- HEADLINES: Fund buying cools at midday; US/EU wheat stay positive.
- Chicago ag futures have eased off morning highs. Fund buying at midday has cooled following a flurry of new influx due to ongoing ideas of long-term inflation and as fresh wheat input remains bullish. Expect elevated wheat market volatility amid extreme exporter stocks tightness and as US and European futures have quickly become overbought, technically. The wheat outlook remains bullish, but choppy trading will be the mantra into late year at decade-high prices.
- Additionally, there is much confusion surrounding Brazil’s biosafety commission approving the import of GMO wheat flour this morning. First, only flour has been approved and already Brazilian millers aim to fight the ruling politically. Arbitrigo, Brazil’s wheat industry association, has asked the Brazilian administration to further analyse the decision with the hope of having it reversed.
- Ultimately, this is an issue of consumer preference, which globally does not favour the consumption of GMO wheat/flour and which will not change in the 2021/22 crop year or for many years in the future. Our message is that the risk that N African/Mid-East importers reject cargoes of Argentine wheat due to the finding of GMO is intact. This issue must be monitored closely as Argentina’s wheat export program ramps up seasonally in Dec-Jan. We also note that the long-term wheat outlook is bullish into mid/late winter even if there are no disruptions to Argentine grain flows.
- Soaking rainfall of 2-4” has impacted South Australia and key portions of New South Wales and southern Queensland in the last 48 hours. Additional rain falls across eastern Australia into Friday and concerns over wheat quality remain elevated. A drier pattern does become established next week, but odds are high that above normal precipitation returns to E Australia late Nov and throughout Dec as La Niña strengthens. E Australia’s Jan wheat future rallied to a new contract high of 374 $AUD/mt ($273/mt) overnight.
- Spot rapeseed/canola futures in Canada and Europe have rallied to new contract highs with ease this week. Feb rapeseed in Europe looks to settle today at $808 per tonne, which compares to Jan Chicago soy at $449. Cash rapeseed oil in Europe is quoted at $0.85/lb for Dec-Jan delivery. Soaring global rapeseed/rapeseed oil prices will act as a buoy for the Chicago soy complex on breaks. Rapeseed prices must work to shift demand to other oilseeds, including soy and sun.
- Finally, we hear that China is booking US soybeans for Dec-Jan shipment. Official sales announcements will be watched for on Friday morning when the federal government reopens.
- The midday US weather forecast is consistent in keeping rain/snow over the next 10 days confined to the far Upper Midwest and Great Lakes. No threats to the completion of harvest are forecast across the Plains and principal corn/soy belt. Model guidance is colder across the Midwest & East Coast Nov 21-26, which should act to keep natural gas prices elevated in the near term.
- The S American weather forecast is slightly wetter in RGDS in S Brazil early next week, with needed rainfall of 0.50-1.00” projected there. Otherwise, soaking rain occurs in Argentina this weekend. A drier pattern develops next week, and Argentine weather moving forward must be monitored closely. Favourable conditions persist into late month across Central and Northern Brazil.
- US/world wheat markets will continue as the bullish leader into the winter months as any slowdown in Russian shipments only implies stocks tightening in other exporting countries. Corn market focus shifts to S American weather exclusively beginning in late Nov. Soybeans stay the laggard, though we would mention that RGDS and Parana in S Brazil do account for 30% of total Brazilian soy production. The risk of drought in S Brazil is elevated.