- Wheat has paced the Chicago morning rally while the row crops fell in corrective trading. Early jitters surrounding the US Mid Term election and sharp fall in crude oil futures offered a bearish grain tailwind. However, KC December wheat has pushed above its prior high at $5.1025 while active call buying has underpinned corn. The trade is betting on reduced US corn/soybean yields on Thursday based on several wind storms that lodged crops amid excessive wet weather during October. Whether wheat can close above key chart-based resistance will key trading heading into the report.
- Chicago brokers report that it has not taking much volume to push the market around. Funds have bought 3,000 contracts of Chicago wheat, while selling 1,000 contracts of corn and 1,800 contracts of soybeans. In soy products, funds have bought 1,200 contracts of soymeal and 1,000 contracts of soyoil.
- 83% of the Kansas winter wheat crop is planted through Sunday compared to a 95% 5-year average. Excessively wet weather and now cold temperatures are limiting new seeding efforts. Also, insurance dates of when the crop must be seeded range from October 15 in NW Kansas to November 15 in the SW corner of the state. As such, producers are losing their eligibility to get crop insurance due to late seeding dates and many farmers are abandoning their wheat seeding intention. We have trimmed our 2019 US all wheat seeding estimate to 48.6 million acres, which compares to the baseline estimate released Friday at 51.0 million acres. Research argues that a bullish story is brewing in US new crop wheat via reduced supply. The wheat market is also discussing reduced world production and that WASDE may have 2018/19 Australian wheat exports too high by 4-5 million mt. Cash connected sources argue that Australia will consume large amounts of wheat due to their ongoing large livestock herd. The Aussie cattle herd has held near record levels, even amid the dire drought. W Australian wheat is being exported to Eastern Australia amid the rising price of feed. A cut in the crop and expanded feed use could easily cut Aussie 2018/19 wheat exports to 8-9 million mt vs the WASDE forecast of 13.0 million.
- The midday central US GFS weather forecast is dry/cold for much of the Midwest. The harvest will slowly advance against the background of winterlike temperatures. Progressively colder temperatures will push southward with snows likely across S Canada and the northern quarter of the North Central US. The corn/soybean harvest will push to completion by Thanksgiving, but it is too cold to allow too much additional wheat seeding or germination. And the midday forecast for Brazil remains favourable with concern over too much rain for North Central Argentina.
- The results of the US election will have an impact on the US$. However, it is Thursday’s report and the G20 dinner between Trump/Xi which will determine long term Chicago price direction. We remain bullish of wheat on shifting world demand to the US, and the strong likelihood that US corn yields will come in below trade estimates of 180 bushels/acre. A close above $5.11 KC December wheat turns wheat price trends upwards.