Written Commentary
MORNING COMMENTS
Macroeconomics:
Yesterday China lowered its benchmark lending rates by 25 points and could be the reason beans were up. The one year loan prime rate was cut to 3.1% and the five year loan prime rate was cut to 3.6% according to the People’s Bank of China. These cuts were expected and may not do much to help boost China’s economy right away. The real interest rate in China is still too high from significant growth and more rate cuts are expected next year.
Ag Fundamentals:
The Chinese rate cuts are not enough to move prices significantly, and won’t until more stimulus provides substantial improvements to demand. China bought more than 90 cargoes in the last 2 weeks- 35 from the US and 7 from Brazil for this crop year and 46 from Brazil for next year delivery. Processors are still profitable here in the US and domestic demand is what will drive the spreads firmer. No Supply shocks are expected as harvest is chugging along smooth, so it’s about getting the farmer to sell. Storage is becoming an issue as the remaining 20% of beans and 35% of corn is cut over the next few weeks.
Weather:
We are expecting La Nina conditions this winter. Odds are about 60% chance we see La Nina conditions which would be colder and possibly double the amount of precip from last winter. Because it is expected to be a weaker La Nina temperatures may fluctuate which could mean snowfall may melt or arrive as rain at times. Either way, the majority of the US growing areas need the water to refill the soil moisture.
The CFS Forecast is showing the following forecasts for La Nina/El Nino conditions. The Probability of La Nina is at 60%, expected to be strongest late December and early January.
The Dec/Jan/Feb Precipitation Outlook for the probability of exceedence from normal map showing higher than expected rain in the Northeast and Great Lakes region.
Export & World News
Flash sale of corn to Mexico this morning, 360K MT. Yesterday, US sold 380K MT tons of US soybeans to unknown destinations in two separate reports. 198K MT of Corn was sold to Unknown destinations yesterday. The US also sold 130K MT of corn to South Korea and 170K MT of corn to Mexico yesterday.
Malaysian palm oil futures were up 85 ringgit, at 4384.
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