- It has been a mixed trading session in Chicago this morning in light volume. Corn and soybeans have firmed into the midday trade while wheat is still holding in the red. The volume of trade has been light with it not taking much volume to push values around. Long wheat/short soy spread unwinding is featured.
- Chicago brokers report that funds have sold; 2,500 contracts of wheat, 1,400 contracts of corn, while buying 3,000 contracts of soybeans, 1,000 contracts of soymeal and 2,800 contracts of soyoil. The double bottom in soyoil prices along with record large biofuel demand has funds looking at new long positions The spot KC wheat/corn spread has narrowed into $1.07 wheat premium, the tightest since major wheat lows where scored in June. The spread peaked at $2.15 KC wheat premium in August and has retreated $1.08. The big question is whether KC wheat needs to become a feedgrain (with world wheat stock/use ratios nearing a record lows and the Russian’s slowing down their export program). UK feed wheat is offered at an equivalent of $233/mt with Ukraine feed wheat offered at $221/mt. US 12% fob Gulf HRW milling wheat is offered at $232/mt or $1/mt below UK feed wheat and just $11/mt above Ukraine offers. KC wheat relative to corn or feed wheat is deemed as cheap. The world is short of hi pro wheat.
- US weekly ethanol production was 1,042 barrels/day vs 1,067 last week. This produced 306 million gallons of ethanol vs 314 million a week ago. US ethanol stocks fell 30 million gallons to 988 million gallons, up 4% from a year ago. US crude oil stocks rose to 447 million barrels, up 4.7 million barrels. However, the 447 million barrels of stock is down 2% from last year. The big question for the US crude market going forward is whether OPEC will trim their production by 1 million barrels/day in their December meeting.
- December Chicago options will expire on Friday and few fireworks are expected.
- The November Cattle On Feed Report was bullish with placements at just 93%, while marketing and the on feed totals were 104%. The placement total was well under expectations and seen as bullish which pushed February futures to resistance at $121-122.00.
- The midday S American GFS weather forecast features heavy and localised flooding rain for N and C Brazil. Rainfall totals of 4-9.00” look to drop across the northern half of Brazil into December 1. The rains could raise disease concern as the soybean crop pushes into the reproductive phase. Near normal rains are expected across Argentina as spring planting accelerates.
- The price decline in wheat makes no fundamental sense, but values are being pushed by ongoing fund selling and bearish chart patterns. Soy futures are rising on wet Brazilian weather and hope for a US/China trade deal next week. Dec corn has bounced off of key support at $3.60. We could be pushed into a bet that the US and China will keep talking after next week’s Trump/Xi dinner as any escalation of trade tensions would further batter the US stock market.
- Tomorrow is Thanksgiving in the US and we will be limiting commentary accordingly.