Grains are lower at midday:
Corn – 5 cents/bu (Dec @ 4.21 )
Soybeans – 4 ½ cents/bu (Jan @ 11.86 ¾ )
Chi Wheat – 18 ¼ cents/bu (Dec @ 5.93)
Cdn $ +0.00070 (76.96 cents)
WTI Crude Oil +0.73/barrel (45.64)
Grain prices are under pressure at midday. Weakness in futures prices comes from two areas. Grains, in general, are reacting negatively to more stories of impending cancellations of Chinese purchases of USA soybeans for December and January shipment, due to negative crush margins in China. We have not seen any USDA confirmation of such cancellations, and likely will not until next week’s Weekly Export Sales Report, since this week’s sales report will only capture business as of the close of business last Thursday, November 19th. Some in the trade are suggesting the cancellations are small, and only relate to importers that failed to hedge their purchase and hedge the offsetting oil and meal. That is why it is hard to imagine the cancellations representing massive tonnage, but such rumors are negative, and this is some of the first negative news that the market has had to deal with in this recent historic rally. Also weighing significantly on wheat values are forecasts for the USA Southern Plains calling for widespread, big rainfall accumulations. One will recall that we rallied a lot yesterday on the declining USDA hard red winter wheat ratings. The additional moisture in the forecast has allowed the market to take back yesterday’s gains and more.
Of course, with tomorrow being Thanksgiving in the USA, we are seeing a significant drop in grain futures trading volumes, as many market participants are already in holiday mode. The lower volumes and lower number of participants can make market moves more exaggerated than they would normally be. Grain markets would be expected to continue to be choppy through the end of the day, and in Friday’s holiday shortened session as well.
The USA Energy Information Administration released it’s weekly report on petroleum stocks today, and those numbers confirmed that Americans drove less, consuming less gasoline for the 2nd week in a row, due to COVID-19 lockdowns. Ethanol production actually rose by 28,000 barrels per day last week to 990,000 barrels daily. Unfortunately, with the drop in gasoline demand, ethanol stocks actually jumped 700,000 barrels higher on the week to 20.9 million barrels.
Market bulls are taking some chips off of the table ahead of the Thanksgiving weekend. We are currently in a South American weather market, with dryness in Argentina and Brazil fuelling this rally. Weather forecasts continue to point to good rains over the next week in Argentina and southern Brazil, while central areas of Brazil look to remain dry. Weather maps can turn on a dime, and with many traders not returning to work until Monday, the 4 days until then represent an eternity in weather forecasting, hence the willingness to sell some corn and soybeans today (amid the news of potential Chinese cancellations).