Halloween Commentary - 10/31/2018

Ag Markets Steady/Weak on Drier US Forecast

6:30 AM CDT CBOT Prices: Nov soybeans are up 0.75 cents at $8.3425, Dec corn is down 1.0 cent at $3.6375 and Dec Chi wheat is down 4.25 cents at $4.955.

Good Morning! Markets are stead to lower this AM ahead of the EIA’s weekly crude/ethanol inventory report and as the US forecast has trended drier beyond the next 7-8 days. The EU & GFS models are in good agreement on low pressure sinking into the Central US late next week and beyond. Cooler air flows southward, but very little rain/snow is included in this morning’s 8-15 day forecast. US harvest and winter wheat planting should be about wrapped up by the middle of November.

Russian wheat exports continue at a record pace despite the government’s new phtyosanitary protocols. Exports through the end of Oct are estimated at a record 16 MMTs, vs. 13 MMTs last year. Ship lineup data suggests shipments in Nov will also be large, and so it’s possible exporters there will have shipped 19-20 MMTs of wheat by the end of Nov. This is 60% of the USDA’s forecast (and 62-64% of some private forecasts) with a full 7 months remaining in the year.

Our sources indicate that in fact that Russian officials are concerned over domestic supply. Bread quality wheat inventories are particularly low in Southern Russia. There’s talk that the government will make exporters map out shipments expected over the next several months. The pace of Russian exports to date has kept prices in other world markets flat. But this also will force an earlier re-allocation of world trade flows in Dec and beyond.

The EU/Black Sea forecast is drier still, with zero precip offered to Central & Eastern Europe, Ukraine and Russia over the next 15-16 days. Temps stay abnormally warm, with no major freezes expected.

South American soybean basis this week is down slightly. Premiums in Brazil are pegged at $2.40 over CBOT futures, vs. $2.65-2.70 previously. South America’s cash market will be key to measuring downside risk in futures. So far there’s been no reason for spot beans to drop much below $8.40 as Gulf beans are offered more than 25% below S American origin. South America’s climate pattern looks favorable into mid/late November. A further relaxation in Brazilian premiums will occur in early 2019.

Macro markets are mostly supportive. Dow futures are up 160 points following Tuesday’s 430 point rally. Crude is up $.30/barrel. EU milling wheat futures are steady.

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