- Chicago is mixed in moderate volume. Corn prices higher on lower yield bets while soybeans are little changed and Chicago wheat futures sag. The market lacks a directional feel with everyone discussing the potential result of the US Midterm election, Thursday’s USDA Crop report and what are the chances that the US/China reach a trade deal. The volume of Chicago trade spikes on the upside, and when the market sags, so does volume. End users will add to forward coverage on breaks, while the US farmer has not been a large cash seller. Seasonally, Chicago rallies into the Thanksgiving Holiday and with US/China trade talks ahead, we expect the market to follow this trend.
- The US exported 49.4 million bu of corn, 45.1 million bu of soybeans, and 12.0 million bu of wheat for the week ending November 1. For their respective crop years to date, the US has shipped out 389.7 million bu of corn (up 171 million or 78%), 315.2 million bu of soybeans (down 231 million or 42%), and 328 million bu of wheat (down 92 million or 22%). The US soybean and corn export totals were larger than expected, while wheat was disappointing.
- The average trade guess for Thursday’s November USDA report is a US corn yield of 180.0 bushels/acre (down 0.7 bushels/acre from October) and a soybean yield of 53.0 bushels/acre (down 0.1 bushels/acre). The yield declines were expected but may not be large enough following all of the rain across the W Midwest during October and resulting yield reductions. We would lean to a US corn yield of 178-179 bushels/acre and a soybean yield around 52.8 bushels/acre. Our lean into the report is for a bullish corn yield market response.
- Tweets and political decisions will be widespread in the coming days with US agriculture focused on trade. It is impossible to know what President Trump will decide on US/Chinese trade negotiations. The good news is that both sides are now in full discussion at a very high political level. That is something that could not be said during the summer or much of the autumn. However, it is doubtful that Chicago can sustain a break with short bought end users needing to take forward coverage, just in case, a deal is cut. Weather is also a big unknown in the ag business, but this year’s political uncertainty has added to the uncertainty and likely upcoming market volatility.
- The midday central US GFS weather forecast is drier and colder than the overnight run. Widespread rain totals of 1-2” impact the E Midwest, but otherwise, mostly dry weather conditions will prevail. Progressively colder temperatures push southward with light snows noted across S Canada and the northern quarter of the North Central US. Mostly dry weather will occur in the 9-15 day period with the final stages of the US harvest to occur. The time for a full shift to S American weather is occurring. The midday forecast for Brazil remains favourable with concern over too much rain for portions of Argentina.
- It is impossible to forecast changes in policy, and so we maintain our current, well documented, views. However, note that a US/China trade deal would produce a lasting bullish change for the US ag markets. We see limited downside in wheat/corn ahead of the USDA November report while January soybeans holds breaks below $8.65. Our longer-term favourite remains wheat on declining Russian/Aussie export potential.