- Chicago wheat futures rallied to new highs at $6.3825 basis December on news that Sudan is working on a pact to secure 1.0 million mt of US wheat through US Government financial assistance. The US Sudan financing is being worked on with the country mired in an economic crisis that is causing acute food shortages. The financial “ask” by Sudan is unlikely to reach 1.0 million mt of wheat, but any demand from this African nation would be welcomed. US wheat futures rallied on the news but has traded in a wide range amid uncertain Russian weather/crops.
- Corn/soybean futures initially followed wheat futures higher but set back on cash selling by US farmers and improving S American weather. Argentine crops benefitted by heavy rainfall overnight and the wet season for Northern Brazil is 2-3 weeks late, but the forecasts offer improved rain chances starting this weekend and continuing into November. Chicago corn/soy futures are stronger midday with soyoil/soymeal spreading active as end users cover future vegoil needs into Q1 2021. World soy crush rates are in decline due to S American soybean shortages (limited soybean supplies in Brazil and Argentine farmers being tight fisted holders) and cash vegoil demand is strong.
- Chicago brokers estimate that funds have bought 4,700 contracts of corn and 4,200 contracts of soybeans, and 4,400 contracts of wheat. In soy products, funds have bought 5,500 contracts of soyoil and 3,200 contracts of soymeal. Funds were active overnight buyers of soymeal but have turned sellers at midday on oil/meal spreading. If soybeans are a true demand led bull, November should be gaining on March. The weakening spread argues for a flat price correction.
- FAS reported the sale of 132,000 mt of US soybeans to an unknown buyer which is rumoured either to be China or the EU. US exporters report that the highest FOB price offers since 2013 is starting to slow importer demand/interest. Chinese crushers are asking for US soybean bids for January/February, but tonnage purchases are down from recent weeks.
- Russian fob wheat bids are steady at $249/mt with offers at $252/mt. Russian interior wheat and flour prices are holding at record highs. The soaring wheat flour price raises the risk that Russia could move to limit its exports or build a domestic reserve to assure supply. The Russian Ruble is weak at 77.4:1 which is just below the 5-year low. The weak Ruble further enhances bids back to the farmer to originate supply. Russian inflation rates are expected to exceed 5.2% in 2020.
- The Brazilian Real sits at 5.6:1. We fear that the Real could decline to the old lows at 6:1 as inflationary pressure grows along with a falling GDP. The Brazilian Government is struggling to grow the economy outside of agriculture
- A daily chance of rain exists across Northern and Central Brazil into late October. The heavy showers start Saturday which will facilitate seeding progress. 10-day rainfall totals are estimated in a range of 1.25-3.50″ with the heaviest totals falling across Minas Gerais and through Argentina. Temperatures cool to the 80′s to 90′s with soil moisture rising. Brazilian farmers and their big equipment can seed crops quickly. The 2020 seeding campaign is the latest in a decade but catch up on seeding is underway.
- Speculative flows are adding to an already record long ag fund position. Cash markets are holding steady/strong, but importers are starting to endure “altitude sickness” which could result in a slowing purchase/import pace. Declining US/Russian and delayed S American seeding has combined with large Chinese demand for US corn/soybeans to rally Chicago. The question for traders is amid improving S American weather, can the demand bulls keep pushing prices ever higher. Demand bulls need to be fed, a longer term bullish outlook is maintained, but this is no place to chase a rally.