** It has been a quiet morning at the CBOT as corn/soybeans trade either side of unchanged, while the wheat market grinds lower on additional fund selling. The volume of trade was active early as liquidation persisted in November soybean futures prior to 1st notice day on Tuesday. There was 53,800 contracts of November soybean open interest at Friday’s close. This likely has to decline closer to 20-25,000. The Nov liquidation has pulled CBOT soy futures lower following an overnight rally. Fund managers tell ARC that they are looking for the right spot to add to long soybean/soyoil futures.
** CBOT grains are mixed with world wheat prices edging lower while the US corn harvest surpasses the 50% mark. The Saudi purchase of optional (likely EU) wheat was done cheaply as world exporters start to discount new sales. The Black Sea wheat market is quiet with a bearish feel noted. Our expectation is for new weakness in world wheat prices as the pressure grows on Northern Hemisphere producers to sell cash wheat prior to winter. US corn prices continue to chop in a sideways range amid tight US farm holding.
** CBOT brokers estimate that funds have sold 5,500 contracts of soybeans, 3,400 contracts of corn, and 2,200 contracts of Chi wheat. In soy products, funds have bought 2,100 contracts of soymeal and sold 2,400 soyoil.
** US weekly export inspections were disappointing for corn and wheat, and slightly better than expected in soybeans. For the week ending October 26th, the US exported 20.4 Mil Bu of corn, 92.1 Mil Bu of soybeans, and 11.6 Mil Bu of wheat. Combined US grain and soy exports were just 3.3 MMTs (121 Mil Bu) vs 4.2 MMTs (154 Mil Bu) last year.
** For their respective crop year to date; the US has shipped ouyt 199.1 Mil Bu of corn (down 164 Mil Bu or 45% from last year), 453 Mil Bu of of soybeans (down 48 Mil Bu or 4.5%), and 407.7 Mil Bu of wheat (down 18.4 Mil Bu or 4.3% from last year). The US export pace of wheat, corn and soybeans is slipping amid strong South American export competition.
** The US dollar is weakening on rumors that a drop in the US Corporate Tax rate would be phased in rather than happening all at once. This would have a much more limited impact on US growth rates and could produce a further weakening in the US dollar. The US dollar has rallied amid the hope that a US tax cut could be enacted this year. With such hopes in fast retreat, one has to be careful about being too bearish on CBOT grain/soybeans on currency. The Brazilian real is trading around 3.26:1 vs the USD.
** Midday GFS South American Weather Update: The midday GFS forecast is unchanged. The outlook offers wet weather across N Brazil and some needed drying weather conditions across S Brazil with more normal rainfall for Argentina. Temps look to average out to be cooler than normal with high temps ranging from the 70’s to mid 80’s. Widespread boosts in soil moisture lie ahead for the whole of Brazil’s soybean belt. 10-day precip is attached via the midday solution. There are no issues should the 12z forecast verify.
** AgResource Market Comment: Argentine farmers are not selling any soy with tax rates to start declining after January 1st. Argy farmers tell ARC that storing soybeans is an easy decision with tax rates to fall .5% each month and the currency likely to post additional losses into mid 2018. Argy farmers will store soybeans and sell grains. US farmers are noting much better than expected yields in corn with a 1-2 BPA gain expected in the November report. Soy is the opposite with a yield loss of .5-1.0 BPA now forecast. Our lean is to be long beans/short grains.
