- Red has blanketed Chicago price boards this morning amid disappointing weekly US export sales, favourable harvest weather and ongoing normal/above normal rainfall expected in S America into early November. It has also been another weak macro day, with the Dow down another 265 points. Money is moving from equities to debt, with the Fed this week hinting that additional rate hikes lie ahead. As such the US$ is stronger, while other major exporting currencies are weaker.
- FAS’s weekly sales report included 15 million bu of corn, vs. 40 million the prior week; 17 million bu of Bu of wheat, vs. 12 million; and a paltry 11 million bu of beans, vs. 16 million the previous week. Weekly corn sales were a marketing year low. Large soybean cancellations worth 25 million bu were made by unknown destinations. This is very likely China, as US beans to other origins are very cheap. China has taken 1.09 million mt of US beans, vs. 12.9 million mt last year. This week’s corn demand is viewed as an anomaly, but following weak ethanol data Wednesday, fresh news this week has been bearish on the margin. For their respective marketing years to date the US has sold 830 million bu of corn, up 41% from a year ago; 766 million bu of soybeans, down 21%; and 445 million bu of wheat, down 18% from this week in 2017.
- Canada’s harvest has resumed, but at a rather slow pace. Spring wheat harvest in Saskatchewan is 72% complete, vs. 65% last week and 98% last year. Canola harvest is 67% done, vs. 95% in mid-October a year ago. Quality issues have been cited following recent snow.
- Following this morning’s selloff, we estimate that managed funds are short 20,000 contracts of corn, 25,000 contracts of wheat in Chicago, and 30,000 contracts of beans.
- The midday central US weather pattern is much wetter across the Delta and Eastern Midwest beyond November 1. Confidence in this solution is low and requires validation by other models in the days ahead. Otherwise, meaningful precipitation over the next 11-12 days will be strictly confined to the Southern Plains and southern Delta region. Like the morning run, cooler than normal temperatures will be sustained across the Eastern half of the US into late next week. Warmer temperatures are forecast thereafter. No major snow events are indicated.
- Jan beans neared overbought territory early in the week, and with China able to refrain from the US market a S American weather issue is needed to sustain $9.00+. We maintain that deep corrections in grain markets are buying opportunities and downside risk in wheat is limited to 5-7 cents.