- Tuesday was another quiet day of trading across the soy complex, that left January soybeans just over unchanged. Support at the 200 day moving average continues to hold, though the markets are still struggling to find direction. It is still early in the year, however early season soybean crush rates are have so far held above a year ago on a week to week basis. Last week’s crush was estimated at 1.75 million mt, and note that there has only been one week this year that has been under 1.7 million mt, which was during the October holiday. Seasonally, weekly processing rates tend to trend higher into the New Year Holiday, which this year is 2 weeks later than 2017 and lands in mid-February. Soybean basis remains historically weak, but holding above the late September lows and should further improves as harvest across most states starts winding down. Seasonally, it’s the wrong time of year to be overly bearish soybeans.
- Corn futures ended lower with December again flirting with major chart-based support. The contract has struggled at resistance levels, and is expected to stay bound to a rather narrow trading range. Weekly US ethanol production (due Wednesday morning) should be strong, but the USDA’s November WASDE is likely to feature another boost in 2017 US yield and end stocks. US harvest progress as of late October vs. changes in corn yield from October to final since 1990 shows a correlation that is not overly strong, but more times than not, a slower than normal harvest results in yield hikes beyond October. This model suggests another 0.5-1.0 bushels/acre boost in yield in the November or January reports, which is also validated by combine harvest data. Rallies will struggle.However, managed funds are short an estimated 200,000 corn contracts, a level that’s only been exceeded in five weeks since 2006. ENSO forecasts are a bit stronger with La Niña in December/ January, and so a close eye will be kept on coming Argentina dryness. This is no place to be bearish of corn.
- Winter wheat futures fell to new contract lows as the market continues to reel from recent tender results, which included aggressive offers, and as currencies in Russia, Australia and Canada all weakened. The Canadian and Australian dollars rest at multi-week lows, and overall steep competition for exports is ongoing. The trade views current US winter wheat crop ratings as adequate for maintaining trend yield potential at this early date. Russian exporters look to scramble to clear stocks ahead of the winter months, but in the next few weeks there is no sign of freezing temperatures in areas surrounding the Black Sea. World cash wheat markets have been unwilling to break, but equally unwilling to rally. Gulf HRW this evening holds a modest premium to comparable origins, and so sales and shipments in the next several weeks will stay just so-so. Funds are heavily short in Chicago and Kansas (an estimated 102,000 and 17,000, respectively), and a modest bounce could occur at any time. However, rallies beyond 15- 20 cents will struggle without adverse S American weather. We see wheat as range bound between $4.10-4.50 basis spot Chicago futures.