- Chicago futures were slightly lower to start. However, buying developed shortly thereafter with values bouncing on positive US/China trade news. But, the volume of Chicago trade remains sparse with midday activity lacklustre.
- Traders argue that early buying developed as China reported in the South China News that they are ready to sign Phase One agreement. China sources claim that enough progress has been made that a signing could occur in November. However, comments from USTR were not as optimistic and Chicago prices retreated into the midday hour. The politics of US/China trade is keeping the market unsettled with neither the bears or the bulls able to garner traction.
- Chicago brokers estimate that funds are flat in soybeans/wheat while buying 2,800 contracts of corn. In the soy products, funds are flat in soymeal while buying close to 2,300 contracts of soyoil.
- The Financial Times is reporting that China will miss its 10% ethanol blend target in their gasoline by 2020. Backlash from energy firms/ local governments have pushed back against China’s effort to utilise more ethanol in the past two years. Now many private sources argue that it will be a long time before the10% blend rate takes hold and launches China’s corn demand upwards. And amid the rapid build out of their electrical charging system, some ponder if ethanol will ever be utilised above 8% as the Government directly pushes to electrical power for environmental reasons.
- Traders are awaiting the results of GASC’s wheat tender for Dec 1-15 shipment. FOB French wheat was the cheapest offer for 1 cargo at $214.86/mt while the next cheapest origin was Ukraine followed by Romania. Russian fob wheat was offered at $221.25/ mt. The Russian wheat market can miss a few GASC tender sales, but Russian wheat cannot miss many or it will not be able to reach its annual export target of 34.0 million mt. A year ago, Russia exported 35.4 million mt of wheat, so it is becoming statistically obvious that Russia needs to become more competitive in GASC tenders for January forward.
- Chicago traders are looking for China demand to surface on Thursday’s export sales report. Large US soybean sales and a greater amount of US red meat needs to be sold to China for a rally to unfold. Traders hear that China has secured large amounts of US pork, but CME hog futures have been sliding on needed confirmation. Remember that unlike the grains, there is no daily sales reporting for US red meat which leaves traders guessing on sales tonnages.
- Rumours about that the Fernandez Government will be raising its export taxes by 10-20% in December. This is causing farmers/exporters to be more aggressive in offering grain nearby. Argentina is not offering fob corn beyond December.
- The midday GFS weather forecast offers less snow for NW IL and SE IA with totals up to 10″. The remainder of the forecast is little changed with rainfall of 0.25-1.50″ for the remainder of the E Midwest/Delta while the W Midwest and Plains are dry. The coldest air resides in the Plains and Rockies. Cold air lingers into early November. The cold and dryness should push farmers to accelerate their harvest.
- It is another day of trading headlines. China said that a Phase One Deal was likely which was then pushed back against by the USTR. Chicago needs to see/taste new Chinese demand to spark a rally ahead of the Nov 8 USDA report. Otherwise, a lack of fresh news/demand will cause a slow erosion in Chicago prices. Chicago acts heavy and our view stays broadly bearish on rallies until there is clear evidence of adverse S American weather from mid-November forward.
- P.S. Just in – Egypt’s General Authority for Supply Commodities (GASC) purchased 235,000 metric tons (mt) of wheat at average price of $235.89/mt (basis C&F), which is $5.30/mt higher than previous tender. Of the total, France and Romania sold 60,000 each and Ukraine sold the remaining 115,000 mt.