- Chicago bounces from early selling on bottom picking; Midday S American weather forecast favourable; US elections loom large for Chicago prices.
- Chicago futures are weaker at midday with December corn briefly breaking below $4.00 chart support while January soybeans near their contract low at $9.75. Wheat futures have followed corn lower with soyoil being the only Chicago market that is showing any willingness to rally. Soybean futures have fallen $1.00/bu and corn $0.35/bu following their early October highs. The spot Chicago wheat/corn spread has pushed out to a $1.80 premium which limits further wheat rallies.
- End user pricing and some bottom picking is noted this morning, but unless S American weather turns adverse or world demand increases (China in particular) any rally effort will be modest and limited to short covering. China has been a very slow buyer of world grain in the past 6 months and is not showing any willingness to take forward coverage into the end of the year. We maintain that the post-harvest rally occurred early in late September and early October. We look for a lower Chicago close today with additional hedge related selling occurring into the weekend. Fridays are trend days and lacklustre China demand, and bearish chart trends are likely to place new pressure on Chicago grain markets heading into the weekend.
- Chicago brokers estimate that the managed money has sold 1,300 contracts of soybeans and 1,400 contracts of corn, and 2,900 contracts of Chicago wheat. In the products, managed money has bought 3,200 contracts of soymeal and bought a net 1,700 contracts of soyoil.
- FAS/USDA reported the sale of 197,180 mt of US corn to Mexico and 101,000 mt of US corn to an unknown destination. No soybean sales were reported.
- US weekly ethanol production was 306 million gallons, up 1 million gallons from last week and up slightly (1%) on last year. US ethanol weekly stocks rose 5 million gallons to 930 million gallons, up 5% from last year. Positive margins persist for US ethanol producers with estimated revenues over variable costs being at $0.14/gallon. However, US gasoline consumption was down 4% from last year at 8.62 million barrels/day. US ethanol production for the crop year to date is closely following last year into November.
- USDA will release their weekly export sales report on Friday due to the US Columbus Day holiday last Monday. We look for US wheat sales of 200-300,000 mt, corn sales of 900-1.3 million mt, and soybean sales of 1-1.2 million mt. Chinese demand for US soybeans has only begun to slide this past week as December shipments are covered.
- A nice mixture of rain/sunshine prevails across Brazil/Argentina for the next 10 days. Northern Brazil will see daily rainfall of 0.25-1.50” with locally heavier amounts. The rain is welcome as farmers speed ahead with spring seeding. And although it is a process, the forecasts are consistent with above normal rainfall and near to below normal temperatures which will help restore lost Brazilian soil moisture. Goias has been the big benefactor of recent day rainfall. Heavy rain will also fall across Sao Paulo and Mato Grosso into the weekend. Forecasted high temperatures will range from the mid 80’s to the middle 90’s.
- The Argentine forecast is also favourable with heavy rains to return this weekend and no sign of extreme heat. Initial corn seeding is active across Santa Fe, Cordoba, and Buenos Aires.
- The US election looms large in Chicago and US financial markets. The bears and bulls all have their talking points heading into the November 5 election due to differing platforms on trade and green fuels. Hedge pressure will return on Friday due to an active weekend of harvest. US farmers are tight fisted with new sales with storage availability strained. Soybeans will try to hold contract lows for a few days while December corn finds end user pricing below $4.00.