- HEADLINES: Wheat soars on US export opportunity to Saudi Arabia; China buying Ukraine corn and Aussie wheat; Russia/Ukraine conflict?
- Wheat/corn futures are pacing the morning Chicago rally with the talk growing that the Saudi tender for April-June wheat could include US HRW from the Gulf. And corn futures are higher on cash reports that China is back securing Ukraine corn and Aussie wheat, while drought fears for Southern Brazil and Argentina are noted in the background on any setbacks. Chicago has a firm tone at midday and a higher close is forecast into Friday’s Stats Canada report. Traders are looking for a further cut in 2021 Canadian wheat, canola, and oat crops. Remember that Stats Canada (like ABARES in Australia) conjures up their crop estimates from satellite analysis. This creates disparity in years where there are large deviations in yield due to an adverse climate. Research argues for a further cut in the Canadian crop and that ABARES will at some point, itemise abandoned fields as the grain has stood too long in water to be cut. The future supply risks of world crops is pointed downwards into 2022.
- Chicago brokers estimate that funds have secured 6,400 contracts of corn, 4,300 contracts of wheat and 3,700 contracts of soybeans on the morning rally. Soy products purchases include 3,100 contracts of soymeal and 1,900 contracts of soyoil. Funds were net sellers of soyoil at the opening but have turned buyers on the rally.
- US export sales for the week ending November 26 (Thanksgiving) were; 2.9 million bu of wheat, 40.2 million bu of corn, and 39.1 million bu of soybeans. For their respective crop years to date, the US has sold 526 million bu of wheat (down 153 million or 22%), 1,395 million bu of corn (down 112 million or 7%), and 1,365 million bu of soybeans (down 555 million or 29%). China and an unknown destination booked 294,000 mt of US soybeans. China is rumoured to be showing interest in US PNW soybeans for February. US soybean exports last week were pegged at 85.5 million bu which compares to inspections of 78.7 million bu. China showed up again as a large buyer of US sorghum.
- There are strong rumours that China has booked 5 cargoes of Ukraine corn for late December/January shipment. China is also bidding for Australian wheat, but the quality of the wheat being booked is unknown. Normally China would secure hi protein Aussie wheat with a Hagberg of 300 or better. Research doubts that much of the 2021 Aussie wheat crop will be able to achieve this quality measure amid the low protein crop of W Australian and all the rain for E Australia. China’s recent interest in booking Ukraine corn for nearby shipment and wheat from France/Australia is noteworthy and counters talk that China will secure less corn/wheat in 2021/22 than in 2020/21. Research looks for China to import like or greater quantities of world grain this year.
- The Saudi tender for over 500,000 mt of April-June wheat is likely to include US HRW wheat for May/June. No Russian exporter is willing to offer new crop wheat amid all the uncertainty of the floating export tax rate.
- The floating Russian export tax rate will limit their new crop sales in the months ahead. And EU wheat stocks are declining rapidly amid strong world demand. The Saudi tender will be interesting to monitor, but the tender should reflect that extreme tightness that prevails for world protein wheat.
- Brazilian millers are unwilling to take Argentine wheat without assurances that the wheat has zero GM material. With Brazilian millers to receive late December shipments, the debate over GMO Argentine wheat is starting to heat-up.
- And the amassing of Russian and Ukraine troops along their common border is worrisome. Russia under the cloak of night is now moving heavy artillery and more than 100,000 troops to the Ukraine border. US Sec of State Blinken has argued that these feels different from prior border engagements. If any shots are fired, world grain markets will react strongly to the upside as both are key grain exporters. This political hotbed has to be closely monitored into 2022.
- The midday GFS weather forecast is unchanged from the overnight run. High-pressure ridging aloft across Argentina/Southern Brazil will restrict the flow of moisture for the next 2 weeks. Temperatures start to warm this weekend under the ridge with highs ranging from the mid 80’s to the mid 90’s. Crop-critical weather lies ahead with soil moisture in fast retreat.
- It appears that first notice day lows were scored in Chicago markets on Tuesday (or Wednesday in the case of KC wheat) as the new variant virus caused speculative liquidation. However, the tightening of world grain stocks is ongoing with S American weather concerning. Bull Chicago trends persist. Look for investment managers to boost their net long positions into late year.