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Wheat
While the action has been subdued in relationship to beans and corn, wheat is trying to climb higher once again this morning. A higher close would make it three in a row but at least at this point, we have not been able to reach up to the highs posted this past Friday.
On the news front there is little additional that I can add to the wheat story. There are continued concerns about abnormally cold weather in Eastern Europe and into Russia. That said, it was reported overnight that Russian exports to date are running over 32% above a year ago at this time. There are a few tenders floating around but I suspect the sales tomorrow morning will once again be on the low side as we are still not really competitive on the world stage. Of course, no one expected the beans sales last week either.
Harvest in Brazil has finally been able to pick up and it was reported that in the state of Parana they have reached 72% complete. This would actually be 12% ahead of the pace last year. Also, yesterday it was announced that Argentina would be able to supply at least 5.5 MMT of wheat to Brazil this coming year.
I continue to believe that December futures will encounter very stiff resistance around the 5.40 level and should be within days of turning back lower.
Corn
While this move has really been about meal and beans we have done a pretty reasonable job of forcing the corn short out as well. That said the failure to hold the gains yesterday may have been the first sign that the move has about run its course. Prices have been firmer again overnight but so far have lacked the enthusiasm to reach back against yesterday’s highs.
I understand that farmers have been rewarding this move as selling picked up notably yesterday. We will have the weekly ethanol report issued later this morning, which should reflect a production of at least 900,000 bbd and export sales in the morning. Like wheat, U.S. corn on a FOB basis is not competitive.
We have scattered showers in the forecast across the upper Midwest over the next few days and cooler temperature but nothing that should create major disruptions with harvest. Yield reports continue to range from average to exceptional. I suspect once we have rolled the calendar over to November, the focus and discussion will revert to the next crop production estimate, which by the way will be the final one of the calendar year.
Unless we see another shock move from meal, it would appear that this corn move has pretty well expended itself. As such, I expect to see prices track lower then into at least Thanksgiving.
Soybeans
The bean market surrendered the majority of days gains by the close yesterday and although we have bounced again overnight, we are contained within Tuesday’s action. As I commented yesterday, the situation that we are facing in meal and beans is logistical in nature and the job of the market is to provide economic incentive to try and correct that. While that can be accomplished by making other substitute products economically viable but also help to compensate for additional transportation expenses. It has been reported that trucks from the eastern and southeastern feed market have been arriving at processing plants to haul meal. Not as efficient as rail but should help alleviate the problem for the interim. There has already been discussion of the competitiveness of bringing South American meal into the east coast and while probably not economically feasible at this point, could also provide an alternative.
Rains have continued to fall through what had been the hot and dry regions of Brazil and it would appear the dry pattern has been broken. The late arriving rains though have meant a late start to planting as well and it is estimated that it stands at less that half of a year ago with 15 to 17% of the country planted. Parana is estimated to have 30% of the crop planted, Mato Grosso do Sul 24%, Matto Grosso at 16% and Goias at 8%.
Farmer selling has reportedly picked up nicely over the past couple days. We could still easily see the bean market hold at these levels for the next day or so as the market tries to sort out these transportation issues but I continue to believe as with the corn and wheat trade that we should see the scale tip lower in November as we refocus on the upcoming November USDA estimates.
