- It has been a low volume and mixed morning in Chicago with corn/wheat trading either side of unchanged while soy futures push higher. The volume of trade remains restricted by the pending US holiday and US/China trade uncertainty. The market’s focus on US/China trade remains acute. Comments from US National Economic Council director Larry Kudlow to Fox News this morning sparked a sharp rally in Chicago soybeans. Kudlow stated that Trump believes that China would like to have a deal and is optimistic on next week’s US/China trade talks. Kudlow also offered that very detailed talks are ongoing on all levels.
- US comments from Trump/Kudlow on China trade are consistent and argue that the hardliners within the Trump Administration are being silenced ahead of next week’s G20 meeting. A US/China trade deal in 2019 would favour President Trump’s 2020 reelection bid as he can focus on infrastructure and the benefits that his trade deals have provided to farmers/manufactures and the general US working population. Chicago values are acutely focused on next week’s dinner.
- Russian wheat stock data as of November 1 reflect a sharp drop from last year. Wheat stocks in Krasnodor are down 80%, Kursk down 75%, and Stravpol down 70% with Rostov down 62%. The sharp fall in SE Russian wheat stocks in the export corridor means that exporters will have to pull wheat from far western locations. This is likely the reason why Russian interior wheat prices are rising again and will be a growing concern to the Government and their developing livestock industry. Russia has exported 20 million mt of wheat, but its exporters will struggle with winter weather and tight wheat stocks going forward. Although there is talk that Pakistan may subsidise wheat exports, multi-national exporters are doubtful that subsidised tonnages will surpass 750,000 mt to neighboring countries. Last year, Pakistan exported 900,000 mt of wheat from late February into September. The odds are low that Pakistan will offer wheat to the world wheat market until February amid low soil moisture levels and a tightening domestic federal budget.
- US crude oil prices are sharply lower with January futures below $55.00. Sinking crude looks to pressure OPEC into cutting production to support income.
- The midday GFS S American weather forecast is wetter in far Northern Argentina, which is not a major producing area, and unchanged in Brazil. The worry is still centered on excessive rainfall in Mato Grosso, Goias and Minas Gerais, which account for some 50% of bean production and 30% of Brazil’s first corn crop. Rainfall does shift northward in the 6-10 day period, but weekly totals upwards of 2-4+” will continue across Central areas. The GFS forecast is drier in Brazil beginning Dec 3, but confidence so far out is low. A string of sunny days is desired.
- Politics drove beans down on Monday and are driving beans higher today. Much will depend upon the language of late November’s Trump/Xi dinner. The odds are that both sides will keep talking, which Chicago will like. US wheat futures are down on fund selling, but Russian prices are rising in the interior amid tightening stocks. With Argentine crop quality being questioned, this is no place to be bearish of wheat as weak long are being flushed out.