Grains Report 01/18/19

DJ U.S. Weighs Lifting China Tariffs to Hasten Trade Deal, Calm Markets
By Bob Davis in Washington and Lingling Wei in Beijing
U.S. officials are debating ratcheting back tariffs on Chinese imports as a way to calm markets and give Beijing an incentive to make deeper concessions in a trade battle that has rattled global economies.
The idea of lifting some or all tariffs was proposed by Treasury Secretary Steven Mnuchin in a series of strategy meetings, according to people close to internal deliberations. They say the aim is to advance trade talks and win China’s support for longer-term reforms.
But Mr. Mnuchin faces resistance from U.S. Trade Representative Robert Lighthizer, who is concerned that any concession could be seen as a sign of weakness, these people said.
The debate is occurring as trade officials try to figure out the best way to pry concessions from China. It hasn’t yet reached President Trump, and the outcome of the discussions aren’t possible to forecast.
In past China discussions, Mr. Trump has sided with Mr. Lighthizer on tariffs, rather than Mr. Mnuchin. But this time, the president has made clear he wants a deal — and is pressing Mr. Lighthizer to deliver one, according to people familiar with the discussions.
The U.S. and China are seeking to resolve their trade dispute ahead of a March 1 deadline. At 12:01 a.m., the following day, tariffs on $200 billion of Chinese goods are scheduled to jump to 25% from the current 10%. The higher levies could batter U.S. importers and further harm an already weakening Chinese economy.
While Mr. Lighthizer is leading the trade talks, Mr. Mnuchin has been active in formulating the administration’s strategy. In talks with members of the trade team, Mr. Mnuchin raised the possibility of offering to eliminate tariffs during discussions scheduled for Jan. 30 in Washington with top Chinese trade envoy Liu He — a month ahead of the target date to conclude the negotiations.
“It could be an arrow in the quiver” of U.S. negotiators, said one of the people tracking the talks.
Mr. Lighthizer has taken his oft-stated hard-line in trade talks, contending that China hasn’t lived up to past agreements and can’t be trusted to do so in the future. In the discussions with China, he has said the U.S. should remove tariffs only when China has shown it has carried out promises made during the talks.
But Mr. Lighthizer has shown some signs of easing his position, say people involved in the talks, including raising the possibility that some tariffs could be eliminated if the U.S. strikes a strong deal on March 1.
A Treasury spokesman said bargaining positions “are all at the discussion stage” and that “neither Secretary Mnuchin nor Ambassador Lighthizer have made any recommendations to anyone with respect to tariffs or other parts of the negotiation with China.” Talks are “nowhere near completion,” the spokesman said.

General Comments Winter Wheat markets were higher yesterday on reports of stronger world prices. Both European and Russian prices were reported higher. The US has not seen much of a demand boost even with less production and higher prices overseas. News that Russia is working harder to restrict exports remains in the background, although Russian exporters are still offering to Egypt and others. However, the Wheat must be brought to ports from farther inland, so the higher transportation costs are raising export price offers. The government is working to limit exports to about 18 million tons through the end of June. It might stop some exporters from selling Wheat into the world market. Ukraine is also having trouble sourcing Wheat for export. Russia remains the largest Wheat exporter in the world. US FOB prices are still at or below just about all of the competition. SRW Wheat is still the worlds cheapest Wheat. World crop reports continue to indicate less production and tightening supplies. Australian and European prices have also been relatively strong.
Overnight News: The southern Great Plains should get mostly dry conditions early week, and rain or snow late week and over the weekend. Temperatures should be near normal. Northern areas should see mostly dry weather, but light snow is forecast for tomorrow and Saturday. Temperatures should be above normal. The Canadian Prairies should see mostly dry conditions, but light snow is possible on Saturday. Temperatures should be near to above normal.
Chart Analysis: Trends in Chicago are mixed. Support is at 517, 509, and 508 March, with resistance at 524, 530, and 538 March. Trends in Kansas City are mixed. Support is at 501, 492, and 488 March, with resistance at 509, 511, and 517 March. Trends in Minneapolis are mixed. Support is at 567, 561, and 557 March, and resistance is at 574, 576, and 578 March.

General Comments: Rice was a little higher after another slow day yesterday. Futures held support areas left from the previous low and will probably try to trade sideways to higher. Weekly charts show more of a sideways trend, and the quiet tone in the cash market is reflected in the futures market as buyers and sellers are not eager to be involved. Volumes traded remain very light. Ideas are the export demand is holding relatively strong, but nothing can be confirmed with the government shutdown. It has been too wet for much fieldwork near the Gulf Coast and producers are wanting to work.
Overnight News: The Delta should get some precipitation this weekend. Temperatures should be mostly near normal.
Chart Analysis: Trends are mixed. Support is at 1049, 1042, and 1034 March, with resistance at 1069, 1080, and 1089 March.

General Comments: Corn was higher on talk of new demand. The demand is said to be coming from Asian countries. US Corn remains very competitive in the world market for now. Ethanol demand is also starting to improve as Crude Oil and products prices recover. There has not been any confirmation of new Corn export demand. USDA is shut down now, so any demand news will have to wait or will come from the commercials. China had promised to buy a lot of US agricultural goods as part of any settlement. There are ideas they will start to buy US Corn, but FOB basis levels were weaker last week, and that means nothing much was going on. Petroleum markets are showing a bottom on the charts now, and that means that ethanol demand could continue to improve. The Corn market seems to found increased selling interest when prices get close to the 390 March area, and has been able to find support near 370 March. Trends are currently sideways on the daily charts and mostly up on the weekly charts
Overnight News:
Chart Analysis: Trends in Corn are mixed. Support is at 376, 375, and 371 March, and resistance is at 381, 384, and 387 March. Trends in Oats are mixed to up with objectives of 308 and 309 March. Support is at 292, 290, and 286 March, and resistance is at 299, 303, and 306 March.

General Comments: Soybeans and products were higher on talk that the US might drop some tariffs on China to encourage a deal and on talk that Chinese company Sinograin had been asking about prices. The talk caused a quick rally in the market and some short covering interest kept prices firm into the close. China bought US Soybeans to fulfill its part of an agreement made in Buenos Aires and might have completed the promised sales with the purchases over the last couple of weeks. However, there are no restrictions on it buying more, and some buying might be done ahead of new meetings in Washington between the two top trade negotiators. There are plenty of Soybeans to sell from the US and South America. South American weather has often been too wet in Argentina and southern Brazil and too dry in western Parana and parts of Mato Grosso an Mato Grosso do Sul. There are forecasts for scattered showers next week in some of the drier areas, but ideas are that the stress will stay even with a little rain. There have been reports of losses in the early harvest areas of western Parana and Mato Grosso.
Overnight News:
Chart Analysis: Trends in Soybeans are mixed. Support is at 900, 891, and 889 March, and resistance is at 912, 915, and 921 March. Trends in Soybean Meal are down with no objectives. Support is at 311.00, 309.00, and 307.00 March, and resistance is at 315.00, 321.00, and 327.00 March. Trends in Soybean Oil are mixed to up with objectives of 2910 and 2980 March. Support is at 2840, 2810, and 2790 March, with resistance at 2880, 2890, and 2910 March.

General Comments: Canola was higher on Chicago price action and on ideas that the Canola market was oversold. Futures have now moved back into the previous trading range. Talk of renewed Chinese interest sparked the rally. It is currently very cold in Canadian crop areas, and farmers are not too interested in selling. Trends are down in the market after the price action so far this week. Commercials have plenty on hand for crushing or exporting, and overall demand is said to be light right now. Palm Oil was higher in reaction to stronger vegetable oils markets The daily charts show that futures are trying to trends down
Overnight News:
Chart Analysis: Trends in Canola are mixed. Support is at 480.00, 474.00, and 471.00 March, with resistance at 487.00, 490.00, and 494.00 March. Trends in Palm Oil are mixed. Support is at 2160, 2140, and 2130 April, with resistance at 2210, 2220, and 2240 April.

Midwest Weather Forecast: Chances for precipitation late this week and through the weekend. Temperatures should be near normal.

US Gulf Cash Basis
Corn HRW SRW Soybeans Soybean Meal Soybean Oil
January 45 March 142 March 85 March 16 March -2 March
February 50 March 86 March 16 March
March 51 March 86 March 16 March
All basis levels are positive unless noted as negative

Brazil Premiums Soybeans Soybean Meal Soybean Oil Corn
Paraguay Paraguay Paraguay Santos
February 26 March -11 March
March 34 March -12 March