• HEADLINES: Wheat falters as offers submitted to Saudi in weekend tender; China still securing Ukraine corn, China TRQ’s coming.

• It has been a summer row crop rally in Chicago this morning as corn/soy futures rises, while wheat sags on the fading hope that US HRW wheat will be included in the Saudi tender while Russia continues to discuss its export quotas for wheat (and all Russian grains) which will start on February 15. The tone of Chicago is bullish for corn/soybeans on Southern Brazilian and Argentine weather worry. We look for a mixed Chicago close with market volatility staying high on thinning volume ahead of the end of the year amid high prices and tight cash supplies. A widely swinging Chicago will persist with volume tapering off even more following next week Thursday’s USDA Crop Report.

• Chicago brokers estimate that funds have bought 5,600 contracts of corn and 4,900 contracts of soybeans, while selling 4,300 contracts of wheat. In the soy products, funds have bought 4,300 contracts of soymeal and 3,800 contracts of soyoil. Investment managers appear willing to add to their existing market length in corn and soybeans, while paring back on wheat. Funds have not really embraced a sizeable net long wheat position except in KC futures.

• FAS/USDA reported that an unknown destination secured 122,000 mt of US soybeans overnight. Commercial sources report that China has booked 24-28 cargoes of Brazilian/US soybeans this week with 15-18 of those cargoes being sourced from the US. China is 50-60% covered on January soy import needs.

• E European cash traders report that the Ukraine continues to book corn with purchases nearing 500,000 mt or about 8-9 cargoes. Why China is willing to pay up for Ukraine corn for nearby shipment is unknown. US Gulf corn is cheaper, but Chinese purchases would also be more transparent due to the US’s Daily Reporting system.

• China is in a timeframe when TRQ’s could be issued for the New Year. These TRQ import licenses are for corn/wheat, which would produce some immediate buying amid heady import margins. We should be closely watching for the China Government to issue TRQ import licenses in the weeks ahead.

• Interfax is reporting that the Russian Government is considering setting an export quota of 14 million mt for all grains in 2022. This would include 9 million mt of wheat from February 15 to June 30. We calculate that if the rumours are correct, Russia would export 31.5-32.0 million mt of wheat, well below the WASDE forecast of 36.5 million. Such a quota would be longer term bullish. However, WASDE will not change their Russian wheat export estimate until the government officially announces the quota and places it in the federal registry. This would likely occur in the January WASDE report.

• The midday GFS weather forecast is slightly wetter than the overnight run for Southern Brazil including the state of Parana. Yet, high-pressure ridging aloft across Argentina/Southern Brazil will restrict the flow of moisture next week. Temperatures start to warm this weekend under the ridge with highs ranging from the mid 80’s to the mid 90’s. Crop-critical weather lies ahead with S Brazilian soil moisture in fast retreat. The GFS ensemble model is drier for Southern Brazil (than the operational) which follows the existing weather trend. There could be a few showers in mid-December for Southern Brazil, but the rains do not appear to be drought breaking.

• Chicago and Paris wheat futures are sagging intraday, but cash markets in the Black Sea and Europe are holding strong. We doubt that any break in KC March wheat can be sustained much below $8.20. Corn/soy futures will be closely following S American weather with a March corn close above $5.90 turning all chart-based price trends up. The continuous daily corn chart illustrates how important the $5.90 level has been looking backwards to July. March soybeans target $13.00 with ongoing dry weather for S Brazil into mid-December.

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