- Today appears to be all about what the funds want, pretty much to the exclusion of all else. CBOT corn has pushed to a new rally high, soybeans and wheat have followed. History suggests that fund follow a three day pattern of entry/exit in positions, and today is dat three! Whether this will be significant, or not, we will no doubt witness tomorrow.
- Early today we considered the estimated fund corn net long, about 190,000 contracts, and compared it with last year’s net short of around 150,000 contracts. Our thought process questions how long the funds will wish to hold the current long as US export demand erodes and longer term climatic forecasts suggest favourable S American moisture as El Niño builds/persists. In a similar reflective mood we also considered US wheat prices, which have rallied strongly, and our thought process leads us to conclude that US exports are endangered to a point where USDA end stock estimates are potentially woefully below their eventual level. US Gulf soft red wheat was this morning around $22 premium to French vs. $18 a week ago and some $10-$12 above Russian levels. This will have worsened during the day! US exports will be reduced as a result!
- Regardless of the competitive disadvantage which the US market is building for itself, we have to live with the market – because it is real, for now. However, we can only continue to point out the oddities which persist, the biggest being the $85 discount which Brazilian soybean meal enjoys compared with US Gulf on a FOB basis (reported to be a record although we cannot confirm this). Markets cannot, and will not, tolerate such an arbitrage for long, and we are confident that market forces will prevail and return us to some normality before long.
- US weekly export data is delayed until tomorrow on account of the veteran’s day holiday, but Brussels pushed ahead with the trend of another big week of wheat export licences. This week’s total reached 588,429 mt bringing the season total to 11.547 million mt. This is 1.009 million mt (9.57%) ahead of the same time last year. Corn imports for the week were 79,000 mt bringing the year’s total (October to September) to date to only 414,000 mt which is about a third of last year’s volume and suggests an annualised figure of around 3.5 million mt.