This Week in Grain

11:07 AM 11/16/2018

The beginning of this week, we saw wheat rally due to the fact that funds were getting squeezed on the December futures contracts, forcing them to cover their short positions.The narrowing of the Dec/Mar spread, along with trade above key moving averages, pushed a portion of the fund short position to exit. Cold temps in Southern Russia also moved market higher. Wet conditions in Argentina are supportive to wheat, as decline in global quality would justify higher values for quality.

The higher wheat market caused the corn market to show some strength early in the week. The corn market seems to range bound between 3.55 to 3.85 on the December futures. On the demand side, farmer selling has been very light on a nationwide basis. USDA caught most everybody off guard last Thursday by adjusting Chinese corn stocks upward by 149 million metric tons. Conflicting data coming out of China created a lot of confusion. The market now assumes that China will not increase its imports over the next couple of years. Given this, world supplies minus the United States and China remain tight at only a 39 day supply. The rest of the world outside of China has very little margin for error.

In soybeans, USDA cut its export target by 160 million bushels last week, and expect more cuts to come if no trade deal is reached with China in the coming weeks. Tweets from the Administration in the US-China trade war has been the reason for rallies and pull-backs on beans. There was an indication of some concessions from China to the US ahead of the upcoming G-20 meeting. Later reports downplayed these concessions, if any were actually made. Just the rumor spiked the futures market 13 cents.

Jim Gallagher

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