- When one looks at the US interior cash corn price, it has been generally sideways since mid 2014. There have been two rallies that occurred during the N American growing season, but otherwise, corn values have held in a 40 cent range. Unfortunately, with a 2017 US corn yield near trend of 169 bushels/acre or more, the outlook for US interior corn prices is for a continuation of the sideways trading range, it is going to be tough to push December corn below $3.30 or above $3.70 into yearend. It looks to be just more of the same!
- Overnight selling continued on Tuesday with limited fresh demand news prompting the unwinding of long soybean/short grain spreads. November soybeans closed 6.25 cents lower. Soymeal prices are holding above all major moving average, though cash basis across the Midwest continues to trade at multi year lows. The latest vessel lineup for Brazilian soybean exports shows that October exports could be close to 3 million mt versus 1.6 million a year ago. However, Brazil is thought to be nearly sold out of old crop soybeans, with spot offers for export this week quoted 30-35 over the US through to the end of the year. Early new crop Brazilian exports are at least 3 months out, with significant volume not likely available until March. Harvest offers are quoted similar to current US offers 45-50 cents over the CBOT. Stronger US sales are needed in the to justify USDA’s record export forecast. Spot soybean prices are still 60-70 cents over the August lows, and our view is neutral. We expect farm selling to slow rallies in the coming weeks.
- Chicago corn futures closed slightly lower in back and forth price action with the weakness in the soy complex allowing the bearish tug on Chicago grain prices. The nearby soybean/ corn ratio closed at 2.81:1. The ratio argues that US farmers should be more aggressive in selling their new soybean harvest vs. corn. Argentina fob corn is cheaper than US values into mid winter and the US corn export profile will continue to suffer as a result. Brazil will export 5.7 million mt of corn October vs. just 1.1 million last year. It is the combination of large Brazilian and Argentine corn exports that will continue to steal US corn export demand, and cap Chicago futures rallies at $3.70-3.80 basis March. A rally in Chicago corn futures will not be sustained without a rally in S American corn basis offers. The Midwest corn harvest is slowly advancing with yield reports maintaining a trend of being better than expected. The US corn harvest is only an estimated 35% completed, and it is the results from the last half of harvest that will be key. However, the yield data leans in favour of a further bump in US corn yields in the November NASS report. Chicago corn prices are seen as cheap and with funds short an estimated 170,000 contracts of futures, one has to be careful about being overly bearish.
- US wheat futures closed mixed with Minneapolis finding some end user support, while Kansas and Chicago wheat futures closed slightly lower in thinning volume. The world wheat market could be forging an early season top with the EU and US needing to see better export demand. Rallies in US wheat futures will be based on fund short covering. 2017/18 global wheat stock/use ratios will be at their highest level in 20 years and near the all time record set back in the mid 1980’s. 128 million mt of wheat resides in China, but the point being is that there is no shortage of world supplies. We expect that world wheat production will rise to an even higher record in 2018 amid the rise in seeding in the Black Sea. The supply bear market appears to be unending without adverse weather. We believe that a “sell the rally” mentality is appropriate with world wheat prices nearing a seasonal top.