- The morning started out green across Chicago, but has turned mixed at midmorning as the grains slide back into the red. Soybean futures have held in the green on the prospect of Argentine and S Brazilian dryness and on bullish technical considerations. Soyoil and grain prices are back lower, but funds are nearing a point of being sold out of their market length in soyoil. Continuing a trend from the overnight, the volume of Chicago grain has been active as the US stock market pushes to new highs on proposed US tax legislation. Inflation is a subject being talked about by commodity traders, but until there is actual statistical evidence of inflation, many traders are loath to make any new bullish positions. Chicago brokers report that funds have bought 4,700 contracts of soybeans and 6,600 contracts of soymeal, while selling 12,000 contracts of corn and 1,200 contracts of wheat. In soybean products, funds have sold 3,000 contracts of soyoil and bought 6,200 contracts of soymeal. Our next upside price target for January soymeal rests at $350/ton.
- For the week ending November 30, the US exported 23.1 million bu of corn, 15.0 million bu of wheat and 66.2 million bu of soybeans. The corn and wheat exports were below trade expectations. For their respective crop years to date, the US has exported 309.2 million bu of corn (down 232 million or 43%), 839.7 million bu of soybeans (down 119 million or 12%, and 469 million bu of wheat (down 33 million or 6,5%). US corn and soybean exports are lagging the pace of the WASDE annual forecast, but we doubt that any big change will occur in next week’s December WASDE report with so much unknown about 2018 S American crop prospects.
- Argentine fob corn offers continues to rise on threatening weather and limited US farm selling. US Gulf fob corn is now priced at a discount to Argentine origin for January, which should start to pull demand to the US. The US has a good shot of being the world’s cheapest corn offer from now through late winter, a big boost for potential future US corn sales. If Chicago traders were really worried about dry/warming Argentine and S Brazilian weather, the Chicago rally would be led by corn. The Chicago corn market touched the 50 day moving average and is down nearly 4 cents at midday. The first Argentine corn crop will be pollinating in 2-3 weeks as sources tell us that stress is building. If Chicago was really worried about La Niña weather, its corn that is being adversely impacted. Currently It is not, which tells us that the worry is not all that great and that it is all about “fund order flows” for now.
- The market appears to be struggling with dry Argentine and S Brazilian weather forecasts. It is early in the growing season, but La Niña is building in strength and we see no evidence of a pattern change at midday. The worry over Argentine drought is likely to worsen heading into the end of December. Worrisome weather is confirmed by Chicago option volatility rising today as the market prepares for greater supply uncertainty. Corn and soyoil should be nearing a trading bottom while beans try to fill an open chart gap at $9.9575 basis January futures (which we have mentioned previously!).