- Tuesday has seen a red day in Chicago with corn, wheat and soybeans all easing back as the 1st December first notice day fast approaches and funds slow their purchases of Chicago soybeans. December Chicago wheat has fallen to contract lows and this has pressured markets in London and Paris, both of which are lower today. Chicago soybeans have fallen below yesterday’s low, which has triggered further selling. A closing price below $10.42¼ basis January futures would point to a $10.20 target, which was the former contract high price level.
- The soybean/corn and soybean/wheat ratio appears to be out of line. In spot soybeans/corn, that ratio rests at a historically high 3.05:1, while in new crop it sits at 2.7:1. Amid our estimate of 500 million bu plus of old crop soybean end stocks with new crop end stocks forecast in excess of 600 million bu, such premium of soybeans to the grains makes little fundamental sense. We suspect that the only reason why Chicago soybean futures are trading at such lofty levels is based on the ongoing speculative interest of China in positioning long in Dalian soymeal and vegoil futures. China’s speculative buying translates to strong crush margins and actual purchases as hedges in Chicago.
- It seems we are destined for a price bottom to be formed in Chicago grains before first notice day with a secondary rally in the soybean complex to determine if a longer term “top” is being formed. As stated above, we believe soybeans are overpriced relative to the grains; OPEC appears to be struggling to reach a supply deal, which is bearish to energy prices and pressuring to the ags; and US corn and soybean export demand is beginning to slow.