- HEADLINES: Wheat/oats/canola score new contract highs; Funds active buyers of grain; Soybeans lag.
- Chicago grain futures are sharply higher at midday with managed money active buyers of the corn/wheat futures on the morning rally. Soybeans have been the laggard on large US yield/stocks talk and that as Chicago rallies amid Brazilian premiums that are sliding. Wheat/oats remain the bullish stalwarts in Chicago. However, with December Chicago wheat testing $8.00 and December oat values above $7.50/bu, it is hard to initiate a long new position. The morning has set new contract highs in wheat/oats/canola.
- Brokers estimate that funds have bought over 12,000 contracts of corn, 4,500 contracts of Chicago wheat, and 3,500 contracts of soybeans. In soy products, funds have bought 5,600 contracts of soyoil while selling 2,100 contracts of meal. Funds are selling soymeal as the US crush seasonally ramps up.
- US cash ethanol swaps have gained another 3-4 cents/gallon this morning which has helped underpin the bullish US ethanol outlook as crude oil futures surge near $85.00/barrel. Crude endured a correction last week that appears to have ended. The next upside price target for WTI spot crude oil futures is a test of the $88-90.00.
- US farmers are not in the fields across the soggy E Midwest, and it will require another 2-3 days for soils to firm enough to support heavy harvest machinery. The lack of harvest has limited cash selling from the producer on the rally. We suspect that cash related selling could increase once farmers return to harvest operations later this week.
- US weekly export inspections for the week ending October 28 were; 24.3 million bu of corn, 83 million bu of soybeans, and 4.2 million bu of wheat. For their respective crop years to date, the US has exported 213 million bu of corn (down 59 million or 22%), 354 million bu of wheat (down 64 million or 15%), with US soybean exports at 354 million bu (down 65 million or 15.5%). The US corn, soybean and wheat export pace continues to struggle based on Hurricane Ida and the delays that it produced. Brazil is offering January soybeans at $0.54/bu under the US, so the US export window for soybeans is limited to the next 10-11 weeks. The forthcoming USDA report is expected to reduce 2021/22 US soybean exports next week Tuesday, while leaving both wheat/corn alone.
- USDA announced the sale of 132,000 mt of US soybeans to China for 2021/22. China is securing US soybeans in bits and pieces; total tonnages are disappointing at the beginning of November. China’s compliance with the Phase One agreement is doubtful amid the lack of time that exists before Dec 31.
- Chilly/dry weather will be featured across the Central US this week. The cold temperatures will start to modify on the weekend with a warmer and drier trend to prevail thereafter. The harvest should score solid progress from Wednesday onward. High temperatures will range from the 40’s to the lower 60’s with lows in the 20’s/30’s/40’s.
- It is a flow day with speculative funds coming into Chicago in the new month. We doubt that the speculative flow will continue, and corrections appear likely into the November USDA report next Tuesday. We look for the USDA to cut 2021/22 US soybean exports by 50-75 million bu and raise US corn ethanol use by 50-75 million bu. No other changes are expected which means that any modest increase in US corn/soy yield could be bearish. For farmers that need to make sales for cash flow or storage considerations, Chicago is nearing a top. This not a place to be chasing a rally.