The CBOT has witnessed mixed grain trade at midday. The wheat market has been lurching lower based on fund order flow amid Egyptian demand concern, while corn/soy futures are higher on short covering. Traders are talking that funds may be sitting on a record net short corn position that is exceeding 235,000 contracts! That along with the growing gains in cash basis for interior Midwest corn/soybeans has CBOT row crop futures higher.
Wheat has not been following any real trend as of late, and price action has been about the buying or selling activities of funds. Russian and EU wheat fob offers have been declining which is acting to cap CBOT rallies, while the big fund short in wheat is supporting values below $4.10 December Chicago. Wheat appears to be caught in a wide trading range.
CBOT brokers estimate that funds have bought 3,500 contracts of corn, and 2,400 contracts of soybeans, while selling 3,900 contracts of wheat. In soybean products, funds have bought 1,200 contracts of soyoil and 2,800 contracts of soymeal.
Today’s weekly EIA ethanol report reflected a modest decline in weekly production to 1.054 Mil barrels per day vs 1.057 last week. This will consume around 310 Mil Bu of corn. US ethanol stocks were 903 Mil gallons vs 896 Mil last week, which is up 16% from last year. US weekly crude oil inventories were 459 Mil barrels which was down 6.5% from last year. The declining supply of US unleaded gasoline remains a supportive factor for US energy prices and ethanol blending margins.
This week’s fed cattle trade appears to be starting at $119.00 in the Plains. Packers initially bid $118.00, but feedlots passed. The trade will be watching to see if the activity kicks up in the afternoon hours.
The Brazilian soybean seeding pace has risen to 68% vs 73% last year and the 5 year average of 73%.The recent rains have restored soil moisture across N Brazil.
Egyptian wheat import standards are confusing (again) with a court order changing the potential level of ergot allowance. The Ministry of Supply is working on a proposal to importers that is expected to offer some clarification.
The October NOPA Census Crush report was neutral with a October crush rate of 164.2 Mil Bu and soyoil stocks of 1.224 Bil pounds.
Midday GFS South American Weather Update: The midday GFS maintains an active pattern of rainfall in Central & Northern Brazil over the next 10 days. The coverage of heavy rain in Brazil expands beginning this weekend, and accumulation next week is pegged as high as 3-6” in Goias – which has been very dry – Minas Gerais and pockets of Mato Grosso. The GFS has reduced its rainfall prospect for Argentina and S Brazil for the next 10-14 days. The GFS model is more in line with the EU overnight model run.
ARC is paying more attention to Argentine dryness, which is favorable in the very near term, but is worth watching as La Nina looks to have been established and research argues that the dryness will extend into early December. This is when yield could start to be adversely impacted.
AgResource Market Comment: Market bearishness has reached a fevered pitch in the past few days across the CBOT. The oversupply of corn, wheat and soy is well known at this point. Cash basis levels are improving in the interior and funds are holding a record short corn position. ARC awaits a rally amid as the market is heavily leaning towards one side. Not everyone can be right with their bearish stance!
