• Managed funds combined length in Chicago corn, wheat and soybean markets on Tuesday totalled 558,000 contracts, up 57,000 contracts (mostly in corn) from the previous week, the highest since the summer of 2012, when supply rationing was a must. A correction was needed. We estimate that combined fund length 465,000 contracts as of Friday’s close. Extreme market length combined with the ongoing spread of Covid and a US Presidential election will produce additional volatility. We caution against chasing daily price swings.

• Longer term, the market cannot avoid global cash market performance and the growing potential of adverse S American weather US ag markets will be demand led with any corrections producing purchase opportunities until record large S American crops can be confirmed.

• Soybean and product markets closed higher on Friday, with soybean oil pacing Friday’s advance.

• For the week, soybeans and meal were lower, while soybean oil was higher on rising world vegetable oil markets. Palm oil was down overnight, but Chicago soybean oil was still at a historic discount even after Friday’s rally.

• The Commitment of Traders report showed that funds were light buyers last week in the soybean market. Net length in soybeans increased 825 contracts to 232,700. In soybean meal, funds bought 2,700 contracts and were net long just over 84,000 contracts, or the most since June 2018. The largest position change was in soybean oil, where funds bought 12,400 contracts, lifting their net long position to 94,400.

• Cash markets were mixed this week, with domestic processing markets holding firm, while exports markets collapsed at the end of the week on sharply higher barge freight. But export demand at the Gulf remains strong, with the world’s next harvest still months out.

• Dec Chicago corn ended a cent lower. Deferred contracts ended slightly higher. Market strength despite another round of selling in crude is noteworthy.

• Managed funds on Tuesday were long a net 276,000 contracts, up 57,000 from the previous week. Fund length has now exceeded all post-2012 weather markets. Since Tuesday, funds have sold an estimated 60,000 contracts. Similarly active fund activity from both sides is anticipated through the release of NASS’s Nov Crop report.

• Yet, a fundamentally bearish spark is needed to sustain lasting speculative selling. Argentine dryness is already a concern given the lack of moisture in Aug and Sep. Interior US cash basis has likely formed its seasonal low. Black Sea basis has weakened amid elevated farmer selling, but the US remains the low-cost exporter for Dec-Feb arrival.

• Upside potential is substantial if yield is lost in S America.

• Dec Chicago wheat ended 5 cents lower. Other contracts ended near unchanged. Wheat-specific new is lacking but world cash markets remain firm. EU futures have been unwilling to break as domestic and export demand there looks to improve in the months ahead.

• Fundamental focus will be centred on weather in the near term and cash market longer term. Weekend precipitation will be regionally beneficial across Ukraine and SW Russia. A bulk of coming Black Sea rain will fall in the next 48 hours. Exact locations and amounts will be scrutinised Sunday evening. Additional rain is also offered to key areas of NSW and Queensland in E Australia late next week/next weekend. Sustained rainfall in E Australia into late Nov will begin to affect quality and force Asian milling demand elsewhere.

• Higher protein contracts will benefit most from additional supply loss. July KC’s discount to Chicago has fallen $0.25 since early October. This spread will continue to narrow into early 2021 as SRW seedings expand and HRW stocks contract.

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Weekend summary 30 October 2020

• Chicago ag futures are mixed but well above session lows at midday. Fund liquidation dominated early amid another round of weakness in global energy markets, but strong US and global grain fundamentals have offered support. US corn is the world’s cheapest feedgrain. US soybeans are virtually the only supply available to world importers through mid-Feb. And even wheat export demand has held steady despite large premiums to EU and Black Sea origin. Spot WTI crude is down $1.40 at $36 but the Dow has rallied to modest gains.

• US export sales through the week ending Oct 22 featured 88 million bu of corn, vs. 72 million the prior week and well above expectations; 60 million bu of soybeans, vs. 82 million the prior week; and 27 million bu of wheat, vs. 14 million the previous week.

• The week’s wheat business was heavily weighted toward white wheat, with China buying one cargo and S Korea buying three. We would mention that US white wheat export commitments currently sit at 141 million bu, a hefty 76% of the USDA’s forecast. Asian demand for US white wheat has been robust. For their respective crop years to date, the US has sold 1,204 million bu of corn, up 168% from last year, 1,726 million bu of soybeans, up 145% from last year and 594 million bu of wheat, up 11%.

• Excellent US corn and soy export demand is known, but it is expected to continue well into late 2020 even assuming normal S American weather. US soy export commitments now account for a record 79% of the USDA’s forecast. As such, a final export number of 2,275 million bu is most probable. This will pull down ending stocks by 75 million bu assuming NASS’s yield is unchanged. New Chinese demand for US soy has been slower in recent days but there is still little/no room for S American yield loss. Acute focus will be placed on Argentine soil moisture as La Niña strengthens.

• Even US corn export will be forced upward if sales of 60+ million bu continue into late November. US exporters were announced to have sold 56 million bu of corn to Mexico this morning. 35 million bu will be delivered in the 20/21 crop year. Exporters also sold 5.5 million bu of corn to unknown destinations and the corn market has quickly turned into one being driven by demand.

• The midday Black Sea forecast is slightly drier in Southern Russia. The US forecast features dryness and warming temperatures into the middle of November. Row crop harvesting will be complete in the next 10-12 days.

• The midday GFS weather forecast is consistent with its morning output and is viewed as mixed. Heavy rainfall will be ongoing across Central and Northern Brazil indefinitely. Lesser showers will allow Brazilian soy planting to accelerate across major producing states Parana and Mato Grosso do Sul. Zero precipitation is forecast in Argentina into Nov 10. Argentine crop areas benefited from soaking rain last week but it is important that regular rain return no later than late November. A rapidly strengthening La Niña is a concern.

• World cash grain and soy markets will be the principle drivers of Chicago futures into late year. We doubt cash markets can sustain any lasting downtrend amid grain supply tightness across the EU, Black Sea and Brazil. Breaks will be absorbed quickly.

• Deep red is the market’s colour at midday with corn, soybean and wheat futures enduring widespread fund selling and deep losses. The DOW has dropped 800 points as a “risk off” theme circulates the world financial markets. Expanding cases of Covid-19, next week’s US Presidential election, and the inability of the US House and the Trump Administration to pass new stimulus has raised investor anxiety. Cash grain/oilseeds on basis and fob offers are exceptionally strong, and have not budged. It is the speculative selling from fund managers that has produced the midday selling pressure.

• Grain futures corrections on fund liquidation usually last for 3-4 days. As November futures go into delivery, a recovery effort should unfold. FAS announced new sales of 120,000 mt of US soybeans to an unknown buyer, 207,000 mt of US corn to South Korea, and 110,000 mt of US soybeans to Egypt. China is using the Chicago break to price prior basis purchases made in September. The US soybean export program to China is massive and the need for cash soybeans is acute. The best place to source soybeans is likely to stop November receipts and take delivery. This should produce a bottom in the soybean market as overbought technical conditions are corrected. Corn and wheat should follow with the US corn export program really starting to kick into a higher gear in early 2021.

• Chicago brokers estimate that funds have sold 3,600 contracts of wheat, 8,100 contracts of corn, and 8,700 contracts of soybeans. In soybean products, funds have sold 4,500 contracts of soyoil and 6,600 contracts of soymeal. Spot Chicago soyoil futures have support below $0.33 while Dec soymeal finds support below $168/ton. End users should scale down into coverage in each soy product.

• The EIA weekly ethanol report showed a modest gain in production at 276 million gallons which would consume some 95.3 million bu of corn. Last week’s US ethanol production was 268 million gallons with US ethanol stocks falling slightly to 823 million gallons. The weekly stocks fall was considered supportive. For the marketing year in corn, the grind is on pace to consume 4,980 million bu of corn, slightly less than the WASDE forecast of 5,050 million bu. The report does not alter our forecast for a US 2020/21 corn grind of 5,000 million bu.

• We doubt that December crude oil futures will drop too far below $35.00.

• A daily chance of rain exists across N and C Brazil for the next 2 weeks. The forecast has returned drier for S Brazil and Argentina. Temperatures cool to the 70′s/80′s to 90′s with lows in the 50s/60s. The drier trend for Argentina must be monitored.

• Hedge fund managers started to reduce their market exposure yesterday. Normally, it takes 3-4 days before the risk mitigation is completed. Chinese pricing is evident in soybeans on a scale down basis. US farmer selling has ended on the decline. December corn should hold $3.95-4.00 support, Nov soybeans $10.40-10.50 and Dec Chicago wheat at $5.90-6.00. Positioning on this break for a S American weather scare is advised. A record strong La Niña will produce heightened S American weather anxiety into 2021.

• A push to new highs in nearby corn/soybean futures did not follow through to the upside which has sparked profit taking with Chicago values retreating at midday. Corn/soybean futures are lower while wheat tries to hang in the green. There is an “air” of correction in the marketplace as speculators have trouble buying December corn at $4.20 and November soybeans close to $11.00. The risk vs. reward amid improving S American, US and Black Sea weather forecasts is not there with a major US election in a week. Fund managers are taking risk off the table, not adding it.

• That said, cash basis bids and nearby futures spreads are holding firm. December/March corn spread has traded at even money for most of the morning while November soybeans trade at 19.5 cent premium to March while December Chicago wheat trades at a 1 cent premium to March. Excluding KC wheat, the entire Chicago spread profile is inverted, something that has not been seen for years. Even the often dumped on Dec soyoil futures market (massive deliveries for years) is trading at a premium to March with cash soyoil values well above delivery.

• US end users have been caught short and booked along with the massive Chinese demand which more than absorbed the harvest pressure. The question going forward is whether the acute buying by China and domestic users will continue.

• Chicago brokers estimate that funds have bought 3,600 contracts of wheat, 4,100 contracts of corn, and 2,800 contracts of soybeans. In soybean products, funds have sold 2,100 contracts of soyoil and 3,500 contracts of soymeal. Midwest cash soymeal basis levels are weakening which is likely due to slowing domestic demand and some substitution of other products in the feed ration.

• FAS did not report any new daily sales on Tuesday. US exporters advise that Chinese demand for US corn/soybeans has really slowed down. China may have booked a cargo of US sorghum at $3.00 over ex the Texas Gulf. There has been a rather dramatic slowdown in Chinese demand for US soybeans and corn in the past 6 days.

• Rumours abound that Ukraine farmers are increasingly defaulting on prior cash corn sales contracts. A late season Ukraine drought looks to cut its corn crop to 29-31 million mt amid daily yield data. The smaller crop has rallied Ukraine interior corn prices with nearly 1 million mt of vessels waiting to load the new crop. Ukraine estimates that just over 55% of the corn crop has been harvested. The EU, China and North African nations are the primary buyers, which means that Ukraine cash grain middlemen are on the hook when a cash default occurs. Ukraine corn exports are seen at 24-24.5 million mt via a corn crop of 30 million.

• A daily chance of rain exists across Brazil with the best rains to start Friday and continue across N Brazil into early next week. Rainfall totals are estimated in range of 0.5-3.00″ and locally heavier amounts. The wet trend is maintained throughout next week. Portions of Mato Gross, Goias and Minas Gerais will receive over 4.00″ of rainfall in the next 10 days. Temperatures cool to the 70′s/80′s to 90′s with lows in the 50s/60s. The coming moisture is quickening the pace of corn and soybean planting throughout S America. Argentina and S Brazil received soaking rainfall last weekend.

• Hedge fund risk managers are wanting to reduce their market exposure heading into next Tuesday’s US election. Increasing volatility is expected depending on the US election results. Corn, soy and meal markets are technically overbought and in need of a correction. And China demand for US soybeans/grain has dramatically slowed in recent days. Amid improving S American and SW Russian weather, a correction could befall Chicago. However, until large S American crops are made, it is tough to be overly bearish. Any fund inspired correction in November could set up a buying opportunity.

• Other than soyoil/November soybean futures, it has been a day of retracement in Chicago. Deliverable Chicago corn receipts were cancelled which is underpinning the December/March spread (only 1 receipt is outstanding at Ottawa) while wheat prices are under pressure from wet weather forecasts for the Central US Plains and SW Russia. After heavy early volume, trade volume has slowed at midday with the US DOW posting sharp losses of 800 points. The macros are pressuring Chicago grains with the US$ higher and “risk off” occurring ahead of the coming November 3 US election.

• Chicago brokers estimate that funds have sold 6,600 contracts of wheat, 4,500 contracts of corn, and 3,200 contracts of soymeal. Funds have bought 4,100 contracts of soyoil and 2,900 contracts of soybeans. A large fund sold 10,000 contracts of corn near the reopening as futures fell below Friday’s low. We doubt that this morning break was enough to correct the overbought condition.

• FAS reported the sale of 129,700 mt of US soybeans sold to an unknown buyer (rumoured to be either a China or EU crusher) with 135,000 mt of soymeal sold to the Philippines. No US corn was reported contrary to cash rumours of Friday.

• US weekly export inspections for the week ending October 22 were; 25.0 million bu of corn, 97.9 million bu of soybeans, and 13.3 million bu of wheat. US soybeans are taking up a large amount of Gulf export capacity leaving the grains with more routine weekly export totals. China imported 58 million bu of US soybeans last week (60% of total) with the Netherlands loading out 780,000 bu of soybeans from Chicago. We expect that US soybean exports will stay massive into year end as China loads out record purchases.

• For their respective crop years to date, the US has exported 239.9 million bu of corn (up 103 million or 75%), 405.8 million bu of wheat (up 15 million or 4%), with soybeans at 526.8 million bu (up 230 million or 78%). The US soybean export pace is likely to exceed 100 million bu in the weeks just ahead as China continues to actively load out prior purchases.

• EU corn and wheat prices are likely to work near parity as livestock feeders struggle with feed availability. Recently, South Korea has been booking US and optional origin feed wheat in lieu of corn. EU corn imports are likely to be cut sharply on a pure lack of GMO-free supply. EU grain prices must act to reallocate (swap out) Ukraine corn sales and allow for some of them to be sourced into the EU while non-EU corn demand is routed the US.

• A daily chance of rain exists across Brazil into November 8. 10-day rainfall totals are estimated in a range of 1.50-4.50″ with the heaviest totals falling across Minas Gerais and throughout NE Brazil. Temperatures cool to the 70′s/80′s to 90′s with lows in the 50s/60s. The coming moisture is quickening the pace of corn and soybean planting throughout S America.

• Chicago values are mixed with selling/profit taking noted. China demand for US soybeans is slowing (not ending), but with cash markets holding strong and the US corn/soy harvest winding down, futures cannot decline too far to make sure that the US farmer sells supply off the combine. Once the grain enters the bin, it is much more difficult to pry away. There is a real bull stocks story for world vegoils and higher prices are likely into year end. A close above $0.35 December soyoil futures confirms an upside target of $0.45-0.50 on reduced non-US soy crush and spot shortages of sun, palmoil and rapeseed oil. US corn futures need to confirm fresh China demand for the next rally leg. Any Covid-19 pandemic worsening would impact corn and US ethanol on reduced US driving.

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Weekend summary 23 October 2020

• Fresh rally highs in corn/soymeal/soybeans have underpinned Chicago this morning. An early break uncovered fresh fund buying as speculative longs continue to pile into new length. Soy crush spreads are blowing out to the upside as world soybean end stocks tighten and cash product basis bids rise. Brazil is virtually out of soybeans while Argentine farmers are tight fisted with stored supply as labour strikes loom over their industry. The US 2020/21 soybean carryout is in retreat and the US cannot meet combined domestic/world demand in the months ahead. Tightening stores of US soyoil and soymeal are the result and the market is trying to find a price that produces substitution. In the case of soyoil, the price of canola, sunoil and palmoil are also sky high on tight stocks which argues for a rationing rally. A close above $0.35 basis December soyoil issues a more dramatic rationing rally signal.

• Chicago brokers estimate that funds have bought 11,900 contracts of corn, 2,700 contracts of Chicago wheat, and 7,500 contracts of soybeans. In soy products, funds have bought 7,400 contracts of soymeal and 3,800 contracts of soyoil. The early soymeal rally felt like an exhaustion top on the upside.

• FAS reported the sale of 152,404 mt of US soybeans sold to Mexico and 132,000 mt to an unknown buyer (rumoured to be an EU crusher), along with 130,000 MTs of US white wheat to South Korea.

• The USDA weekly export sales report for the week ending October 15 reflected sales of; 13.5 million bu of US wheat, 72.1 million bu of corn, and 81.8 million bu of soybeans. Corn/soybean sales were larger than expected. The US also sold 321,900 mt of soymeal and 37,000 mt of soyoil. The US has now sold 1,666 million bu of US soybeans, just 10 million less than all the soybeans that were exported in 2019/20. The US soybean export sales pace argues for a 2020/21 export total of 2,325 million bu. Chinese purchases have slowed this week, but other buyers like Mexico and the US are stepping forward.

• On a known basis, China has now secured 25 million mt of US soybeans with 60% of the (10.9 million mt or 6.5 million mt) unknown destination category likely destined for China. This takes estimated 2020/21 China purchases of US soybeans to 31.5 million mt, well on their way to 35-37 million mt for the 2020/21 crop year. Amid the purchases already on the book, a 2020/21 crop year total of 38 million mt is realistic, especially if S America has any new future adverse weather.

• China has booked a known 10.5 million mt of US corn on a known basis with another 1.5 million estimated to be in the unknown category for a grand total of 12.0 million mt. We estimate China corn 2020/21 corn imports from the US at 14-14.5 million mt. So far, the USDA is correct in staying with a 2,325 million bu US 2020/21 corn export estimate.

• Chicago spot soybeans have strong chart-based resistance at $10.80-11.00 with December soymeal showing resistance at $390-400/ton. November soybean futures scored a new rally high to $10.8525 as buy stops were triggered. China showed as a buyer of 11,000 mt of US soyoil, but we doubt that China secured 20,000 mt of meal. The meal sale will be switched or corrected with US cash meal weakening at midday.

• A daily chance of rain exists across Brazil into November 5. Showers start on Friday and continue for the next 2 weeks. 10-day rainfall totals are estimated in a range of 1.50-4.00″ with the heaviest totals falling across Minas Gerais and throughout Argentina. Temperatures cool to the 80’s to 90′s.

• At one point, the nearby crush spread gained an astounding 20 cents/bu as soymeal/soyoil posted hefty gains. The soymeal market is technically overbought as the cash market weakens. A correction is expected Friday on profit taking ahead of the weekly CoT report. However, SW Russian wheat weather remains arid (at least up until October 30 when some rains show on midday run) which will underpin Dec Chicago wheat below $4.16. March corn is fundamentally overvalued above $4.20 without large new US sales to China. Cash corn and soybean movement increased on the morning rally which could spark profit taking in bull spreads.

• Fresh rally highs in corn, soymeal and KC wheat have underpinned Chicago this morning. Fund flows remain to the buy side with new demand noted across the floor. Yet, the volume of Chicago trade has declined from the opening. The tone of Chicago is becoming apprehensive as demand led bull markets need to be fed. End users/importers are looking at current prices as extreme. Gulf Dec corn is offered at $5.80, Gulf December HRW wheat at $7.95/bu with Gulf December soybeans at $12.40/bu. Such prices are not cheap, and as recent day purchases have shown, large new US daily sales are slowing. The USDA/FAS did not announce any new sales today. China interest for US soybeans is in seasonal decline with China crushers worried by record imports and storage availability. With S American rainfall improving, one must be careful with any new net new long positions.

• Chicago brokers estimate that funds have bought 8,900 contracts of corn, 300 contracts of Chicago wheat, and 6,600 contracts of soybeans. In soy products, funds have bought 1,800 contracts of soymeal and sellers of 2,900 contracts of soyoil. The funds are adding to their massive long position amid the new rally highs in corn.

• Bloomberg news is reporting that China has no plan to intervene in its domestic surge in corn values. China stated that their corn harvest is 80% finished under favourable weather conditions and will be completed by the end of the month. The Government makes no mention of corn imports and it is uncertain whether their statement of “not intervening” means to the issuance of TRQ’s for corn imports. The China corn intervention comment leads to fresh uncertainty as WASDE’s China corn import estimate of 7.0 million mt.

• The price of domestic China corn is so high that Chinese sources indicate that livestock feeders are incorporating wheat in the ration. Both conventional and feed wheat work into China’s feed ration for hogs/poultry. Record corn prices are causing end users to seek economic alternatives.

• Indian wheat prices are always above the world marketplace due to their domestic support program. But, amid rising world wheat prices, it is possible that India could export wheat for milling/feed purposes in 2020/21. The problem is one of Indian wheat quality that tends to be so varied. Yet for EU feed compounders, Indian wheat could be a GMO free alternative to Ukraine corn

• Turkey has removed is grain import tariffs to ease the recent price spike of Black Sea wheat. Turkey has missed the world rally and has only modest forward coverage. Look for the Turks to use any modest correction to be a buyer.

• US weekly gasoline consumption fell to 8.29 million barrels, down 14% from 2019. US weekly ethanol production was down 8% to 268 million barrels with US ethanol stocks at 829 million gallons, down 13 million gallons. The current pace of US ethanol demand argues for a further 100 million bu cut in the US corn ethanol grind to 4,950 million bu. US ethanol blender margins are at their worst level since April at minus $0.04/gallon. A drop in crude oil below $38/barrel would push US ethanol margins into the red. Ethanol margins make March corn futures look rich above $4.20.

• Gulf March-April corn premiums continue to rise which has some exporters talking of new forward business for US corn. Whether the buyer is China, Japan or another SE Asian feed producer, there is a bid on the Gulf corn market for late winter/spring.

• A daily chance of rain exists across Brazil into early November. The showers start a day earlier than expected on Friday and continue for the next 2 weeks. 10-day rainfall totals are estimated in a range of 1.50-3.50″ with the heaviest totals falling across Minas Gerais and throughout Argentina. Temperatures cool to the 80′s to 90′s. Brazilian farmers and their big equipment can seed crops quickly. The 2020 seeding campaign is the latest in a decade, but the seeding pace is increasing.

• Uncertainty aplenty. A US election in less than 2 weeks, increases in US/EU Covid-19 cases, and when will a vaccine be available that has efficacy against Covid-19. China interest for US soy is in seasonal decline with funds holding a combined record long in US ag futures. Amid improving S American weather, this is no place to chase a rally. We await a correction. If a bearish shock develops, it is likely to be related to a coming macro-economic event.

• 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.

• Chicago futures have been back-and-forth with profit taking pushing wheat to trade both sides of unchanged while corn/soybeans hold in the green. The volume of trade has been strong with fund interest key to buy the early day break. Prices are rising at midday with wheat prices turning back higher.

• In demand led bull markets, spreads/cash basis should be gaining daily, but the soybean/corn nearby spreads have been weakening in recent trade. Yet, world cash corn, soybean and wheat futures spreads have been holding strong which is underpinning Chicago. The world cash market must show weakness for any Chicago futures break to be sustained. For now, Chicago is struggling with large net fund length, slowing Chinese demand for US soybeans, and difficulty in assessing the 2021 impact of reduced Russian wheat production.

• Wide ranging and volatile Chicago markets are expected in coming weeks, with any break dependent on rains returning for Russian winter wheat and S American crop areas. We see the chance for rain as favourable for S America with the Russian forecast returning to an arid trend. Non-US weather gains in importance in the trading sessions that lie ahead.

• Chicago brokers estimate that funds have bought 1,600 contracts of corn and 3,900 contracts of soybeans, while selling 2,200 contracts of wheat. In the products, funds have sold 5,200 contracts of soyoil and buying 3,200 contracts of soymeal. Fund managers were sellers after the 8:30 morning reopening with modest demand pulling prices higher into midday. On the rallies, cash sales of US corn and soybeans are said to be robust.

• FAS reported the sale of 123,000 mt of US corn to Mexico and another 345,000 mt to either Mexico, Japan or China. Most see Mexico as needing forward coverage of US corn and are willing to advance their purchase pace on breaks.

• There has been widespread talk about Brazil’s drop in import tariffs (8%) for corn/soybeans for cargoes before 2021. US exporters report that there is elevation or loadout capacity available beyond the second week of December, but that vessels arriving and off-loading in Brazilian ports before December 31 makes the calculation tight. A few US soybean cargoes may sell to Brazil, but there are 3 boats that are loading in Uruguay and destined for Brazil. The US will see modest Brazilian demand due to limited US Gulf elevation availability

• The GFS’s Black Sea weather forecast is arid at midday. Light scattered showers are offered over the next 24 hours with rainfall amounts forecast to be less than 0.4″ and coverage of the area being no better than 30%. Warm/dry weather conditions follow into late October.

• The Brazilian weather forecast is increasing rainfall totals for N Brazil. The midday model continues a trend that calls for needed soaking rainfall to start this weekend and persist into early November.

• Paris wheat futures hit a new rally high and on a continuation spot futures chart have exceeded the May high at €209.50/mt.

• The midday GFS weather forecast is wetter across the Eastern Midwest over the next 10 days. Moisture-equivalent totals in excess of 1″ will be confined to IL, IN and OH. 4-10″ of snow falls across the Dakotas and MN. The forecast stays cold for another 2 weeks with just a few spits of moisture for Plain’s HRW wheat. The cold/wet weather will slow the remaining 2020 Midwest corn and soybean harvest.

• Rising world wheat/corn fob cash prices has stimulated the morning Chicago rally. The Russian Government is claiming that it looking at increasing domestic wheat stores (2-4 months of demand) without suggesting it would impact 2020/21 wheat export availability. The Russian Government continues to look for ways to control domestic wheat storage. Clarification from the Russian ag ministry is awaited. We maintain a view that improving S American weather will produce a Chicago correction in late October or November that offers a new purchase opportunity. For now, don’t chase Chicago rallies or breaks.