- HEADLINES: Morning rally cools on mediocre export sales; Canola scores new high.
- Chicago futures are mixed at midday with corn, soybean, and wheat futures trading both sides of unchanged. December corn futures rallied to sharp early gains with December futures testing key resistance at $5.65-5.70. Traders suggest that short sold $5.60 and $5.70 corn calls were blown out with the active purchase of futures, while the soybean market sags on oversupply and sluggish China demand. Once again, the USDA did not report any new US soybean sales to China and sales totals argue for a sharp cut in the USDA export estimate in less than 2 weeks. The lack of China demand and expectation of rising US soybean yields has traders selling soybeans against their long grain positions. Wheat values have come off their highs amid the weakness in Paris futures. We continue to hear of troubles that some Mideast and African nations are having in financing high priced wheat purchases. Yet, the US$ falling to a new 30-day low has provided background support to wheat in particular. The pace of wheat trade will be watched closely moving forward.
- Canadian canola futures are sharply higher with spot futures rising more than $50 Canadian which is not underpinning soyoil. WTI crude is down $1.10 per barrel at midday.
- The soyoil market is offering some weakness that is independent of other vegoil markets amid the sharp rise in US crush rates. We are not hearing of new Chinese demand for US corn, and although we are bullish, we would not chase the Chicago rally today.
- US weekly export sales through the week ending Oct 21 lean a bit bearish as FAS data showed a contraction in US corn and soy interest.
- Corn sales through the period totalled 35 million bu, vs. 50 million the previous week. This is still 5 million above the pace needed to hit the USDA’s target, but better demand is needed to fuel rallies, particularly amid shrinking Brazilian export commitments. US soy sales totalled 43 million bu, vs. 106 million the previous week, with China securing only 40 million bu on a known basis. Wheat sales were a disappointing 10 million bu, vs. 13 million the previous week. The US Gulf market, on a fob basis, is becoming much more competitive for world market share in the Jan-Feb period, but current steep premiums will limit non-traditional business into late autumn/early winter.
- For their respective crop years to date the US has sold 1,172 million bu of corn, down 3% from last year’s record, 1,119 million bu of soybeans, down 35% from last year, and 463 million bu of wheat, down 22%. USDA is unlikely to lower US soy export demand in its Nov report, but the market is acutely aware of this year’s timely pace of seeding in Brazil, with the first of new crop Brazilian exports likely to leave the country in early Feb.
- The midday GFS weather forecast is little changed with North American outlook. Light but steady rains will continue to challenge harvest progress in IL, IN, OH, with 48-hour precipitation totals there pegged in a range of 0.25-1.50”. It remains that a lasting period of dryness will blanket the whole of the Central US Oct 31-Nov 10. A timely completion to harvest is anticipated. Additionally, there are hints of needed rainfall across the western HRW Belt Nov 7-8.
- The GFS forecast is similarly consistent in S America. The only potential issue at present is a lasting period of dryness due in across the southern third of Brazil over the next two weeks. Soil moisture there is adequate for early crop growth, but rain will be needed by late Nov. Widespread boosts in soil moisture occur in Central Argentina and across Central and Northern Brazil in the near-term. This rain will be particularly welcomed in Argentina amid recent dryness and excessive heat this week.
- Soy remains the laggard, while incredible corn demand potential and extreme exporter wheat stocks tightness underpin breaks in grain markets. A steady/higher corn yield is needed in NASS’s Nov release to prevent additional bullish vigour, but until the report has come and gone, we look for resistance in Dec Chicago corn at $5.65-5.70.