** It feels like CBOT fund traders have hit the “pause button” with corn, soybean and wheat futures trading mixed at midday. The volume of trade is far less than Monday’s fund inspired selling spree. That selling was met with strong end user pricing as evident by the 40,000 contract rise in CBOT corn open interest. March corn is back hugging $3.50, March Chi wheat back to $4.30, while the soybeans languish on intra-market spreading. March soybeans are holding their prior lows against $9.55.
AgResource would point out that funds fired considerable bearishness at corn, soybeans and even wheat with large sales on Monday. The market absorbed the selling and is recovering this AM. This tells us that there is scale down pricing from end users. And that even if Friday’s USDA report is bearish, the downside risk appears limited, this is no place to make sales.
** CBOT floor brokers estimate that funds have sold 3,000 contracts of soymeal, while buying 2,400 contracts of wheat and 4,500 contracts of corn.
** Funds have also bought 1,000 contracts of soyoil and sold 3,000 contracts of soybeans. The Index Fund rebalance will continue at the close with net buying expected in grains and soybeans.
** Egypt’s GASC received 7 offers for wheat with one offer seeming very cheap at just above $192/MT. The offers came once the Gov’t offered assurances of that demurrage would not be an issue with any new sales. World exporters object to paying demurrage on any wheat that is sold as fob. Egypt secured 115,000 MTs of Russian wheat in the tender.
** Australian Statistical Bureau estimated the 2016/17 wheat crop at 30.4 MMTs vs ABARES estimate of 35.0 MMTs, previously. ARC notes that WASDE pegged the 2016/17 Aussie wheat crop at 33.5 MMTs, so the difference between the Australian Stats agency and its own estimate is only 3.1 MMTs.
ARC would note that WASDE does not have to follow the Aussie Stats Bureau and can maintain their own estimate of 33.5 MMTs. Nonetheless, ARC research argues that WASDE should lower 2017/18 Aussie wheat exports by 2 MMTs to 15.5 MMTs due to its high fob prices amid static world wheat demand. Unfortunately, the loss or gain of 2-3 MMTs of Aussie wheat from more than a year ago does alter the bearish outlook for world wheat prices going forward. The world is still awash in wheat with Russia aggressive on offers.
** Soybean rust concern is increasing across Central Brazil amid all of the recent rains. The rust is causing producers to reduce their soy yield estimates.
** Midday GFS Weather Forecast Discussion: The forecast is slightly drier for Argentina and the northern half of Brazil over the next 10 days. The next 4-5 days will be largely dry across Argentina/S Brazil with high temps ranging from the 90’s to lower 100’s. A front will pass across Argentina on Sunday and push into S Brazil on Monday. The front looks to produce .2-1.25” of rain with coverage pegged at 60%. Temps will cool to the mid 80’s to mid 90’s (still above normal). A second and somewhat weaker system will pass northward during the middle of next week producing .1-.6” of rainfall. A trend of below normal rainfall is also starting to emerge for the northern half of Brazil. With the soy crop flowering, the need for rainfall is increasing and soils in this part of the belt do not hold large amounts of water. Monitor N Brazilian weather!
** AgResource Market Comment: The CBOT is likely to keep chopping sideways into Friday’s report. Brazil’s CONAB will be out with their crop estimates on Thursday with USDA on Friday. ARC looks for a Brazilian soy crop of 111-111.75 MMTs from CONAB, up 3-3.75 MMTs from USDA’s December forecast. China Dec trade data will also be out overnight along with the Index rebalance at the CBOT close. Our advice, don’t sell breaks or buy rallies!
