- Chicago corn and soybeans are seeing some gains as we start the week whilst wheat is still the weak commodity of the trio. As Chicago prices remain at or near multi-year lows and equity markets close to historic highs it would not be out of place to question if money is flowing out of equities and in to ag commodities. If this is the case it could explain the increase in open interest that was seen on Friday. Tonight’s Thanksgiving delayed COT report will clarify fund activity as well and we will update charts tomorrow.
- US weekly export inspections for the week ending 26 November were; 67.4 million bu of soybeans, 11.8 million bu of corn, and 10.1 million bu of wheat. For their respective crop years to date the US has shipped out; 375 million bu of wheat (down 71 million or 16%), 263 million bu of corn (down 95 million or 26%), and 733 million bu of soybeans (down 58 million or 7%). In late October US soybeans were above last year, and are now falling behind on a slowing shipping pace.
- Russian wheat is not flowing to Turkish millers, but it was reported that a cargo of sunflowerseed oil did set sail over the US holiday weekend. Turkish flour millers are not in a hurry to seek supply from other exporters, but Ukraine is offering high protein wheat to make up any Russian shortfall. Turkey has not apologised to Russian officials which has hardened their political relationship and has many Russians asking for stiffer economic sanctions. We have heard that Russia will not ask for an official banning of wheat or vegoil trade with Turkey, but instead will focus on fruits and vegetables. (Seems they know which side their bread is buttered – excuse the irony!)
- The calculators are grinding out estimates as to what future Argentine corn and wheat production is likely to be following their expected tax cut on December 10th – once President Macri is installed. Doubtless we will get updates as to totalled crop areas, but one has to consider that Argentina could easily produce 30 million mt corn crops with their exports rising to 20-24 million mt or more. The extra corn exports will compete directly against Brazil, Ukraine, Russia and the US in future crop years. One result will likely be that US baseline corn exports need to be revised downwards by 100-200 million bu in the years ahead. The US has tremendous competition lurking in world corn trade.
- At this time we see the S American weather forecast as “OK” and therefore see no reason for concern at this time.
- Summary:
- Soybeans – can not rule out more a of a “recovery” bounce as Argentine export tax to drop (only) 5% to 30%.
- Corn – the market is very oversold but with Argentine export restrictions gone and the 20% export tax reduced to zero (effective 10 December) it is hard to become bullish.
- Wheat – the market remains oversold but very large Chicago deliveries and the strong US$ keeps sellers active.