- Chicago values are mixed at midday with corn firm, while soybeans and wheat are weaker. It is a reversal of yesterday’s trend. Chicago is lacking direction and we expect this chop/chop to persist into the US holiday next week. Few traders are interested in raising their risk profile amid existing trade and political uncertainty. We look for a mixed Chicago close with selling on rallies due to favorable S American weather. Dec/March corn spreading is robust with gains in open interest of 42,000 contracts noted.
- Chicago brokers estimate that funds have sold 3,000 contacts of wheat and 3,100 contracts of soybeans, while buying 3,300 contracts of corn. In soy products, funds have bought sold 3,600 contracts of soyoil while buying 1,100 contracts of soymeal. Profit taking in soyoil has been featured as the funds bank profits on weaker Asian cash prices and overbought conditions.
- Traders worry that with the “US Support of Hong Kong Bill” on the desk of US President Trump, that this signing will alter China’s stance on US/China Phase One trade deal. We doubt that that will be the case as China offered to invite to the USTR head Lighthizer and Sec Treas Mnuchin to Beijing knowing that the Bill was likely to be signed by Trump.
- We suspect that China will be willing to go forward with trade negotiations regardless of US support of the Hong Kong protesters. Worry is something that traders are always good at, but trade negotiations will broaden and deepen heading into the December 15 US tariff increase threat on $157 billion US$. The risk in the marketplace is that the US Deputy Trade officials accept China’s offer and head to Beijing early next week.
- US weekly export sales came in as expected. For the week ending November 14, the US sold 16.1 million bu of wheat, 31.0 million bu of corn, and 55.7 million bu of soybeans. China showed up as securing 20.9 million bu or 37% of the US soybean total. China has bought 8.5 million mt of US soybeans (312 million bu) with 3.1 million mt sold in an unknown destination classification (114 million bu). We suspect at least half of the unknown sales will be switched to China. This means that China has nearly performed on its pledge to secure 10.0 million mt of US soybeans duty free. Large new Chinese purchases will require a trade deal or a new allocation of duty-free licenses.
- Midwest corn farmers are fretting at the cold/wet weather forecast with an estimated 2.2-2.4 billion bu of corn likely to be in the field at Thanksgiving. Cold/dry weather is needed to accelerate the harvest with Midwest soils muddy/saturated. Any Upper Midwest corn harvest that waits until spring could endure yield losses of 20-40%. The market will become sensitive to US corn harvest and weather into December.T he good news is that the midday GFS forecast has taken rain/snow further south into the Delta.
- The midday GFS weather forecast offers needed rain for N Brazil/S and C Argentina in the next 10 days. Any dryness is centered on Paraguay and the southern third of MGDS. Otherwise, the forecast is favourable with improved crop conditions the result. For the vast majority of the S American corn/soy crops, soil moisture is favourable.
- Chicago values are chopping sideways with favourable S American weather and uncertainty in US/China trade capping rallies. Corn prices are being underpinned by the amount of crop that is likely to be left in the field in mid-December. December option expiration is Friday while first notice day is the day after Thanksgiving. It is US/China trade that keys price direction into the December holidays.