- Chicago grain markets have recovered with wheat posting sharp gains while corn follows amid rumours of China buying. Soybean futures have followed to the upside on commercial talk that China has booked 2-4 cargoes of US soybeans for January with Chinese crush margins back in the black. The volume of trade this morning has been massive with fund selling on liquidation while end user and commercial demand has offered support. The fund selling has slowed at midday and a higher close would indicate that a trading bottom has formed.
- Rumours abound that China has secured as much as 1.0 million mt of US April corn while also asking for offers on US HRW/White wheat. We cannot confirm any US wheat sales to China, but the cash wheat demand talk started to blossom after the Chicago opening. We noted that US wheat prices relative to the rest of the world have become competitive. US wheat depending on freight costs could work into N Africa and Mideast when futures were trading near the day’s low. The function of price was to reach levels that spark new consumption, which appears to have been reached in corn, wheat and soybeans this morning. The demand will act to slow S American weather liquidation that has been ongoing since Monday. It is a long growing season before S American crops are made.
- Chicago brokers report that funds have bought 8,500 contracts of wheat, 12,000 contracts of corn, and 5,300 contracts of soybeans. In the soy products, funds bought 2,900 contracts of soymeal and 4,000 contracts of soyoil. Funds were sellers overnight, but returned as buyers as commercial buying was noted.
- On the weekend it was suggested that China was issuing another 5 million mt of corn import licenses. You must have a GMO certificate to import US corn into China. It appears that these rumours are true and that the overnight weakness in Chicago corn sparked buying. We note that WASDE is forecasting that China from all origins will import 13.5 million mt of corn, while the FAS China attaché forecasts 22 million mt in 2020/21. We could see China taking 24-28 million mt which would raise US 2020/21 corn exports above 3,000 million bu, an historic record.
- The US produced 286 million gallons of ethanol last week that was down just 5 million gallons from the week prior. Such ethanol production would consume 99 million bu of corn and argue for an annual corn grind that is 100-150 million bu above the WASDE estimate of 5,050 million. There is a chance with the soon to arrive Covid vaccine that WASDE could raise their 2020/21 US ethanol demand forecast by 50 million bu in the December report next week Thursday.
- The GFS weather forecast is consistent with the overnight run in terms of 10 day rainfall totals. Another 3-4 days of hot/ dry weather will prevail across Brazil with any showers to occur in SC Brazil including Parana and Minas Gerias. The chance of Argentina rain has ended with the next chance not occurring until late in the 10-day outlook. A more arid weather pattern is setting up for S Brazil and Argentina in coming weeks. The MJO has shifted into position 4 which suggests that the models may be overdoing the rain for N Brazil next week. But there is still a chance of daily rain, it is just that the coverage may not be as high as advertised.
- US weekly export sales will be slower on Thursday due to last week’s US Thanksgiving Day holiday. La Niña influences wax and wane, but with its ongoing strengthening, the odds are that additional weather scares will develop in coming weeks. ERS just raised the 2020 US net farm income estimate to $119.6 billion on rising crop prices. This is a 36% bump on last year and the best since 2014. The income hike as many farmers holding onto any remaining cash grain stores to avoid taxes. A US demand rationing rally is required. China shows no evidence of slowing their ag buying. Rising DDG prices is keeping US ethanol producers profitable. A sustained bearish trend is unlikely until S American crops are made.