- Chicago markets are trading are lower at midday amid sustained weakness in financial markets and midday selling in crude futures. US crude stocks through the week ending Nov 6 were up 4.3 million barrels to 488.7 million. This is up 9% on last year and while this week’s news of the forthcoming Covid vaccine is welcomed, it will take some time to approve, distribute and eradicate the virus. Soy oil is holding up best on a % basis on soaring global veg oil prices and talk that an accident occurring at a soy/sunseed crush facility in Argentina will keep that plant closed indefinitely.
- It is estimate that managed funds as of Wednesday morning were long a net 363,000 contracts of corn, the most since 2012, and 280,000 contracts of soybeans, a new all-time record high. This week’s correction was needed, and it remains that bull markets must be fed on a daily basis. FAS failed to announce any new export sales this morning. Russian wheat exporters will be relatively aggressive up to Feb 15, when shipments begin to count towards a 15 million mt all-grain export quota. The S American weather forecast has trended wetter in Central and Northern Brazil but remains concerningly arid in key areas of far S Brazil and Argentina.
- This week’s ethanol data leans modestly positive corn but slightly bearish ethanol. US ethanol production last week totalled 287 million gallons, vs. 282 million the previous week and a new crop-year high. Work suggests that an average of 285 million gallons per week is needed to meet the USDA’s forecast. Assuming miles driven begins to recover next summer, ethanol’s bearish impact on the US corn balance sheet will be waning. Seasonally, ethanol production should reach an intermediate peak in the weeks ahead.
- US motor gasoline consumption though the week ending Nov 6 totalled 8.76 million barrels per day, vs. 8.34 million the previous week and the highest since early October.
- This week’s Central US drought monitor features a modest expansion in abnormally dry conditions across TX, OK and portions of the Central Midwest. The near-term Central US forecast is aligned with La Niña-based climate outlooks. Meaningful precipitation will stay isolated to the Midwest into late month. The return of moisture to the Plains is unlikely through the remainder of 2020.
- The midday GFS weather model is wetter across Western Argentina and Central Brazil relative to its overnight release. A more seasonal pattern of daily showers will be established across Mato Grosso, Goias and Minas Gerais over the next two weeks. Cumulative totals will reach upward of 2-4″. This will stabilise soil moisture there. Better rains also lie ahead next week for South-Central Brazil, including major producing states Mato Grosso do Sul and Parana. Yet, our concern is that rainfall in Southern Brazil won’t be lasting. Dryness returns to the region beyond Nov 19. The erratic nature of precipitation across the southern half of Brazil’s ag belt will weigh on crop health longer term.
- Bullish row crop fundamentals have not changed but amid extreme fund length we should expect increased volatility well into 2021. USDA corn and soy export forecasts are too low in our view. Boosting total cropped area in 2021 by 9-10 million acres, of mostly soy, will be a difficult chore.