- There is still too much grain supply chasing limited demand growth, which will be exacerbated by this year’s record corn yield. Rallies will struggle. However, managed funds’ combined net short in wheat and corn is approaching record levels, and with producer corn selling to be lacking into the new year, it is left to the spec trade to up their bearish bets for price to erode further. It is not that balance sheets are tightening, but the flow of money suggests downside risk is limited.
- Soybeans closed lower on Monday on technical selling following disappointing US export data and favorable S American weather forecasts. Funds were estimated sellers of; 9,500 soybean, 4,000 soymeal, and 5,000 soyoil contracts. After the close, the Commitment of Traders report showed that as of last Tuesday, funds had been net long nearly 47,000 contracts in soybeans. US Soybean export inspections were within expectations, but fell to a 4 week low of 77 million bu. After a strong start to the year, inspections began to disapoint in late October and the export has steadily slipped further behind last year as Brazil has maintained strong late season exports. NASS reported that the 2017 soybean harvest has now reached 93% complete versus the 5 year average of 95%. MN was the only Cornbelt state that has completed harvest, but most look to wrap the 2017 harvest up in the next 10 days. Brazilian weather will take increasing importance in the upcoming months, though planting is still underway.
- Weaker major exporting currencies and a lack of fresh export news sent corn to minor losses, though December futures managed to hold above prior lows. The market lacks a story on both sides for now, and until more is known about the duration of Argentine dryness, and whether it persists into December, both the bulls and bears will struggle for leverage. The CFTC’s report released on Monday pegged managed funds net short position as of last Tuesday at 206,000 contracts, up slightly on the previous week. Following post-WASDE report selling, we estimate funds’ net position this evening at a record large 231,000 contracts. US farmers will likely stay absent from the market, and the question ahead is who is left to sell? Harvest progress as of Sunday reached 83% complete, vs. 91% on average this week, but amid complete dryness across the Plains and W Midwest through late November, some 92-94% of the crop will be gathered by the coming weekend. Dryness in Argentina is viewed as favourable in the very near term, but the EU ensemble weather model on Monday afternoon maintains a lack of meaningful rain there through to November 28. Holiday-reduced volume lies ahead; S American weather will be the market’s primary driver of price beyond the US Thanksgiving holiday.
- The Russian Ruble found new lows for the recent move, and as such lowered the cost of replacement in interior markets across the country. Russian fob offers Monday evening were unchanged, but the market seemed to have slowed demand above $196/mt, basis spot, and so we expect both rallies and breaks to struggle into the holidays. We also mention that managed funds as of last Tuesday were short a net 125,000 contracts, not quite a record but far more than expected. Funds are also short a net 24,000 contracts of HRW, which is getting rather close to the all-time record posted in mid-2016. The market for new short positions is lacking. US winter wheat crop conditions as of Sunday fell to 54% good/excellent, vs. 55% a week ago and slightly below average. Deterioration is noted in IL, MO, MT, SD and TX, and we look for further erosion in good/excellent ratings into December amid expanding dryness across the Southern and Central Plains. It doesn’t pay to be bearish here, but we doubt the market can fund much demand on rallies.