- HEADLINES: Soyoil paces Chicago decline as market reacts to EPA release; Midday GFS weather forecast wetter in Argentina.
- Chicago values at midday are trading lower, with soybeans and soyoil collapsing following the EPA’s updated blending mandates released late Wednesday. The market is clearly disappointed with the 1% hike in renewable fuel volume obligations in calendar year 2023, and while renewable diesel output expansion will continue in the near term. The value of RINS looks to fall sharply as there will be no issues at all in meeting the US’s 2023 targets. The coming erosion of RIN values will, on balance, reduce total plant revenue. Jan Chicago soy fell below its 200-day moving average with ease this morning.
- The EPA’s announcement has collided with wetter extended range forecasts in Argentina and ongoing pitiful (negative) US soyoil export demand. The midday GFS forecast is in line with ensemble model solutions released overnight which feature a modest but needed uptick in rain chances across Central Argentina beginning Dec 8-9.
- US exporters in the week ending Nov 24 recorded net soyoil sales cancellations worth 5 million lbs. This follows cancellations of 200,000 lbs the previous week. It feels that the USDA’s soyoil export forecast is much too high, and still US soyoil is expensive in the global oil market. EU rapeseed oil this morning is quoted at $0.58/lb, vs. $0.80 a year ago in early December. Maximum biofuel production/consumption is needed to prevent a rise in monthly soyoil stocks.
- US corn export sales in the week ending Nov 24 totalled 24 million bu, vs. 73 million the previous week as Mexican demand slows. Soybean sales were 25 million bu, unchanged from the previous week and right at the level needed to meet the USDA’s target. Wheat sales totalled just 6 million bu, vs. 19 million the previous week.
- For their respective marketing years to date, exporters have sold 723 million bu of corn, down 48% from last year, 1,370 million bu of soybeans, unchanged from last year, and 494 million bu of wheat, down 6%. Key is whether corn sales can see semi-lasting improvement as S American surpluses tighten by mid-winter. Today, US corn is expensive relative to competing markets for Dec/early Jan.
- The midday GFS S American weather forecast is wetter in important regions of Central Argentina in the 6–10-day period. Blocking high pressure ridging is forecast to move slightly northward beyond Dec 8, which allows for an improved flow of moisture and a moderation of temperatures thereafter into Dec 15-16. Confidence in details so far out is lacking but calls for additional ‘band-aid’ rainfall in Argentina have been consistent in the last 24 hours. Extreme heat and complete dryness into Dec 8-9 will accelerate moisture loss nearby.
- The Brazilian outlook lacks issues, with normal/above normal rainfall of 2-5” offered to the entirety of Brazil’s Soy Belt in the next 10 days. Brazil avoids heat.
- Renewable diesel production remains a key driver of soy demand longer term, but disappointing mandated 2023 growth, along with soyoil fund length of 100-105,0000 contracts on Wednesday warrant a correction. Choppiness continues until S American yield potential is better known.