Corn futures prices continue to work in a sideways fashion as harvest progresses. The market lacks any supply side news for a while and export demand is pedestrian at best. The feature then turns to domestic demand and the slow movement of cash corn. Simply, the farmer doesn’t like the price and will store as much as possible until it improves. The basis is then left to do the work in order to keep grain moving. There were reports of spot corn bids of 30 over Dec in central Illinois and 23 over in central Indiana this week. This was reflected in a firming of corn futures spreads. Dec/July traded in to -17 ½ from it’s low of -24 ½ at the beginning of the month. Other deferred spreads also firmed and we like bull spreading March/May if it sets back to -6 ½ or May/July if it sets back to -5 ½. Chicago wheat spreads also firmed this week as there were a few receipts cancelled. Look to bull spread Dec/July if it trades out toward -15, or March/July if it trades back to -8.
The feature in the soy complex is the uptick in export demand now that harvest is winding down. All three legs of the bean complex are seeing solid export sales recently. Basis levels in soybeans have begun to work higher as the pipeline needs are strong and the producer sales are slow. Bean spreads have firmed along with cash, and we like the risk reward of bull spreading Jan/July at -12 ½ or March/July at -10 if they set back. There is also little risk in owning July/Aug at less than a penny inverse. Soyoil has been gaining on meal as domestic meal demand appears a bit more sluggish than a year ago and solid export pace for oil. Over time oil should continue to gain share value, particularly with supply concerns due to El Nino as it impacts Indonesian and Malaysian palm oil production. It would become more interesting if, for example, the government approves the $1 producers credit for biodiesel or restricts the ability of imported vegoils to be used to meet the mandate. As for outright prices, meal appears to be stuck between $300 and$320 as DDG’s limit the upside for now and the $300 level continues to be well supported. Beans and bean oil look to work higher in the near term.