- HEADLINES: Chicago chops amid a lack of fresh news; US holiday looms for traders; Cash basis bids for corn/soy stay strong.
- Chicago values are mixed in pre-holiday choppy trade. The volume of trade is poor due to traders closing out positions ahead of the US Thanksgiving Day Holiday. Firm cash basis bids for W Midwest/Plains corn offers support while Paris wheat is rising on export demand. US soybean futures are sideways awaiting S American weather developments during December.
- Choppiness is persisting in Chicago. It is interesting that the bulls are disappointed by the size of the post-harvest rally, while the bears are disappointed by the inability of the market to sustain a break. Few traders have profited from the recent choppy Chicago which has hurt trading volume. The question from all is when do trends restart?
- We anticipate choppiness persisting through Friday’s holiday shortened close. However, if Brazilian weather is favourable, a more sustained break in the soybean market will occur as the potentially record large supply is digested. Corn should follow soybeans while wheat holds in its already defined trading range.
- Chicago brokers estimate that funds have bought 3,200 contracts of corn, 2,100 contracts of wheat, and 1,800 contracts of soybeans. In the products, money managers have bought 2,000 contracts of soyoil and 1,400 contracts of soymeal.
- Corn basis has been rising in the W Midwest/Plains with some areas seeing cash pushes of 3-5 cents. Central IL corn basis is $0.30-0.35 over or $7.00 cash corn bids. Locations where the crop was shorted due to drought last summer are showing cash basis of +$0.60-0.90 over. Amid a slow US export program, the cash market is trying to pull Eastern Midwest corn westward. This is not logistically easy and will take considerable time. Rising cash basis is another way that the US corn market is trying to ration domestic demand.
- The potential of a rail strike continues to dominate cash grain discussions across the US. Whether you are a biofuel producer, a soybean processor, exporter, or livestock feeder, all are trying to make sure that their stock of feedstocks is high with real worry tied to rail car availability to move the finished product. US ag could survive a strike that lasts a week, but a lengthy strike during the holiday season would be devastating. Few in Washington are offering any hint on whether Congress will intervene. All of this would be bearish Chicago as biofuel production and exports slow. Our hope is that a rail strike can be averted.
- The S American weather forecast is little changed and consistent. Northern and Central Brazil has a daily chance of rain for the next 2 weeks. Buenos Aires in Argentina will also have a new chance of rain mid next week, while the rest of the country stays dry. Argentine soybean seeding is speeding ahead, but due to the winter drought, regular rains are required during the heart of the growing season. The extended range 10–15-day forecast brings rainfall southward into S Brazil with fresh shower chances for Argentina. December is the wettest month of the year for Brazil. Unlike last year, we do not foresee lasting dryness for Brazilian crops.
- This is seasonally the most bullish week of the year for corn/soy futures as US cash grain sales slow. In coming weeks, it is all about S American weather and resulting crop sizes. We would point out that a 5% above/below trend soybean crop is a massive 7.5 million mt variation. This moves the needle of the market. We currently hold a sell rallies mentality on slowing US export demand. Cash basis should form a peak in early December.