- Wheat futures are higher on short covering amid the lack of deliverable Chicago receipts and the modest gain in EU values as wet weather continues a slow the seeding pace in the UK, Italy and France. EU farmers can seed wheat well into February without much yield loss, but as of today, too much rain/saturated fields are keeping planters in the sheds. Corn is caught between the sag of soybeans and the gains in wheat. US corn export demand has improved marginally, but it is not enough to sustain a recovery. We look for a mixed close with Chicago traders awaiting news on a US/China Phase One Deal. We maintain that it is in the interest of both US President Trump and Chinese President Xi to reach some sort of trade truce before December 15.
- Chicago traders estimate that funds have sold 2,300 contracts of soybeans, while buying 1,200 contracts of corn and 2,400 contracts of wheat. In soy products, funds have sold 3,100 contracts of soyoil while buying 300 soymeal.
- US export inspections for the week ending Nov 21 were; 23.8 million bu of corn, 71.4 million bu of soybeans, and 15.5 million bu of wheat. The soybean exports were larger than expected (largest in 2 years) while the grains lagged. China took 37.2 million bu of US soybeans last week (52% of the US weekly total), the largest weekly export total for US soybeans to China since the trade war started in June of 2018.
- For their respective crop years to date, the US has sold 220.4 million bu of corn (down 298 million bu or 57%), 528.5 million bu of soybeans (up 80 million bu or 18% from last year), and 453.9 million bu of US wheat (up 82 million bu or 22%). We estimate that China has yet to ship out about 5 million mt of US soybeans. We expect that China will more regularly export 1 million mt/week into the end of the year. The biggest problem for US soybeans is that China has nearly used up its 10 million mt of tariff free import allocation. A trade deal is needed for US soybeans to keep flowing to the world’s largest soy importer
- The Chicago/Minn wheat spread has rallied to an historically unusual $0.335 Chicago premium. HRS Minn wheat has not traded at such a sharp discount since September 2007. On a spot basis, the record high for Chicago SRW vs HRS was in August 2007 when Chicago traded at an 80-cent premium to HRS.
- The Brazilian weather forecast is ideal with heavy rains for the dry central area. The rest of Brazil looks to see at least normal rain with any dryness focused on the southern half or third of Argentina. This area has enjoyed heavy rains in the past 24 hours but follow up moisture will be required after December 5. The good news is that there is no evidence of any above normal temperatures for Argentine crops with highs in the 70′s to the mid 80′s. The Brazilian new crop soybean crop is off to a favourable start with at least trend line yields expected.
- Chicago soybeans sinking on improved Brazilian weather and the potential for trend line (or above trend line) yield should the weather pattern hold through December. Chicago wheat is rising on sharply on fund buying tied to no receipts in deliverable positions against Chicago futures and last week’s high being exceeded. Corn is caught in the middle with spreading being sizeable. The Chicago wheat move is largely fund inspired with US wheat prices moving to deeper premiums vs. other world exporters.