- HEADLINES: China buys more US SRW wheat; Rumours of Brazilian corn switching to the US: Midday GFS weather forecast drier N Brazil.
- Chicago futures are mixed at midday with soybeans lower, while the grains have rallied. The volume of Chicago trade is down from yesterday with fund managers busy covering massive corn/wheat shorts while peeling back length in soybeans and soymeal. Soyoil is back testing key support at $0.50 basis January futures.
- China purchased an additional 200,000 mt SRW wheat overnight which pushed March Chicago wheat close to $6.40 resistance. China has now purchased 1.6 million mt of US wheat and talk is that their total purchase on this round may reach 1.75 million. The Chinese demand should prod the USDA to raise their 2023/24 wheat export estimate on Friday. We maintain that China will take 2.0 million mt of US wheat in the 2023/24 crop year, but the French wheat market has not followed Chicago to the upside, and the future opportunity for China is to secure French SRW.
- Corn has rallied on rumours that China is washing out 6-10 Brazilian corn cargoes with the hope that the corn will be switched to the US on the profitable economics. The Brazilian corn market has rallied sharply as its exportable supply is within 1-2 million mt of being sold out for the season. China has purchased 1.0 million mt of US corn in the 2023/24 crop year. The rapid sale of the record large 2023 Brazilian corn crop increases the odds for US corn sales to China (and other importers). Crop year to date world corn trade is record large, it is just that Brazil has been filling the business. US corn export sales are forecast to be noticeably stronger in the weeks ahead on its newfound competitive economic position. Brazilian corn export sale commitments have reached 51.0 million mt or just 1 million of the crop year forecast.
- Chicago brokers estimate that managed money has bought 7,400 contracts of Chicago wheat, 8,400 contracts of corn, while selling 6,400 contracts of soybeans. In the soy products, funds have sold 5,100 contracts of soyoil while buying 2,400 contracts of soymeal.
- China’s Caixin Services index (PMI) rose to 51.5 in November, a hint that China’s economic outlook may be brightening. China’s manufacturing index fell to 49.4 in November, which was down 0.1% from October. Copper and other industrial metal prices were rising on the hope of renewed demand. Commodity markets cannot sustain rallies without growing Chinese demand. China is forecast to import record tonnages of soybeans and feedgrains in the 2023/24 crop year on its government reserve restocking.
- China is rumoured to have booked 3-4 cargoes of US soybeans for January/February this morning. The purchase is said to be out the PNW. China continues to use weakening Chicago prices to book forward coverage into March.
- The midday GFS weather forecast is drier than the overnight for Northern Brazil and wetter for Southern Brazil. Limited rain is forecast for Northern Brazil over the next 5 days with isolated accumulations of 0.25-1.50”. The forecast models call for an increase in Northern Brazilian rainfall in the week 2 forecast with totals of 1.50-4.00”.
- Southern Brazil will endure soaking rainfall later today which continues into Saturday. 10-day rain totals are estimated in a range of 3.00-6.50” which is up 1-1.50” from the overnight forecast. New rounds of flooding are possible. The extended range forecast offers additional heavy rain for S Brazil.
- Soybeans are extracting weather premium on the prospect of rain for Northern Brazil in the extended range. Yet, Brazilian crop estimates are in decline with the winter corn in the biggest supply risk due to falling seeded acres. Both US corn and wheat have brightening export demand outlooks, while the soy complex struggles under the weight of another big Brazilian soy crop. We note that soyoil is back to its November lows on fund selling, but as new renewable diesel plants open, a cash led soyoil rally will unfold in 2024. End users should use the soyoil break for new purchases.