Good morning friends
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Weather improvements are expected in Brazil and Argentina, while rain out east will keep combines idled this weekend. Outside of Texas, the harvest weather been fantastic. Slight precip has fallen in the upper Midwest maybe stalling a few guys and gals, but the majority of the corn/bean belt would have progressed nicely. The Western belt will have fantastic conditions this weekend while the producers out east in Indiana and Ohio will likely be rained out on Sunday. This could be where a spark comes from, you could see the markets come off lows this week as these forecasts came out.
Chinese and US leaders will have a conference call today. The Chinese are continuing their push to get the U.S. to remove tariffs imposed last year and cancel the tariff hike scheduled for December. Reuters is reporting if the US would drop the tariffs from last year (remember the original tariffs remain up) then they would apparently drop those tariffs. I think the market has priced in a lot of optimism and faith that Phase 1 of this deal is a reality. After reading the recent reports, I would not be so sure. This feels like the setup we had before the May meetings. There will be more talks in two weeks, U.S. Trade Representative Bob Lighthizer and Treasury Secretary Steve Mnuchin will travel to China for talks the week of Nov. 3.\
US corn exports stink right now. Another week of sub 20 million bushel purchases is not going to get the market to believe prices need to move higher. Mexico is really the only buyer right now. Someone should ask Trump when the expected Japanese demand he touted two weeks ago will show up. Both forward commitments and export shipments are lagging tremendously right now. I worry that as corn harvest progresses, this strong basis will go away and the December corn contract falls to levels where September went off the board. Basis has been steady in both Central Illinois and Omaha this week. As of right now, Dec corn trades 40 cents over where Sep went into FND.
Wheat and cotton sales were disappointing as well. This comes as both markets trade near 3 month highs and have corrected 10%. USDA reported wheat sales of 262,400 MT for the week ended Oct. 17, which was below the bottom end of pre-report estimates. U.S. wheat continues to face stiff export competition, especially form the Black Sea region and France. Weekly cotton export sales came in at a ho-hum 140k bales for 2019-20. And China was not in the list of major buyers. Cotton exports are ahead of pace, and the Yuan-USD cross has been stable. I worry if that goes away the shorting comes back. I would be pricing March cotton in the 66-68 cent level in the short run, if you catch a move lower then look to buy it back come December.
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