- Tuesday was another mixed day of trade, with markets reversing Monday’s trends. Soyoil recouped losses as the palm oil market stabilised, which took meal lower on spreads, while soybeans settled down, but well above the early morning lows. Soybean crush spreads ended lightly mixed, with January trading over $1/bu at the high and closing down a quarter of cent at $.9925/bu. Funds ended the day as estimated sellers of; 3,000 soybean and 4,500 soymeal contracts, and buyers of 4,500 in soyoil. The new crop soybean/corn ratio ratio this week is slightly less than it was a year ago, at 2.6:1, but still well above the long term average of 2.3:1. With harvest wrapped up, producers are turning attention to crop production plans for next year. The question going forward is whether the current new crop price ratio is enough to pull in additional soybean acres. Major moving averages sit just under the market around $9.85, while strong rallies above $10 will offer the next selling opportunity.
- Corn futures fell another 2 cents amid a lack of news, a higher US$, weaker crude, and as the USDA’s long term projections lack any bullish fodder. Assuming normal weather trend corn yields will reach 190 bushels/acre by 2027, and even despite a lack of acreage growth US end stocks will stay near 2.5 billion bu. Finding world market share is the goal, and this of course requires a major change in world currency relationships or adverse S American weather. In the near term, however, we maintain that neither the bulls nor bears will have much lasting momentum. Argentine cash basis levels continue to rise, and have rallied rather quickly, and on paper the US Gulf market is becoming more competitive. The EIA’s report on Wednesday is again expected to include near record ethanol production and ongoing export interest, Brazilian ethanol is now quoted at an 8-month high $2.15/gallon, vs. US Gulf ethanol at $1.50.
- Another round of Egyptian wheat business has come and gone with yet lower prices, and as such Black Sea offers through March are down slightly. Egypt bought two cargoes of (once again) Russian wheat at an average fob price of $193/mt, down $1.50 from its last tender in mid-November, and it remains clear that world cash wheat prices continue to decline from highs posted in late summer. However, the US market very quickly is priced to sell, SRW is quoted at a multi-year low $177/mt. Lower protein HRW is priced at parity with comparable German and Baltic supplies. It is likely that managed funds early this morning were short a net 125,000 contracts, and as interior US basis strengthens, a bearish outlook can not be advised at current prices. US wheat is competitive in a range of $4.25-4.40, basis March Chicago, and N Hemisphere crop establishment is now key. We would note that the USDA’s baseline numbers show a steady contraction in US wheat end stocks into 2020 amid a lack of acreage/yield growth.