funds cut their bullish wagers on U.S. crude to the lowest level in nearly two months and Brent crude to the lowest in a year, data showed on Friday, as oil prices dropped amid trade worries and concerns over a slowdown in demand. The speculator group cut its combined futures and options position in New York and London by 41,031 contracts to 356,854 in the week to Aug. 14 
 
• (JPM on key events this week) The FOMC meeting minutes (Wed 8/22 at 2pmET), the flash PMIs for Aug (out Thurs morning 8/23 – this will be the first major eco data point for the month of Aug), the US-China trade negotiations (8/22-23), the US hearings on the $200B/25% China tariff proposal (8/20-24 and 8/27), the next round of US-EU trade talks (8/20), and the Fed’s Jackson Hole conf. (8/23-25; Powell will speak Fri morning 8/24 at 10amET). 
 
• (Bloomberg) The biggest event on the calendar this week will be Jerome Powell’s speech at the Kansas City Fed’s annual economic policy symposium in Jackson Hole on Friday. There are a lot of interesting questions hanging over the economy right now (on fiscal policy, trade, inflation, productivity and so on) and Powell’s speech will get the typical ultra-close reading that a Fed chair’s speech typically does. 
 
• (Bloomberg) The Fed’s annual jamboree in Jackson Hole, Wyoming, dominates the week’s macro calendar, with emerging market turmoil and the outlook for interest rates set to figure high on the agenda. That kicks off Thursday. But a day before that, investors get to parse Fed minutes to see whether officials were still committed to two more hikes this year 

Ag Markets: 
 
• (Reuters) China’s soymeal futures were down over 1.8 percent in early trade on Monday, their biggest daily drop since early June. Prices fell as worries about the impact of the U.S.China trade spat eased but concerns mounted over falling demand for livestock feed as China confirmed its third case of the deadly African swine fever. 
 
• For the week, CZ up 7.25 cents, SX up 36 cents/bu, WU up 13.75 cents, SMZ up $14.60 and BOZ up 24 points.  
 
• Funds Friday sell 7K corn, 4K beans and 3K meal while buying 10K wheat and 2K oil.  
 
• New crop corn sales 8.9 mmt vs. 5.7 mmt LY, new crop soy sales at 11.5 mmt vs. 7.9 mmt LY while wheat sales at 8.6 mmt vs. 10.9 mmt LY. New crop US corn export sales at 15% of USDA estimate (vs. 5 year average of 16%) while soy sales at 21% (vs. 28% average). 
 
• Look for crop ratings Monday stable to lower vs. prior week’s 70% G/E in corn (-1% vs. prior week) and 66% in beans (-1% vs. prior week). Remember that crop ratings late summer typically decline. 
 
• Mexico Economy Minister Friday says bi-lateral with US on NAFTA may be concluded by Aug 22-23. 
 
• (Reuters) White House official says a trade deal w/Mexico is “very, very close†
 
• Swedish Ag Board estimates 29% drop in cereal production to 4.2 mmt. 
 
 
• Late session soy rally Friday sparked by confirmation that “Chinese and U.S. negotiators are drawing up a road map for talks to end their trade impasse culminating with meetings between President Trump and Chinese leader Xi Jinping at multilateral summits in Novemberâ€. 
 
• CRB last week down 5 to 452 with crude oil down $1.00 tp $66/barrel.  Gold down $34/oz to $1177/oz. 
 
• WZ/CZ, which typically narrows sharply from early Aug into early Sept, stages abrupt widening Friday (15 cents) over concern that Russia may eventually limit wheat exports.  Potential Russian curbs on 18/19 wheat exports is unlikely to occur until depletion of their exportable wheat surplus next year.  Thus in the meantime, advise selling headline driven surges in wheat vs corn. Consider the following: Remainder of N Hemisphere wheat harvest is accelerating, Recent Egyptian tender drew multiple offers,  2019 US winter wheat area will increase   Growth in 18/19 global corn demand (+31 mmt) will exceed growth in global 18/19 corn demand (+2 mmt) by a wide margin.  
 
Highlights of RJO Radio interview Friday with KC IB include: o Look for 10% gain in 2019 US HRW area amid cuts in cotton, soy and canola area o HRW farmers 75% sold on 2018 crop but very little N/C sold despite 2019 area gain o Mid-Aug rains in dry areas will benefit soy more than corn (some C KS corn cut for silage) o Wheat rally from early July low has already cut some demand for feed wheat [email protected] 

KWZ/KWH more likely to widen than narrow as pick up in HRW export demand will take time o KC/CGO board premium may be narrow but cash premium of HRW to SRW is not  o Risk 19/20 US wheat stocks swell over 1 bil bu unless 18/19 US export demand 2-3 mmt above USDA    • (DE/farm fundamentals) – John Deere’s conf. call Fri morning suggests the farm economy is stronger than many think. “If you think about the crop fundamentals, they’ve actually strengthened for several crops like corn, wheat, and cotton, which outweigh the soy situation. As a result, we forecast total cash receipts, a leading indicator for our large ag. sales for 2019, to be higher than for 2018…. the farm economics picture for next year may actually be stronger than realized because of improving commodity market fundamentals worldwide with little change in farm costs. Uncertainty surrounding the trade and market availability conditions may have distracted from the North American farm economics todayâ€. 
 
• (Reuters) India’s palm oil imports are likely to fall 15 percent in 2017/18 from the year before to their lowest in six years, hit by a hike in import taxes, a weaker rupee and tighter credit for would-be buyers, a senior industry official told Reuters. Reduced purchases by the world’s top importer of the oil, where it is widely used to fry foods such as samosas or bhajis, could pile more pressure on benchmark international futures that are already trading near their lowest in three years. 
 
• (Reuters) Wheat harvests in major European Union countries are winding down with drought having shrunk crop sizes but quality generally good, analysts said on Friday. “The market consensus emerging is that German new-crop wheat is generally decent quality with good protein content,†one German analyst said, referring to production in the European Union’s second-largest producer 
 
• (Reuters) – China’s Ministry of Agriculture said on Sunday 88 hogs had died from African swine fever in the eastern city of Lianyungang, the third outbreak this month, as the highlycontagious disease threatened to spread through the world’s biggest pig herd. A total of 615 hogs have been infected since Aug. 15 with the swine fever in Lianyungang, in Jiangsu province, where authorities have banned the movement of hogs, related products and animals that are easily infected both into and outside the affected area, the ministry said. 
 
• (Reuters) – The Cemtex Pioneer, a vessel carrying U.S. soybeans that was caught up in the China-U.S. trade row, has left east China’s port of Nantong near Shanghai, according to shipping data on Thomson Reuters Eikon on Sunday. Cemtex Pioneer, which was previously fully laden in port, is the third vessel to unload a U.S. soybean cargo in China over the past week after sitting at anchor off the coast since July. 
 
• (Reuters) – The United States has dropped a contentious demand from the renegotiation of the North American Free Trade Agreement to impose restrictions on Mexican agricultural exports, Mexico’s top farm lobby said on Sunday. Talks to rework the 24-year-old pact are entering a crucial phase and Mexican Economy Minister Ildefonso Guajardo said outstanding bilateral issues between Mexico and the United States could be resolved by the middle of this week. Much of the renegotiation, which has gone on for more than a year, has focused on revamping rules for the automotive industry. 
 
• (Weekly Ag Scorecard) Managed funds in C/B/W/ML/Oil are net short -57K vs. -66K short last week. Managed fund corn short shrinks 5K to -25K short, soy short up 3K to -59K, wheat long up 2K to +67 long, oil short swells 6K at -97K and meal long up 10K to +57K.  Corn short smaller than expected.   

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