It’s been a mixed and mostly dull session so far at the CBOT. Beans are down another 5 cents as funds’ modest long position is being liquidated ahead of the holidays, while new bearish grain input is lacking – and recall funds hold a record short position in CBOT corn & wheat combined.
Prevailing themes include rising feedgrain basis levels across the Plains, and rising DDG prices, which is working to aid ethanol production margins, and which is partially offsetting falling ethanol prices. The US forecast is still much too dry & cold for comfort, and some lite short covering is noted in US wheat futures.
FAS’s daily reporting system included 145,000 MTs of US soybeans sold to unknown destination for 2018/19 arrival. No new corn/wheat sales were featured, though we do mention US wheat is the lowest offer in Iraq’s latest tender, and any purchase will be included in FAS’s daily report by early next week.
There’s just not a lot for either the bulls or the bears to sink their teeth into, and key will be how South America’s forecast evolves into the weekend. ARC mentioned this morning that the EU & GFS are in poor agreement, even in the 7-day period, and until this resolves speculators will be loath to take new meaningful positions.
Soil moisture has no doubt improved in Central Argentina, yet cash prices there continue to rally. Bean offers are hard to find over the next 60 days, and Argentine corn basis has hit new seasonal highs at $.57/Bu over futures, vs. $.25 over in October, and vs. US Gulf basis this morning at $.44. It’s our opinion that any new weakness in corn must be led by South America’s cash market. And following late corn planting, the crop there won’t be 50% harvested until mid-summer, assuming that some 500,000 hectares can be planted in the next 10 days. Argentine planting progress will be updated on Thursday afternoon.
Tomorrow’s EIA report is expected to include another boost in motor gasoline stocks, but another slight decline in crude inventories, and also another week of impressive US ethanol production. Ethanol production has been record large (for each particular week), and still cash DDG prices are rising, which is noteworthy.
Crude at midday is up $.30/barrel at $56.40, basis spot. EU milling wheat futures look to settle exactly unchanged.
Midday GFS Weather Forecast Discussion: The midday GFS is little changed from this morning, and still projects soaking rainfall across much of Argentina and Southern Brazil over the next 6-7 days. Yet more rain is offered to Argentina in the 12-15 day period, and the GFS’s solution is favorable should it verify. A close eye will kept on changes in the operational models, but first we await this afternoon’s final EU model run, as this morning the EU was much drier in Argentina. It’s not a bullish forecast, but with the models in such poor agreement over the next week confidence in any solution is lacking. 10-day precip is at below.
We also mention the US forecast has trended colder beyond Jan 1, with sub-zero lows possible as far south as NE & IA.
AgResource Market Comment: As of today, ARC estimates managed funds maintain a combined net short in corn & wheat worth 350,000 contracts, and are very close to nearing a net flat position in soybeans. We maintain a strategy of not chasing breaks, and there’s a long way to go before S American surpluses are determined.
