- Soybeans were on both sides of unchanged throughout Tuesday and closed 1-2 cents weaker on late day selling. Market news has been light at the start of the week, though November soybeans had support under the 50-day moving average. Soy product markets also ended weak with soyoil following energy markets to deep losses, while meal futures were lightly mixed around unchanged. Soy crush spreads ended down 3-8 cents, with the largest losses noted in nearby spreads. The spot soybean crush spread is well under the highs that were traded last summer, but at $1.43/bu is still record high for late October. Chicago is offering crushers an average margin of $1.30/bu through to May and a $1.23 average to the end of the year. This should keep US crush demand strong in the months ahead. At Tuesday’s low, Nov soybeans were 41 cents under last week’s high. US farmers are not anxious to add to sales at these prices, but rallies will be slowed by large US supplies. Without a China resolution, we see spot soybeans caught in $8-9 range.
- Dec corn settled just above unchanged. Prevailing themes include uncertainty over US yield, rising ethanol export potential, and concern over the pace of Russian grain exports moving forward. Corn will follow wheat should the Russian government move to further slow down wheat shipments. Futures-based ethanol margins are negative. Actual margins in the cash market are modestly above variable costs. The incentive to maximise weekly production has eroded. However, unchanged US ethanol prices and rising Brazilian prices have triggered a rather sizeable premium in Brazil, which will remain a large market for US ethanol in late 2018/early 2019. The US forecast is a bit drier next week, and so a full ten days of active harvest lies ahead. A clearer yield picture will be available by the weekend. Work continues to indicate fair value lies between $3.70-3.85 basis Dec futures.
- World wheat futures ended steady to slightly higher. Strength is noteworthy given plunging macro markets. We look for chart-based support to hold this week in anticipation of a meeting between the Russian government and exporters on Friday. We doubt that Friday’s meeting will bring a change to Russian grain shipment policy, but recall in 2014/15 a tax was placed on exports in Feb. The tax was announced the previous December. Contacts suggest something is needed to slow down Russian exports, but just how this is done exactly is known. Interior prices will be the trigger for an outright cap. Russian interior prices are rising but are not yet at excessive levels. Whether the government intervenes is still very much uncertain, but there is little doubt that Russian stocks are tightening. Russian stocks/use on Nov 1 is pegged at their lowest since 2012. World cash markets are again little changed. Gulf HRW is offered at/below Russian for Dec-Feb arrival.