- Chicago futures are mixed at midday with wheat higher while corn/soybeans recover from the overnight profit taking. Threatening S American weather and the latest ENSO reading showing a strengthening of La Niña in the Equatorial Pacific have combined to produce new speculative buying. This has sparked a Chicago bounce into the midday hour.
- The liquidation of December futures ahead of first notice day on Monday and the US Thanksgiving Day holiday combined to produce the Tuesday Turnaround. Seasonally, Chicago futures tend to rally into the Thanksgiving Day holiday and then decline into December first notice day. However, the proximity of first notice day on Monday (November 30) has pulled this selling forward with many traders taking the days off on Wednesday and Friday. We look for a mixed close with the market acting well off the overnight liquidation.
- Spreading has been the driver of Chicago volume today. Traders are active buying wheat and selling corn/soybeans and buying soymeal and selling soyoil. Wheat has been used as the short leg for any long corn/soybean positions while oil/meal has been popular in recent weeks. The corn/soybean and soyoil fundamental stories are strong, it is just that traders want to bank their gains ahead of Thanksgiving. We expect that post the US Thanksgiving Day holiday that corn, soybeans and soyoil will resume their bullish trends.
- Chicago brokers estimate that funds have bought 5,000 contracts of wheat and 4,100 contracts of soymeal, while selling 5,500 contracts of soyoil, 4,000 contracts of corn, and 6,100 contacts of soybeans. We note that December soyoil is trading at an historically unusual 33 points premium to March soyoil with just a few days left before delivery. For years, soyoil spreads have been trading near to full carry amid the fear of large deliveries.
- There have been widespread rumours of China switching cargoes of February US soybean to Brazil and/or China switching palmoil purchases into other vegoils including soyoil. We hear that a few palmoil cargoes may have been switched to soyoil. However, there are few sellers of Brazilian soybeans for February off the Northern arc of Brazil. And the cost of getting out of a US cargo is extremely high. There may be a 1-3 cargoes of soybean switches, but we hear of no net cancelations. We suspect that the rumours of switches came from China to spark a Chicago correction to allow them to buy soy futures on a break.
- The FAS weekly export sales report will be released Friday due to the US Thanksgiving Day Holiday. The CFTC CoT report will be published Monday afternoon.
- The midday GFS weather model solution is like the overnight forecast with limited rain for Mato Grosso, Goias, Mato Grosso Do Sul and even Parana over the next 10 days. There are hints of better rain in the 11-15 day period, but that is too far out for confidence with many times the model just correcting for normal seasonal trends. The GFS/EU models have been over-forecasting rainfall for weeks and the rains in the 11-15 day period is not being pulled forward into the 6-10 day timeframe.
- Argentine rain starts to fall in key crop areas on Thursday with showers lingering into the weekend. Totals are initially modest ranging from 0.25-0.85″, but the stagnation of a front will allow shower totals to add up to 1.25-3.50″. The best rains include RGDS in Southern Brazil which has been exceptionally dry since October 1.
- Chicago markets have been scoring their lows in the overnight session as London Hedge funds sell call options as a hedge or sell futures outright to collect profits. The thin overnight volume exacerbates price movement. Chicago spreads and flat prices are recovering from the overnight break as speculative selling slows amid S American weather forecasts that are concerning for 10 days.