- Midday Chicago futures are mixed with new US corn/soybean sales to China providing the early bullishness for the summer row crop futures. The fresh China buying caused bull spreading in Nov/March soybean futures while lifting December corn back futures to resistance at $3.95-4.00. Wheat has spent the morning lower with rain forecast for the Plains and portions of SW Russia.
- Chicago trade volume is diminished at midday with all eyes on the close. An inability of corn/soybean futures to rally off the fresh Chinese buying would suggest that the market is laden with too much speculative length with nearly 60% of the 2020 US corn crop yet to be cut. China is now covering January import needs with Brazilian premiums rising amid seeding delays.
- Chicago brokers estimate that funds have bought 5,700 contracts of soybeans and 4,900 contracts of corn, while selling 1,600 contracts of wheat. In soy products, funds have bought 3,900 contracts of soyoil and 4,800 contracts of meal. We estimate that through Tuesday’s close that funds are holding a net long soybean position of a record large 239,000 contracts of soybeans, 77,000 contracts of meal and 86,000 contracts of soyoil. All combined, fund managers are estimated to be net long a record large 400,000 contracts plus in the soy complex.
- The USDA reported that China secured 420,000 mt of corn said to be for April/May shipment and 264,000 mt of US soybeans. We hear that China has booked an additional 3-4 cargoes of US soybeans for January this morning. The corn business was completed late last week, and no new interest is being shown. China likely secured 2 cargoes of US sorghum at an expensive price of $300/mt.
- Chinese forward crush margins are negative amid massive soy imports. State run Chinese crushers will be running at maximum capacity while other smaller private crushers are worried about the coming oversupply. Chinese livestock herds have dramatically expanded on the year, but ASF exists and is capping growth. Chinese domestic demand for feed is strong, but with the feeding margin negative, caution is being expressed by some of China’s largest livestock producers about chasing corn or soymeal prices higher.
- Russian fob wheat markets are thinning with transparency being lost as bids/offers widen. November 12.5% fob wheat offers rest at $250-252/mt with bids at $245-247/mt. Cash wheat shorts have been the driving bullish wheat fundamental as interior farmers await needed rain for their new crop. Tight fisted Russian farmer selling has limited wheat origination and caused shorts to exit losing positions. Russian farmers want to see rain before selling stored stocks.
- South Korea purchased Brazilian corn overnight at $247.70 CIF for Nov/December shipment. US corn was noncompetitive which was a surprise. Argentine fob corn offers disappear beyond the middle of December.
- The Central US forecast is drier than the overnight run with less rain for the Western Midwest and the Central Plains. The models have extracted 0.25-1.25″ of rain from the west. The GFS forecast continues to place showers across the Lakes and the E Midwest this weekend. Cool to cold temperatures persist with highs ranging from the 50′s/60′s with lows in the 30′s.
- The Brazilian forecast is drier across Mato Grosso/Goias. The overnight EU model was wet with rainfall of 1.50-3.00″. The GFS/EU models are apart in their Brazilian forecasts, a trend that now extends for 5 days. We favour the wetter EU model with spring soy seeding to advance.
- Volatile and wide-ranging Chicago trade is expected. Speculative length is record large in the complex which along with slowing Chinese demand on a seasonal basis will cap future Chicago rallies. Yet, debate persists on the size of China demand for 2020/21 US corn under their TRQ import program which underpins breaks. China’s market volatility is on the rise with interior domestic corn/ meal values starting to relax.