10/17/18

Morning Commentary - 10/17/2018

Markets Do Little Overnight; Better Harvest Weather Ahead for US, Canada

Nov soybeans are up .25 cents at $8.85, Dec corn is up .5 cents at $3.7575 and Dec Chi wheat is down 2.75 cents at $5.2075.

 

Good Morning! Overnight trade was again mixed and dull. The EIA’s weekly energy report will be released later this AM. Whether crude stocks build further and whether better US export demand is found will be key. Export sales on Thursday should show improvement on the week in corn. But otherwise, there’s just not a lot of fresh input on which to add new positions. US combine data is awaited, but harvest won’t resume in full until this weekend/early next week.

Soybean premiums in Brazil have been firm on the rally in futures. 

Brazilian beans this AM are offered 26% above Gulf beans. Recall China’s tariff on US bean imports is 25%. We don’t expect any new purchases from China, but the boost in South American cash prices can’t be ignored. Given lofty S American values, Jan beans are viewed as fairly priced at $8.80-9.10.

World grains markets have been unmoved for weeks. Our EU/Black Sea sources suggest interest in the markets at all is limited. Quality Russian wheat is getting harder to find and domestic prices are rising. But EU and US markets continue to wait on confirmation of slowing Russian shipments. Brazil is now interested in buying modest tonnages of Russian origin.  

The US weather forecast is a bit drier in the E Midwest in late October. Nearly complete dryness lies ahead for the whole of the Corn Belt into Oct 30. Temps will be variable, but no extremes are indicated.

We also mention dryness and relative warmth will find the Canadian Prairies over the next 10 days. Snow cover in Saskatchewan and Manitoba has melted. No additional snow is seen into next week, and so it’s possible producers there can rush to get spring wheat & canola out of fields prior to the next meaningful snow event. Canadian canola futures have eased this week.

Crude is down $.30/barrel at $71.65, spot, while RBOB gasoline is higher. Malaysian palm oil futures rallied 16-19 ringgits overnight. EU milling wheat futures are exactly unchanged. Dow futures are down 90 points. The US administration has formally announced it seeks to negotiate new trade deals with Europe, the UK & Japan in the near term.

Data continues to point to a longer-term bull market in wheat. Corn is valued fairly between $3.70-3.90, spot. We favor beans sales on rallies amid favorable South American weather and record large US/South American stocks.

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