** Green is the color of the morning as CBOT wheat, corn, soybeans gain into the midday hour. Soymeal/soyoil spreading has been noted on the dry weather trend that prevails across Argentina and the uncertainty surrounding the biodiesel mandate that has to be announced by the EPA before November 30th.
Argentina is the world’s largest soymeal exporter, so if the La Nina inspired dry weather trend were to persist into early 2018, the market impact would be squarely on CBOT soymeal. Corn and wheat appear to be entering in a short covering market mode heading into next week’s holiday shortened trade. Seasonally, it’s the time of the year that CBOT prices rally as farmers finish harvest and have no interest in selling their recently tucked away harvest. For now the market may have found a low with the short term charts starting to turn upwards.
** CBOT brokers estimate that funds have bought 3,500 contracts of corn and 2,200 contracts of soybeans, and 1,900 contracts of wheat. In soybean products, funds have bought 2,800 soymeal while selling 1,900 soyoil.
** There are strong rumors that China has booked 5-10 cargoes of US corn and maybe as much as 12-18 cargoes of US ethanol. Some of the corn may have been purchased and announced as unknown destinations in prior days, but those that have TRQ licenses to import US corn may be using them to profit from. ARC does not see the Chinese Gov’t as being a buyer of US corn, but the demand is noteworthy as the US/Chinese fob corn price spread has widened during the past 6 weeks. ARC suspects that China is becoming a more routine buyer/importer of US ethanol.
** NASS will release their Cattle On Feed Report later this afternoon. The trade will be looking at the placement rate of 107-112% – growing supplies of feeders that could be available beyond April. ARC would note that if rain does not soon arrive across the Plains, that the amount of wheat that will be grazed out will be minimal. The lack of wheat grass growth is something that will gain market prominence heading into the heart of winter. ARC sees the movement of more feeders into feedlots as being bearish for June forward cattle futures amid record large US red meat supplies.
** IMEA released their ’17 production estimates for provincial corn and soybean production this AM. They pegged their soybean crop at 30.6 MMTs – virtually the same as last year on expanded acres. In corn, they projected a 18.75% decline in production due to reduced seeding due to a slower soybean planting pace. IMEA will now release crop estimates monthly.
** Midday GFS South American Weather Update: The midday GFS maintains an overall drier weather trend for Argentina and S Brazil for at least the next 10 days. A few lite showers are offered on Nov 26-27, but our confidence in rainfall totals of .2-.6” is low. Otherwise, mostly dry weather will prevail across a majority of Argentina’s ag belt into late November.
Soaking rainfall is offered to N and C Brazil in the next 10 days with totals through the period reaching as high as 5-8.00” across; Mato Grosso, Goais and Minas Gerais. The heavy rains are favorable for now, but drier weather will be required for optimal growing conditions. No extreme heat is noted for either Argentina or Brazil for the next 7 days. 90’s return to Argentina in the 7-10 day period.
** 10 Day GFS Rainfall Forecast:
** AgResource Market Comment: Strong bullish seasonal price trends in the week during Thanksgiving and grain markets that are excessively loaded with fund shorts are providing the recovery in CBOT today. Argentine and US Plains dryness, Australian wetness are talking points with crude oil rising to sharp daily gains. There could be some hedge pressure late day, but the Brazilian real is mostly firmer this AM. US farmers have no interest in cash sales before Turkey Day. Nonetheless, don’t think that the CBOT is ready to sustain a lasting bullish trend unless world weather concern worsens during December.