- Chicago grain futures have extended the overnight rally, with Jan beans recovering from session lows. More attention is being paid to the abrupt weakening of calendar spreads in Chicago wheat, and today has the feel of a short squeeze. Non-commercial traders last Tuesday were short a net 65,000 contracts of wheat in Chicago. We estimate their position this morning was closer to net short 80,000 contracts.
- We would also mention that low temperatures across the Black Sea Region this morning fell into the low/mid-20s. Snow cover is absent. No snow is offered to E Ukraine and Southern/Central Russia over the next 4-5 days. Winterkill rarely impacts price, but freezing temperatures there will be added to excessive rainfall in Argentina, unwanted rain during Eastern Australia’s harvest, and ongoing drought across much of Europe and the Black Sea. Interior US wheat basis is firm, and in parts of the Plains rallied last week with first notice day approaching. Few, if any, wheat deliveries are anticipated. EU milling wheat in Paris has followed, with spot futures there up €2.25/mt ($.07/bu).
- Weekly US grain inspection are delayed until Tuesday. Corn inspections are expected in a range of 45-50 million bu, with wheat at 14-16 million and beans at 40- 45 million. The lag in bean shipments relative to last year will widen. Spot crude is up $.60/barrel, with more talk centered on a potential OPEC production cut in 2019. However, Brazilian ethanol prices this week have fallen again following Petrobras’ lowering of official gas prices in Brazil. Brazilian ethanol maintains steep premiums to US Gulf origin, but US ethanol exports are needed amid lofty stocks and tight production margins.
- The midday S American weather forecast is a bit drier in the 6-15 day period, but heavy rain (2-4”) will fall across North/Northeast Argentina in the next 24 hours. This system moves into Southern Brazil at midweek. Normal to above normal precipitation will continue across the whole of Brazil’s soybean belt into the very end of November. 16-30 day guidance also indicates a pattern of normal rainfall across Brazil during the opening week of December.
- In recent years, the US wheat market has often rallied into first notice day, a theme that will likely continue amid strong cash markets. Seasonal trends are also positive into the latter part of the month.