- HEADLINES: Soybeans test key support at $11.75-12.00 January, Wheat rallies on tightening world stocks; Corn caught in-between.
- Chicago ag markets are mixed at midday with wheat futures higher while soybeans sag to fresh lows on pre-USDA report positioning. The trade is expecting a bearish USDA November crop report as the US soybean yield rises at least 0.5 bushels/acre and demand is cut by USDA adjusting exports lower by 50-75 million bu (according to traders). The positioning for a bearish USDA report has punished Chicago soybeans by $0.60/bu over the past 4 trading sessions and dragged corn/wheat values lower. The supply side of the equation has outweighed demand with domestic US ethanol and soybean crush margins at or near record highs as cash soy products trade at a sizeable premium to Chicago.
- Grain futures are more mixed with soybean shorts wanting to be long of corn/wheat as an offset. We note that a considerable amount of bearishness has already been digested by Chicago, but you just never know what the USDA will do in terms of yield. End users are waiting for the USDA crop data before extending forward coverage. Chicago lows should be scored early this week.
- Participants in the China International Import Expo signed purchase agreements for 8.4 million mt of soybeans. The buyers are rumoured to be China’s state-owned importers, Sinograin/COFCO, while the sellers to include the ABCD’s of the world grain industry. The framed contracts could push US exporters to announce large sales in the USDA daily reporting system.
- Weekly FGIS export sales were massive for soybeans at 97.3 million bu while grain exports were disappointing. For the week ending November 4, the US exported 22.2 million bu of corn and 8.5 million bu of wheat. Last week’s US soybean exports were revised upwards to 95.8 million bu. For their respective crop years to date, the US has now shipped out 237.7 million bu of corn (down 62 million or 21%), with US wheat shipments at 364 million bu (down 66 million or 15%) and US soybean shipments at 509 million bu (down 227 million or 31%). China shipped out 66.5 million bu of soybeans or 68% of last week’s export total.
- The USDA is expected to cut 2021/22 Russian and raise EU wheat exports based on pace analysis. The vessel line-up for Russian wheat is in fast retreat. The EU marketplace cannot decline too far (Paris wheat), or another push of EU wheat export buying looms. Paris wheat futures price must ration future demand.
- Brazilian wheat importers/truckers will be testing Argentine wheat for GM material starting next week. Argentine farmers seeded 55,000 HA of GMO wheat which is worrisome with Brazilian/world wheat millers mandating that Argentine wheat be GMO free before offloading. The odds are high that an importer will find GM material in an Argentine wheat cargo which would set in motion a rash of phytosanitary concern. This needs close attention in future world wheat trade.
- The midday GFS weather forecast is faster with a storm system pulling across the Central US late this week. The system produces showers across the NW Midwest midday Thursday into Friday. Dry/cooling weather follows. We estimate that that 86-88% of the soybeans and 82-84% of the US corn crop was harvested through Sunday. The forecast this week is mild/dry which will push the last of the crop into the bin. The extended range forecast stays dry for the US Western Plains for the next 2 weeks.
- Fear of a bearish USDA November Report has pushed soybeans to sharp losses in recent days with values becoming oversold. Longer term, it is the price of fertiliser, energy and chemicals that places a peg under Chicago grain futures. In the bull leadership role will be corn as world producers cut future seedings due to cost. We are returning to a more bullish outlook on wheat/corn following the needed supply focused correction.