Morning Grain Market Research
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Although we have rebounded from pressure in the early overnight trade, and witnessed surprisingly large volume in corn, overall the grain and soy markets appear rudderless this morning and as such could easily be pushed around by whichever breeze is more prevalent. Will it be a hot wind blowing up from Argentina or possibly a stark and dry winter chill rushing down from Canada to further stress the wheat crop and leave our subsoil thirsting for replenishment? It could even be a gust of hot air bloviating out of Washington D.C., but regardless of what or where it comes from, it would appear that these markets need something fresh to provide additional direction.

While the most critical report for the month; Prospective Plantings, will not be released until the 29th(a couple days earlier than normal due to Easter) this is not to say there are not potentially market moving reports to be issued in the meantime. Tomorrow, we will see both the weekly export sales, which should be solid for corn once again, as well as the soy crush data for the month of February. The trade is expecting a crush figure of around 149.4 million bushels.

While I am not sure if fortunate is the correct word or not but the issues in Argentina may have provided a boost for American farmers in more ways than one. Yes, it has sparked a general nervousness concerning reduced global supply and provided incentive for buying in markets, but it also came at a time when the relationship between our top bean customer, China and the US are less than optimal. Beginning with washing machines and solar panels and now steel and aluminum, there is no doubt that Washington is targeting trade with China.

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By no means would I imply that China does not engage in unfair trade practices and would not ruthlessly take advantage of any trading partner if given the chance, but for us in the ag trade, it can leave us in a very precarious situation. They are our number one customer for ag exports as a whole ($22b or 16% of all exports) and when it comes to soybeans, account for around 60% of our shipments. Note as well that soybeans alone account for 17% of all US ag exports and for over 50 years, US ag has posted trade surpluses. In regard to volume, as they say, a picture is worth a thousand words and this chart published in the Financial Times provides a stark visual of this trade. Since the tariffs have been announced, various officials from China have been discussing retaliation and more than once beans in particular have been mentioned, but as of yet at least, nothing appears to have been done and in fact, we have seen a recent resurgence in Chinese business. I have to believe, we have the weather issues in Argentina to thank for this but unfortunately, once again it would appear that ag has become the unwitting victim in international trade battles (not to mention a scapegoat for problems within the oil/refinery industry).

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