- 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.