Mixed in reduced volume best describes CBOT this AM. Corn and soybeans have traded lower on weak US weekly export sales while the wheat market recovers on spreading and gains in protein wheat. No one has much passion for a long or short position at the CBOT, and the trend of sideways trade persists. Corn has pushed to a new contract low as spot futures targets the $3.30-3.50 downside double bottom target left from late summer. December corn is within 1.5-6.5 cents from this objective. The up one day down the next trade looks to persist. We expect that traders will want to position long on Friday ahead of the weekend and the weekly CoT report which should reflect an expanding net short position.
CBOT brokers estimate that funds have sold 4,200 contracts of corn and 3,400 contracts of soybeans, while buying 1,900 contracts of wheat. In soybean products, funds have sold 1,800 contracts of soymeal, while being net flat in soyoil. Fund traders look to return to the long oil/short meal trade assuming that normal rains return to Argentina in December.
For the week ending November 9th, the US sold 18.0 Mil Bu of wheat, 37.4 Mil Bu of corn, and 40.6 Mil Bu of soybeans. The wheat and soybean sales were deemed as disappointing. ARC does note that sorghum commitments as of mid-Oct are up 22% on last year, while the USDA forecasts a pretty sizeable decline (31 Mil Bu, or 13%) in 2017/18 US sorghum exports. The sorghum balance sheet could get pretty tight if the recent pace of sales continue, and interior sorghum basis has rallied 20 cents since harvest began.
For their respective crop years to date, the US has sold 617 Mil Bu of wheat (down 32 Mil Bu or 5%), 801 Mil Bu of corn (down 287 Mil Bu or 26%), and 1,197 Mil Bu of US soybeans (down 216 Mil Bu or 15%). China has been a larger buyer of Brazilian soybeans of late, but it’s their demand from the US in the last half of the crop year that will determine if USDA’s annual export estimate is correct.
Egypt booked 240,000 MTs of Russian wheat in an overnight tender. The purchase included an estimated premium of $3-3.50/MT for ergot and other quality spec uncertainty. But still Egypt managed to pay $195/Mt, basis fob, vs. $196.50 a week ago. Including cost and freight, Egypt paid $209/MT, vs. $210 last week. The world cash market remains stagnant, and in recent weeks has fluctuated by only a few dollars per ton. Russian wheat hasn’t budged from $192/MT thus far in November. Paris milling wheat futures look to settle unchanged on the day.
Midday GFS South American Weather Update: The midday GFS maintains that soaking will impact a portion of Cordoba in Argentina next week – this has been the driest region of the country since late summer – but the GFS is still the wettest of the major forecasting models in Argentina. Otherwise, mostly dry weather will continue across a majority of Argentina’s Corn Belt into late Nov. Very heavy rain is offered to Brazil in the next two weeks, with totals through the period reaching as high as 5-7” in Mato Grosso do Sul, Goais and Minas Gerais. Brazilian soybean planting should be completed in the next few week.
We also mention monthly climate updates include rising odds of abnormal dryness in Argentina and Southern Brazil in the Dec-Feb period, as climate forecasters begin to account for the arrival of La Nina.
AgResource Market Comment: The November WASDE, which was surprisingly bearish corn, has largely been accounted for. Next up is the trend in soil moisture in Argentina in late Nov/Dec. There’s nothing yet to spook the spec community of its record short corn position, and growing short wheat position, but neither is the much room for new selling.
