Good morning friends,
US row crop markets are mixed this morning, while crude oil makes a new 9 month low. December corn and January soybeans remain in their tight ranges at 370 and 888, while cotton markets bleed lower as FND approaches for December futures at 76.66, up slightly. Wheat markets are making moves as December Chicago now trades 26 cents over KC as variable storage rates or VSR are decreasing in Chicago from 8 to 11 cents. Chicago trades 515 while KC trades 510. This basically means storage in SRW will become cheaper in the coming delivery period, which should prevent a lot of deliveries in the Chicago. Crop progress reports were delayed yesterday due to Vets day, wheat planting pace should have been non-existent last week. There is little price action worth noting outside of the continued slide in cotton prices and the sudden jump at the front of the curve in Chicago.
Talks between China and the US are starting up again as Treasury Sec Steven Mnuchin is back talking with his Chinese counterpart Liu He per reports from the South China Morning Post. The rumors are a framework for a trade agreement is being worked on. Terry Brandstadt, the ex-governor of Iowa and known friend of President Xi has been optimistic in his rhetoric in recent days, but I don’t know if I would buy into it. While the White House’s National Economic Council is reviewing what offers from China on agricultural tariffs, technology transfer, cyber security and intellectual property protection would be acceptable, the buck stops with Trump who insists current tariffs need to continue to get China to make necessary concessions. Brandstadt is obviously concerned about the soybean markets and I applaud him for doing all he can to close the communication gap but I don’t see this as anything concrete yet. Total soybean exports to China from global partners is off 30% from a year ago. The Chinese soybean markets are starting to reflect this tightness as crush margins sit near record highs.
Soybeans
Soy harvest is now coming to an end as cash basis has rallied at the river. IL River soybeans are now bid $.48 under the CBOT, and MS River bids in the QC are 39 under. Basis at both locations were close to a buck under several weeks ago. Jan soybeans have held above the 50-day moving average all month, and we expect that in the near term the market will be well supported on any breaks. The longer term outlook completely hinges on whether China lifts tariffs on US soybeans.
Wheat
Wheat markets have been enjoyable to watch in recent days from a volatility standpoint. Over the last week, December vs March futures has tightened up dramatically as short covering amidst the first reversal in VSR is years. KC is probably the buy here as much of the buying in Chicago has come via spreading against KC. Basis in KC wheat is increasing and well above last year’s levels at this time. World cash prices are holding. The Russian and US markets are the cheapest, offered in a range of $230-240 for the last several weeks. US wheat is competitive and should continue to see demand. Drought will be o going in Europe, Ukraine and Central Russia into late November. Whether seeding was completed last week across the US Southern Plains will be key in Tuesday’s afternoon Crop Progress report. Rains in Argentina are helping corn and bean development, but are hurting wheat. Santa Fe was reported to have received almost 9 inches in the last few days.
December vs. March Wheat

Cotton
Cotton markets just can’t get off the mat. Much like soybeans, a low-slow trade is expected until we find out more about trade. In the meantime, producers in Texas watch more rain fall as strippers and pickers remain idle. The outside market forces were particularly bearish for cotton yesterday with a sharp break in energy prices, a move to a new 16-month high for the US dollar and a collapse in the US stock market. The selling pushed the market down nearly 2% and down to the lowest level since October 25th. It was clear from the reaction after last week’s bullish USDA report news that the recent collapse in China’s stock market and concerns with the Chinese and emerging market currencies is a major near-term bearish force. Open interest has fallen sharply in the past several sessions to reach the lowest level since October 2nd. The long liquidation selling trend is seen as a short-term bearish force and the drop in open interest helps confirm that the long liquidation selling trend may be intensifying as support levels are violated. 10 more days until the bearish seasonal flips to a buy recommendation.
Corn
Corn futures are very tied to 370, with little news to break it away. US Gulf corn is again highly competitive for JFM delivery. The US corn harvest through Sunday is estimated to have reached almost 90% complete. The world cash market has printed its harvest low, I think we probably see this range through Thanksgiving. After that I think risks lie to the upside if there is a trade deal, while downside risks should be muted for now. Longer term downside risk is in play given the planted acreage uncertainty we could see in the US if there is not a bean deal. That is a trade for a different day though, target 410+ as a place to start pricing some corn for next year.
This article originally appeared in the This Week in Grain (T.W.I.G.) Newsletter “Tuesday Morning in Grain and Oilseeds 11/13” at 11/13/18 07:33:38 AM CT.

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