- HEADLINES: China rumoured to be buying/bidding for Ukraine corn for Jan-June; Russia wants to slow wheat trade; Brazilian GMO decisions on Argy wheat Thursday.
- Rising US inflationary pressures have rallied Chicago corn, soybean, and wheat futures this morning. The upside leader has been the grains while traders are reluctant to chase a soybean rally due to slowing Chinese demand. We look for a strong Chicago close with a test of recent contract highs in wheat due later this week. Note that due to the US Veteran’s Day Holiday on Thursday, the FAS Weekly Export Sales report will be released on Friday. The market tone is bullish with fresh inflows from managed money being felt across the screen.
- Chicago brokers estimate that funds have bought 4,300 contracts of wheat, 6,500 contracts of corn, and 2,100 contracts of soybeans. In soy products, managed money has secured 3,100 contracts of soyoil while selling 1,200 soymeal. The funds are adding to their commodity exposure, a trend that we argue will prevail into the end of the year.
- There are rumours that China is bidding for Ukrainian corn for January-June shipment. Yesterday, 200-250,000 mt of Ukraine corn was sold to China. New sales are pending as negotiations continue. We note that China is expected to release new TRQ Import licenses before the end of the year, which at hefty import margins, should find willing private buyers of US/Ukraine corn. S American corn does not have a phytosanitary certificate and is excluded. The rise in domestic Chinese corn prices during and post-harvest has world exporters raising their import estimates of 2021/22 Chinese corn.
- Reuters is reporting that Russia will soon be setting an annual wheat export quota for January-June of 2022. This is about 6 weeks earlier than prior expectations (mid-February). And Russian Ag minister Patrushev is becoming frustrated that its export tax calculation is not pushing Russian wheat out of world trade. Today, even with the export tax, Russian fob wheat is reported to be the cheapest in the world and the ag ministry is threatening to change how the tax is calculated to somehow slow trade. Russian domestic wheat/flour prices are perched near record highs while domestic Russian food inflation is running at 6-7% annually. And Russian farmers are in no hurry to sell stored wheat based on regional drought conditions impacting their new seedlings.
- Brazil is expected to determine Thursday whether it will approve drought tolerate GMO wheat that was seeded on 60,000 Ha in Argentina. The decision will be important. However, Brazilian millers won’t care what the Brazilian Government declares, we understand they will test and reject any Argentine GM wheat that is found.
- US weekly ethanol production was 305 million gallons, down 20 million from the prior week, but up 6% on last year and 1% on 2019. US ethanol stocks rose 7 million gallons to 852 million which was up 1% on last year, but down 3% on 2019. The EIA ethanol grind was not as big as expected with the data slightly bearish for corn. Yet, key Midwest ethanol producers are raising cash corn basis bids with reports of some Central Illinois plants paying 30-35 cents over December.
- The midday Central US weather forecast is like the overnight run with showers to push eastward into the W Midwest in the next 24 hours. W Midwest rainfall totals look to range from 0.25-1.25” with locally heavier amounts. Dry and cooler weather follows with the next chance of rain being late next week over the Ohio Valley. The Plains stays in an arid weather trend into Nov 23.
- It is a “risk-on” day with world wheat values surging on the potential that Russia may further restrict trade through taxes/quotas while wet weather is causing downgrades to the E Australian wheat harvest. New contract highs are expected. Corn is surging on rising cash basis bids from US ethanol producers and rumours that China is securing Ukraine corn. Soy is a follower of the grain rally. Upside wheat price risk is sizeable if Brazilian millers seek US HRW on Argentine GM worries.