• There is more than one way to eliminate a commodity surplus. The US cranberry industry, hit by Chinese tariffs that has benefited the Canadian cranberry industry, has agreed to destroy a quarter of its 2018 production. It is reported that 240 million lbs will be destroyed. For some reason that angers us even more over the stupidity of this trade war. It is said that some were piling soybeans on the ground in ND because they cannot move the harvest due to the trade war. We don’t know many who have piled soybeans outside and not later regretted it, but maybe they have it hedged. The cost doubtless flows back to the farmer. There is plenty of storage space due to the short corn crop. Elevators are not getting full and little/no corn will be stored outside. We heard told of an elevator in MN that had built outside bunkers that will now remain empty. We wonder if the USDA has been tracking a phantom corn crop in S MN/N IA that is not there, and think that the November corn yield could be a bullish surprise on Thursday. Back in 1993, when farmers knew they had a had a bad crop due to wet conditions it took until the November report that year before the USDA found out and reported how bad it was. Knowing that NE and others did produce record crops the USDA has them at records in too many places where the harvest was disappointing. Potentially in our opinion, the USDA IA corn yield is bushels too high. This is not 1993 but a reflection of it.

• The US and China may or may not be serious about putting an end to their trade war but China appears to be preparing for the long haul if an agreement escapes them. Informa says that Chinese pig producers are reducing soymeal in feed rations from 20% to 10-12%. These may not be the most efficient feed rations but will utilise what feedstuffs they have and can acquire outside the US. China boosted their feed grain production producing surpluses and they will re-balance domestic production toward more protein. They will also diversify their plant protein imports increasing imports of rapeseed, sunflower meal, palm cake and even peas while buying 80% of the Brazilian soybean crop. They are not going to settle on a trade agreement with the US because of any dependence on US soybeans. We believe that China has determined that it will make it to the next Brazilian soybean harvest without buying from the US and the early planting in Brazil will help them achieve that.

• Liquidation is the word of the morning as Chicago traders trim recent net long positions ahead of the November USDA crop report. Traders note that NASS has surprised the trade with larger than expected US corn and soybean yields in recent monthly reports. The average US November corn yield estimate is 180.0 bushels/acre with the soybean yield at 52.8 bushels/acre. This would be down 0.7 BPA from October on corn and down just 0.1 BPA in soybeans. Bullish traders argue that record or near record amounts of October rainfall and several strong wind storms caused an even larger US corn and soybean yield drop.

• Chicago brokers report that funds have sold 2,000 contracts of wheat, 3,400 contracts of corn, and 3,000 contracts of soybeans. In soy products, funds have sold 3,700 contracts of soymeal while buying 1,900 contracts of soyoil. It does not take much volume to push Chicago prices around.

• Colin Peterson (D-MN) will be taking over the House Ag Committee following the Democrats win of the House in the US Mid Term Election. Questions abound on the 2018 US Farm Bill and if Colin will ask for a rewrite. We expect that work eligibility rules for the SNAP program will be modified and that Peterson could push to lift the cap on the US CRP program. Right now, the 33-year-old CRP program is capped at 24 million acres. Rep Peterson has argued to lift the CRP cap and allow additional acres to return to the program to benefit wildlife and farm income. Yet, the US Congressional legislative divide will likely cause the current Farm Bill to be extended for another year.

• Russia has been exporting wheat like it will reach 50 million mt annually. Russia wheat exports look to reach 27 million mt by the end of the year. If the Russian Ag ministry limits wheat exports to 33-34 million mt, this would leave just 5.5-6.5 million to export from January through June. It is becoming obvious that the Russian Government will have to place some sort of restriction on trade to leave enough flour/wheat for their own population. How and when such restrictions are announced is being debated, but an announcement could come before year end. World wheat trade is equal to last year with millers having limited forward coverage. October 2018 world wheat trade was record large.

• The midday central US GFS weather forecast is slightly drier at midday with limited precipitation for the Plains and much of the Midwest into Nov 16. Any meaningful rain will drop across the SE and Eastern US. Several bouts of cold air will cycle southward with one bout on the weekend and another during the middle of next week. Arctic air builds across Canada and will likely cycle southward in the 14-20-day period. This is a cold and mostly dry weather pattern for the Central US heading into late November. The midday S American forecast features near to above normal rainfall for much of Brazil with frequent and heavy rains to start across Argentina this weekend. Favourable conditions will prevail with the only concern being for ripening winter wheat across Argentina.

• The USDA Nov report awaits traders on Thursday. US weekly export sales data will be overlooked as traders focus on US corn/ soybean yields instead. Traders expect that WASDE will cut its US soybean export estimate due to the tepid US sales pace. The big question is US corn yield and whether NASS cut it 1-3 bushels/acre. World wheat prices will likely hold firm on falling supply.

• Wheat has paced the Chicago morning rally while the row crops fell in corrective trading. Early jitters surrounding the US Mid Term election and sharp fall in crude oil futures offered a bearish grain tailwind. However, KC December wheat has pushed above its prior high at $5.1025 while active call buying has underpinned corn. The trade is betting on reduced US corn/soybean yields on Thursday based on several wind storms that lodged crops amid excessive wet weather during October. Whether wheat can close above key chart-based resistance will key trading heading into the report.

• Chicago brokers report that it has not taking much volume to push the market around. Funds have bought 3,000 contracts of Chicago wheat, while selling 1,000 contracts of corn and 1,800 contracts of soybeans. In soy products, funds have bought 1,200 contracts of soymeal and 1,000 contracts of soyoil.

• 83% of the Kansas winter wheat crop is planted through Sunday compared to a 95% 5-year average. Excessively wet weather and now cold temperatures are limiting new seeding efforts. Also, insurance dates of when the crop must be seeded range from October 15 in NW Kansas to November 15 in the SW corner of the state. As such, producers are losing their eligibility to get crop insurance due to late seeding dates and many farmers are abandoning their wheat seeding intention. We have trimmed our 2019 US all wheat seeding estimate to 48.6 million acres, which compares to the baseline estimate released Friday at 51.0 million acres. Research argues that a bullish story is brewing in US new crop wheat via reduced supply. The wheat market is also discussing reduced world production and that WASDE may have 2018/19 Australian wheat exports too high by 4-5 million mt. Cash connected sources argue that Australia will consume large amounts of wheat due to their ongoing large livestock herd. The Aussie cattle herd has held near record levels, even amid the dire drought. W Australian wheat is being exported to Eastern Australia amid the rising price of feed. A cut in the crop and expanded feed use could easily cut Aussie 2018/19 wheat exports to 8-9 million mt vs the WASDE forecast of 13.0 million.

• The midday central US GFS weather forecast is dry/cold for much of the Midwest. The harvest will slowly advance against the background of winterlike temperatures. Progressively colder temperatures will push southward with snows likely across S Canada and the northern quarter of the North Central US. The corn/soybean harvest will push to completion by Thanksgiving, but it is too cold to allow too much additional wheat seeding or germination. And the midday forecast for Brazil remains favourable with concern over too much rain for North Central Argentina.

• The results of the US election will have an impact on the US$. However, it is Thursday’s report and the G20 dinner between Trump/Xi which will determine long term Chicago price direction. We remain bullish of wheat on shifting world demand to the US, and the strong likelihood that US corn yields will come in below trade estimates of 180 bushels/acre. A close above $5.11 KC December wheat turns wheat price trends upwards.

• Chicago is mixed in moderate volume. Corn prices higher on lower yield bets while soybeans are little changed and Chicago wheat futures sag. The market lacks a directional feel with everyone discussing the potential result of the US Midterm election, Thursday’s USDA Crop report and what are the chances that the US/China reach a trade deal. The volume of Chicago trade spikes on the upside, and when the market sags, so does volume. End users will add to forward coverage on breaks, while the US farmer has not been a large cash seller. Seasonally, Chicago rallies into the Thanksgiving Holiday and with US/China trade talks ahead, we expect the market to follow this trend.

• The US exported 49.4 million bu of corn, 45.1 million bu of soybeans, and 12.0 million bu of wheat for the week ending November 1. For their respective crop years to date, the US has shipped out 389.7 million bu of corn (up 171 million or 78%), 315.2 million bu of soybeans (down 231 million or 42%), and 328 million bu of wheat (down 92 million or 22%). The US soybean and corn export totals were larger than expected, while wheat was disappointing.

• The average trade guess for Thursday’s November USDA report is a US corn yield of 180.0 bushels/acre (down 0.7 bushels/acre from October) and a soybean yield of 53.0 bushels/acre (down 0.1 bushels/acre). The yield declines were expected but may not be large enough following all of the rain across the W Midwest during October and resulting yield reductions. We would lean to a US corn yield of 178-179 bushels/acre and a soybean yield around 52.8 bushels/acre. Our lean into the report is for a bullish corn yield market response.

• Tweets and political decisions will be widespread in the coming days with US agriculture focused on trade. It is impossible to know what President Trump will decide on US/Chinese trade negotiations. The good news is that both sides are now in full discussion at a very high political level. That is something that could not be said during the summer or much of the autumn. However, it is doubtful that Chicago can sustain a break with short bought end users needing to take forward coverage, just in case, a deal is cut. Weather is also a big unknown in the ag business, but this year’s political uncertainty has added to the uncertainty and likely upcoming market volatility.

• The midday central US GFS weather forecast is drier and colder than the overnight run. Widespread rain totals of 1-2” impact the E Midwest, but otherwise, mostly dry weather conditions will prevail. Progressively colder temperatures push southward with light snows noted across S Canada and the northern quarter of the North Central US. Mostly dry weather will occur in the 9-15 day period with the final stages of the US harvest to occur. The time for a full shift to S American weather is occurring. The midday forecast for Brazil remains favourable with concern over too much rain for portions of Argentina.

• It is impossible to forecast changes in policy, and so we maintain our current, well documented, views. However, note that a US/China trade deal would produce a lasting bullish change for the US ag markets. We see limited downside in wheat/corn ahead of the USDA November report while January soybeans holds breaks below $8.65. Our longer-term favourite remains wheat on declining Russian/Aussie export potential.

• The CoT report showed a big week of fund selling in the Ag markets. Across the 10 principle markets, funds were sellers in 9 of them. Hogs was the only market that funds were buyers in through the week. The largest selling was in soybeans, followed by soyoil and then Chicago wheat. Funds still maintained a small net long corn position. Across all 10 markets, funds were net sellers of 107,000 contracts, and were net short 25,000.

• Fund short covering supported a strong soybean rally overnight, though gains were pared back by the morning open. January soybeans end the week $.30 higher and marked the second consecutive close over the 100-day moving average, which has not happened since May. Commitment of Traders data showed that as of Tuesday, funds had sold nearly 27,000 soybean contracts and had increased their net short position to just over 71,000, the most since last January. That heavy short position helps explain the two day, 35 cent rally. Hedgers on the other hand used the break in Chicago to cover hedges, buying back close to 30,000 contracts to take their net short position to just 3,600. With a hefty payment coming from the government, we expect US farmers will become more aggressive sellers on a further rally in the coming weeks. Ahead of the end of month meeting between Presidents Trump and Xi, we expect breaks will find support from fund short covering and end user pricing. The risks are that a deal is struck and US/Chinese soy trade resumes.

• Dec corn rallied 4 cents and moved through all major moving averages. The next upside target rests at $3.78, and fundamental support will be available into the release of the USDA’s November reports next Thursday. The USDA also released its long term projections earlier than expected. This is done mostly for budgetary purposes and so is of course not official. However, the USDA’s idea is that acres will rise but so will total consumption. Exports are kept above 2,400 million. 2019/20 stocks/use is pegged at 10.6%, which is not bearish. There remains pressure on next year’s weather and yield. Competition for export demand via aggressive S American/Black Sea offers will cap rallies. Expensive barley and feed wheat, and tight spot supplies will support on breaks. Beyond the Nov WASDE, S American weather, which is favourable, will be increasingly important.

• US and EU wheat futures ended largely flat on the day and week. Little fresh news was available, and all eyes will be on the Black Sea cash market next week, and whether interior Russian prices continue to move higher. Russian flour prices will attract most attention from millers and government officials moving forward. Otherwise, the USDA’s long term projection included all wheat seedings in 2019/20 of 51 million acres, up 3.2 million from last year. Total use is forecast up 46 million bu. US wheat end stocks in 2019 are pegged at 933 million bu, vs. 956 million in 2018/19, and which is neutral relative to current prices. We maintain that a secondary bottom has been scored. Russian prices are likely to move higher, which will boost US/EU market share into early/mid-2019.

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Weekend summary 2 November 2018

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Fund positions disaggregated data

• Chicago futures are sharply higher this morning, driven mostly by optimism surrounding Presidents Trump and Xi meeting in late November in Argentina. Trump this morning tweeted he’s been in discussions with China, a central part of which has been trade. The market certainly doesn’t want to be caught short if a deal, or signs of a deal, gets done. Recall the issue in the soy complex isn’t so much ballooning US stocks, but rather much-reduced Chinese soybean demand as a whole.

• We estimate that managed funds this morning were short a net 72,000 contracts of soybeans, the most since January. Funds are estimated to be short 40,000 contracts of Chicago wheat and are net even corn. Our view is that a deal needs to be signed before one can turn bullish soybeans, but there is little for the market to do other than cover shorts when such news appears.

• US export sales through the week ending Oct 25 were mixed. Corn sales were a disappointing 16 million bu, up 2 million on the prior week but well below the average needed to meet the USDA’s forecast. Soybean sales totalled 15 million bu, vs. 8 million the previous week. Large cancellations were made by unknown destinations. China’s commitments have fallen to 960,000 mt. Wheat sales totaled 21 million bu, the highest since September. For their respective crop years to date, the US has sold 860 million bu of corn, up 28% from last year; 788 million bu of beans, down 29%; and 481 million bu of wheat. We would mention that wheat sales have been rising as the US Gulf market becomes more competitive. There is talk that excessive rainfall across the Plains in October (8-10”) will prevent any expansion in winter wheat acres there. The US balance sheets needs some measure of expansion to keep 2019/20 stocks above 750-800 million bu. Heavy rain impacts Central TX and parts of southern OK overnight.

• The EU/Black Sea forecast at midday is still dry. S American weather is favourable, with this season’s boost in Brazilian soil moisture to occur much faster than in recent years. The midday central US weather forecast is wetter across the Central Plains in the extended period, but these rains are expected Nov 16-17, much too far out to place much confidence in. Otherwise, too much rain falls across the Southeast and Eastern Midwest into next Tues/Wed. A welcomed drier pattern evolves thereafter. IN, OH and PA will be targeted with rainfall of 1.5-3.0” over the next 4-5 days.

• The world wheat market is beginning to pay more attention to changes in fob price relationships which increasingly favour the US and EU.

• Chicago futures are mixed at midday, with beans up, wheat down and corn caught between. It is more of the same in US wheat futures as the US$ rallies to new weekly highs and US wheat export sales this and next week will be routine and limited to traditional buyers. We have previously highlighted that Russia’s dominance will likely not continue beyond early December, but the market needs a steady flow of export news to maintain rallies.

• This week’s EIA report is neutral crude and supportive ethanol and corn. US ethanol production through the week ending last Friday totaled 311 million gallons, up 10 million on the prior week and the highest since late August. Weekly ethanol stocks fell to 953 million gallons, down a hefty 50 million on the week and the lowest since mid-September. A combination of large domestic blending and exports is suspected. Weekly ethanol stocks/use fell sharply, and ethanol futures look to be scoring a seasonal bottom. Crude stocks less strategic reserves last Friday totaled 426 million barrels, up another 3 million from the prior week and up 32 million barrels from late summer. Crude stocks continue to recover, though remain 6% below this week a year ago. We caution against turning bearish energy markets as spot WTI nears oversold territory. Indonesia and Brazil have plans to boost biodiesel blending mandates. Indonesia is targeting mandatory use of B20 in all machinery. Brazil’s National Council for Energy Policies has proposed boosting biodiesel blends from 10% to 15% by 2023 at the rate of 1% per year. If realised this could have a major effect on Brazil’s biodiesel production in the years ahead.

• Australian wheat replacement costs are rising again as deliveries to major elevators are lower than expected. Replacement price in S Australia, a major exporting state, this week is pegged at $8.35/bu.

• The midday central US weather forecast has turned abruptly colder in the 11-15 day period, though confidence in this is lacking. Other model guidance is broadly warm in November, and the EU release this evening will be monitored. Otherwise, the GFS maintains a welcomed drier pattern beginning late next week, with precipitation in the 8-15 day period to be rather light/scattered in nature. Any rain/snow that does fall in the extended period will favour the E Midwest. Soaking rainfall of 2-3” will impact the Delta/Southeast, IL, IN, OH and PA today through next Mon/Tues.

• Rallies in corn and beans will struggle as the trade moves closer to analysing S American supply and demand. New wheat sales would not be advised as interior Russian prices rise, wheat futures near oversold territory, as fund length has been liquidated. Note that the number of long spec wheat positions in Chicago is the lowest since the spring of 2016.

• Chicago futures at midday are weaker by varying degrees. Wheat is leading the way down, though there is little fresh wheat-specific news. Coming rainfall in Argentina will stabilise yields there, following modest reductions by private firms in recent weeks, and Argentine fob offers are highly competitive for early 2019 delivery. The US$ is also eyeing August’s high at 97 points. Otherwise, major exporter currencies are little changed, if a bit stronger in the Russia and S America. As such, today’s decline in wheat will again put Gulf offers below EU/Black Sea origin for Dec-Feb.

• It is clear following Egyptian results last week that US wheat competes for non-traditional business at $4.95-5.15, basis spot Chicago. The market needs to see a more steady flow of export demand to rally further, but we highly doubt Russian cash prices can trade lower between now and early 2019. Ruble strength is further restricting exporter margins. We also mention wheat and soybeans are again nearing oversold levels.

• Brazilian soybean planting this week is estimated at 64% vs. near 50% last week and 43% on this week in 2017. The Brazilian forecast next week may be a bit too wet, with accumulation Nov 5-13 pegged at 4-8” in Mato Grosso, Goias and Parana. Newly planted crops will be well watered though.

• Wednesday’s weekly EIA report should include a modest boost in US ethanol production and a sixth consecutive build in weekly crude stocks. Ethanol margins, basis futures, remain depressed. Brazilian ethanol prices are down slightly this week but maintain a sizeable 33% premium to US Gulf origin. Brazil will ramp up corn-based ethanol production moving forward, but in the near term Brazil’s sugarcane harvest looks to be at a 12-year low. Official monthly biodiesel production (in August) will also be released Wednesday. WTI crude is down $0.75/barrel at $66.30. Lows in early and midsummer were posted at $63.50-64.50. EU milling wheat futures look to settle €1.50/mt ($.05/bu) lower.

• The central US weather forecast has eliminated chances for meaningful snowfall across the Dakotas and Western Midwest into Nov 14 but otherwise is little changed. A more active pattern of rainfall begins in the next 24 hours. Moderate to heavy rainfall favours the Delta/Southeast and Eastern Midwest Thurs-Sat. The heaviest totals, 1-3”, will favour AR, TN, KY, IN, OH and PA. Two additional systems will favour the Eastern US in the 6-15 day period, with excessive totals possible in MO, IL, IN and OH.

• Corn and beans are stuck in range unless S America’s climate pattern turns hot/dry in Dec/Jan. Wheat is too cheap below $5.00 amid steady world cash prices, rising interior prices in Russia and amid lingering heat and dryness in Germany, Poland, Ukraine and Russia.

• Overnight strength in soybeans faded just after the morning open and technical selling kept the market lower into late in the day. Soybean export inspections hit a marketing year high of 48 million bu, and the USDA announced sales of 120,000 mt to unknown destinations, all of which had no noticeable effect on Chicago trade. After the close, NASS reported that the US soybean harvest had advanced 19% last week to 72% complete. This was the largest advance of the year, and the most for late October since 1986. However, there remains a significant amount of work to be done in the Northern and Western states. Kansas at just 42% complete was still more than 28% behind average. IA moved its harvest forward by 35% last week to 71%, while IL leads the Cornbelt at 86% complete. Slow exports and the advancing harvest continue to weigh on Chicago soybean trade, with next support for January near $8.30.

• Chicago corn futures ended fractionally lower amid limited corn-specific news. US harvest progress as of Sunday reached 63% complete, a bit below the longer term average but compared to 52% on this week a year ago. Another week of active fieldwork lies ahead for Plains, but delays return to the Southern and Eastern Midwest. Harvest is 50-77% complete in IN, OH and PA. Cash prices in Ukraine continue to erode amid better than expected yields. There is talk that final production there may reach 33-34 million mt, vs. USDA’s 31. This additional supply will likely be sent directly to export markets. Consequently, the USDA’s total world corn trade forecast seems slightly too low, but Black Sea, US and S American corn are all available to importers for late-year delivery. The University of IL pegs new crop corn seeding at 91.1 million acres, up 2 million, based on expected returns. This is noticeably below prior trade expectations. Wheat, small grains and cotton are favoured with expansion in 2019/20. Work maintains that spot corn is stuck between $3.65-3.85. The issue in the near term is whether NASS’s Oct yield is realised.

• US wheat futures moved little in either direction. Egypt’s buying of US wheat last week confirmed that a secondary bottom has likely been posted, while a further surge in value requires better export demand on a weekly basis. Gulf HRW is offered at parity with Russian for Dec arrival, basis fob. We expect the US and EU markets to battle for world market share over the next 90 days as Russian sales and shipments slow. Funds bought a net 2,000 contracts in Chicago. Interior Russian wheat prices continue in a broad bullish trend, and close attention will be paid to miller/livestock feeder sentiment there in the weeks ahead. US winter wheat crop conditions were put at 53% good/excellent, vs. 52% on this week a year ago. This is a bit lower than expected, but very close to the 10-year average. We would note that good/excellent rating in KS is pegged at 42%, vs. 55% a year ago. Slowly but surely the US will attract additional non-traditional export demand.

• Domestic wheat prices in Russia this week are again steady to higher. Prices near ports are up very slightly, but further inland prices continue to soar relative to early 2018 lows. Sourcing high quality interior wheat will be more difficult, and seasonally interior Russian wheat prices move higher into early the following year. We strongly doubt Russian fob offers fall much, if at all, through the remainder of the marketing year.

• Ag markets are mixed at midday, with grains steady and beans down 5-6 cents. The US$ has rallied further and looks to settle at the strongest level since August. US job growth in October will be released Friday morning. A strong showing will keep the US$ as a safe haven investment. The €uro is testing last week’s lows.

• US exporters sold two cargoes of soybeans to unknown destinations for 2018/19 delivery. Other fresh news is lacking. US export inspections through the week ending Oct 25 included 26 million bu of corn, vs. 40 million the prior week and expectations for 35-45 million bu. Wheat export inspections totalled a routine 14 million bu, unchanged from the prior week. Soybean inspections were 48 million bu, vs. 45 million bu the previous week and the highest of the marketing year so far. For their respective crop years to date, the US has shipped 338 million bu of corn, up 69% from last year; 269 million bu of soybeans, down 41%; and 316 million bu of wheat, down 23% from this week in 2017. Mexico has been an abnormally large buyer US beans, but pace analysis suggests the USDA’s total US soybean export forecast is too high. Note that amid this season’s record pace of planting in Brazil, early season soy exports there will begin in very early February.

• Brazilian soybean planting last week reached nearly 50% finished, and should hit 60-65% complete this week. Normal rain continues across Central Brazil into the weekend. There are hints of a more pronounced boost in soil moisture in the 8-15 day period. Mato Grosso, Mato Grosso do Sul and Goias (which when added together account for some 50% of Brazil’s soy crop are targeted with rainfall of 3-5” in the period Nov 9-12.

• The trade’s average guess on US soybean harvest rests at 70% complete, with corn at 64%. Winter wheat conditions, the first of the season, are estimated at 53-55% good/excellent, vs. 52% in late Oct a year ago.

• The midday central US weather forecast is little changed. A rather stagnant pattern lies ahead, with dryness and near normal temperatures to continue across the Plains and far Western Midwest. Cooler temperatures and moderate but steady rainfall occur across the Delta/Southeast and Central and Eastern Midwest. Low pressure will linger aloft the Great Lakes region over the next ten days. Overnight lows in the 30s will be more common across the Northern and Eastern Ag Belt beginning this weekend. Cumulative precipitation (mostly rain) into Nov 12 is pegged at 2.0-3.5” across IN, OH, OH, TN and KY.

• Egypt’s buying US wheat last week is a big deal, longer term. Gulf HRW this evening will maintain discounts to Black Sea origin for Dec-Feb arrival. We also wonder if world millers/end users will be more active in extending wheat coverage as deferred Russian offers stay at elevated levels. Wheat will likely gain on corn/beans into late year.

• Ag markets are higher in Chicago, with wheat recovering all of Thursday’s loss and more. Grain futures on Thursday were oversold, and US Gulf wheat is now highly competitive in the world market. Note that a full 8 months of wheat’s international trade year remain. EU wheat futures in Paris are up €3/mt.

• Cargill this morning offered Egypt two cargoes of US SRW at $219/mt, the cheapest of all wheat offered to Egypt. Ultimately Egypt is likely to buy Russian/Eastern European based on cheaper freight. But, this is a sign that the US will now compete for non-traditional destinations moving forward, particularly below $5.20, basis spot Chicago futures. Interior Russian prices will be updated later today. And we mention the EU/Black Sea forecast has trended steadily drier this week. Rainfall across Ukraine and Southern Russia will total just 20-40% of normal into November 10.

• This morning’s meeting between Russian official and exports was rather brief and lacking in fireworks. Russian wheat shipments will be ongoing, but it is likely the USDA’s export forecast of 35 million mt is 1-2 million too high. The Russian government will monitor quality and exports closely moving forward. This is just more of the same, but the market is acting to reallocate world market share amid unchanged Black Sea fob offers and falling EU/US prices.

• We estimate that this morning managed funds’ position in Kansas/Chicago wheat combined was a net short 35,000 contracts. Funds’ combined Kansas/Chicago position hasn’t been net short since April. There is also more talk of disappointing corn yields, which in pockets of the Central US have failed to exceed last year.

• The GFS weather forecast is wetter across the Southern and Eastern Midwest over the next 5-7 days. Rainfall coverage late next week has been expanded to include E KS, MO and the whole of IL, with totals there pegged in a range of 1-2”. Heavier totals will favour KY, IN and OH. This won’t be a major issue for national harvest progress, but it is unlikely that the E Midwest will finish harvesting corn/beans prior to the first week of November. Light snow is forecast is N IL, WI and MI, but confidence in this is low. Drier weather follows Nov 5-10.

• The wheat market since late summer has been disappointed by routine US export sales and the lack of any move by Russia’s government to really slow down shipments. It is our thesis that the world cash market will simply favour US wheat during the second half of the 18/19 campaign.

To download our weekly update as a PDF file please click on the link below:

Weekend summary 26 October 2018

Our weekly fund position charts can be downloaded by clicking on the link below:

Fund positions disaggregated data