- Russian wheat export volumes will likely be in sharp decline beyond the middle of December as exporters adhere to pledged export totals and the cost of replacement soars as wheat must be sourced from deeper in the interior as stocks in the west are exhausted. There are eleven time zones in Russia and trucking or railing it from Siberia to the SE Russian export market is extremely expensive. The big Russian wheat program has would seem to have reached its zenith.
- It has been a morning of positioning with deeply green values this morning. The market is too short of soybeans/soyoil, which heading into a weekend of political uncertainty (G20/Trump/Xi) is producing active fund short covering. The grains are following. A deepening trade war worry pressured the market on Monday with recovery over the past two trading sessions. The rally has been bigger than the decline as funds are short nearly 70,000 contracts of soybeans and 76,000 contracts of soyoil. We see no reason for spot Chicago soybean futures to rally above $9.00 without a trade deal. Chinese President Xi speaking in Spain pushed free world trade rather than regional protectionism. Xi offered conciliatory statements on US/Chinese trade and IP protection, which Chicago liked. However, the Xi statements are not implying that China is willing to bend to US demands. There remains great political uncertainty as to what US President Trump will accept as a truce.
- Chicago brokers report that funds have bought; 3,100 contracts of wheat, 5,500 contracts of corn and 6,100 contracts of soybeans. In soy products, funds have bought 2,200 soymeal and 6,800 contracts of soyoil. FAS reported that the US sold 268,748 contracts of soybeans for delivery to unknown destinations. The rumoured buyer is either Mexico or the EU. Algeria purchased 600,000 mt of optional origin wheat on Tuesday. Some traders argue that US HRW wheat was included in the sale by Cargill. The wheat would have to be dramatically discounted on a FOB basis to work.
- The midday S American weather forecast is like the overnight solution with heavy rains slated to fall across the northern half of Brazil with totals of 3-8.00”. Below normal rains are expected across Argentina as spring planting accelerates. No extreme heat is foreseen due to persistent cloud cover across Brazil. Highs will range from the 70’s and 80’s across Argentina and the 80’s to lower 90’s across Brazil. The forecast is generally favourable for crops with too much rain for local parts of Brazil.
- The politics of trade is driving Chicago markets this morning. Soy prices are higher on the hope for a US/China deal. Research leans that a truce will be reached at the G20 dinner between Trump/Xi late week. However, it is it can only be a best guess. On the bearish side, China may be willing to bet that Trump has just 12-18 months of leadership remaining, before the next US election process starts. For China, this is not a lot of time with Brazil looking to produce a record large soy crop of 122-126 million mt. The point is that strong rallies near $9.00 would appear to be a near to mid-term upside for soybeans as this price has halted Chicago soy rallies since the US/China trade war started last summer.