- Chicago futures have been back-and-forth with profit taking pushing wheat to trade both sides of unchanged while corn/soybeans hold in the green. The volume of trade has been strong with fund interest key to buy the early day break. Prices are rising at midday with wheat prices turning back higher.
- In demand led bull markets, spreads/cash basis should be gaining daily, but the soybean/corn nearby spreads have been weakening in recent trade. Yet, world cash corn, soybean and wheat futures spreads have been holding strong which is underpinning Chicago. The world cash market must show weakness for any Chicago futures break to be sustained. For now, Chicago is struggling with large net fund length, slowing Chinese demand for US soybeans, and difficulty in assessing the 2021 impact of reduced Russian wheat production.
- Wide ranging and volatile Chicago markets are expected in coming weeks, with any break dependent on rains returning for Russian winter wheat and S American crop areas. We see the chance for rain as favourable for S America with the Russian forecast returning to an arid trend. Non-US weather gains in importance in the trading sessions that lie ahead.
- Chicago brokers estimate that funds have bought 1,600 contracts of corn and 3,900 contracts of soybeans, while selling 2,200 contracts of wheat. In the products, funds have sold 5,200 contracts of soyoil and buying 3,200 contracts of soymeal. Fund managers were sellers after the 8:30 morning reopening with modest demand pulling prices higher into midday. On the rallies, cash sales of US corn and soybeans are said to be robust.
- FAS reported the sale of 123,000 mt of US corn to Mexico and another 345,000 mt to either Mexico, Japan or China. Most see Mexico as needing forward coverage of US corn and are willing to advance their purchase pace on breaks.
- There has been widespread talk about Brazil’s drop in import tariffs (8%) for corn/soybeans for cargoes before 2021. US exporters report that there is elevation or loadout capacity available beyond the second week of December, but that vessels arriving and off-loading in Brazilian ports before December 31 makes the calculation tight. A few US soybean cargoes may sell to Brazil, but there are 3 boats that are loading in Uruguay and destined for Brazil. The US will see modest Brazilian demand due to limited US Gulf elevation availability
- The GFS’s Black Sea weather forecast is arid at midday. Light scattered showers are offered over the next 24 hours with rainfall amounts forecast to be less than 0.4″ and coverage of the area being no better than 30%. Warm/dry weather conditions follow into late October.
- The Brazilian weather forecast is increasing rainfall totals for N Brazil. The midday model continues a trend that calls for needed soaking rainfall to start this weekend and persist into early November.
- Paris wheat futures hit a new rally high and on a continuation spot futures chart have exceeded the May high at €209.50/mt.
- The midday GFS weather forecast is wetter across the Eastern Midwest over the next 10 days. Moisture-equivalent totals in excess of 1″ will be confined to IL, IN and OH. 4-10″ of snow falls across the Dakotas and MN. The forecast stays cold for another 2 weeks with just a few spits of moisture for Plain’s HRW wheat. The cold/wet weather will slow the remaining 2020 Midwest corn and soybean harvest.
- Rising world wheat/corn fob cash prices has stimulated the morning Chicago rally. The Russian Government is claiming that it looking at increasing domestic wheat stores (2-4 months of demand) without suggesting it would impact 2020/21 wheat export availability. The Russian Government continues to look for ways to control domestic wheat storage. Clarification from the Russian ag ministry is awaited. We maintain a view that improving S American weather will produce a Chicago correction in late October or November that offers a new purchase opportunity. For now, don’t chase Chicago rallies or breaks.