- Chicago values are weaker at midday with the grains leading the decline. Wheat futures have fallen to its lowest level since October 11 with the corn market in tow. Dec Chicago wheat fell below its 100 and 200-day moving average which spiked values lower for a short period of time on active fund selling. Whether wheat closes below those key moving averages will be watched closely by traders.
- The soybean market is feeling the pain of large deliveries against November futures. The soy deliveries were not expected amid the sluggish and latent Midwest harvest. China demand for US soybeans has been lacklustre this week as negotiations are said to be progressing.
- Chicago needs to see sustained Chinese buying which is not occurring, and the Midwest harvest looks to advance next week, regardless of the snows that are flying today. We look for a lower close with some bounce in Chicago soy going home. Chicago needs fresh demand news to feed the bulls.
- Chicago brokers estimate that funds have sold 4,900 contracts of wheat, 4,300 contracts of corn, and 3,100 contracts of soybeans. In soy products, funds have sold 2,600 contracts of soyoil while being flat in soymeal.
- US weekly export sales for the week ending October 24 were; 18.1 million bu of wheat, 21.6 million bu of corn, and 34.7 million bu of soybeans. The wheat sales were slightly above trade expectations while soybeans/corn were disappointing.
- For their respective crop years to date, the US has sold 536 million bu of wheat (down 55 million or down11%), 449 million bu of corn (down 410 million or 48%), and 708 million bu of soybeans (down 76 million or down10%). The US corn sales are at pace that is just above the 2012 drought year.
- US Biodiesel production fell to 156 million gallons in August from 759 million gallons in July according the Energy Information Administration. Soyoil was the largest ingredient at 701 million gallons.
- FC Stone is expected to release their November US corn/soybean production estimates on Friday. IEG (lnforma) is rumoured to also be releasing their US November crop forecasts on Friday or Monday. Traders will start to think ahead to next week’s USDA November corn/soybean production estimates. We estimate 2019 US corn yield at 166 bushels/acre and soybeans at 47.0 bushels/acre. Our view is that the US corn yield will fall slightly to the October frost/freeze which pushed corn tests weights lower across the N Plains and the W Midwest.
- Brazilian farmers are receiving new crop cash bids of 87-88 Reals/bag for soybeans, one the highest bids in years. It is rare that Brazilian soybean farmers have witnessed such good prices during planting, although some replanting is occurring, Brazilian farmers are upbeat on 2020 crop prospects with rains in mid-November likely to brighten yield prospects.
- Following another 24-36 hours of light snow across the Lakes States, the forecast turns cold/dry for the next 10-12 days. Such weather is helpful in returning producers to harvest. The cold/drying forecast will help strongly advance harvest into mid -November.
- US President Trump remains optimistic on a Phase One trade deal with China saying that a new location is being sought. This underpinned the soybean market. However, corn/wheat values act heavy on slowing US export demand. US corn sales to date are down over 400 million bu from last year with Ukraine harvesting a record large crop. Corn bulls need a bullish US corn yield on November 8.
- P.S. An interesting article I received today (from a respected commentator) stated he had been bearish for the last three years (which previous writings confirm), and this bearishness was largely based upon President Trump’s trade and farm policies. However, he says he was not bearish enough given “false promises” relating to the ethanol industry in particular. In addition he refers to the major price cycle low that is scheduled for this autumn (which I can agree is scheduled but the specific timing could be questionable) and suggests that current price moves confirm the formation of such a low.
- Further, he is critical of the USDA’s current crop forecasting accuracy, particularly in not highlighting quite how poor the US corn and soybean crops are this season, suggesting that it will only be in January when true harvest data is made available.
- Consequently, he is now bullish into the 2020 US election year with the comment that if ag commodities are still as weak this time next year Donald Trump will be a “one term wonder”. The US/China trade war is looking closer than ever to some sort of resolution, which should (if there is any sense in the world – and that is questionable) ignite some US price recovery coinciding with a post major cycle price low.
- It seems sensible at this time to consider these thoughts and position accordingly, and I believe this ties in with our thought processes, well documented for some time.