- HEADLINES: Row crops soar on Brazilian heat/dryness; Meal paces rally; Brazilian corn market adding premium.
- Corn, soybean, and meal futures are sharply higher at midday, with wheat in tow and with soyoil weaker. Meal in recent weeks has been carrying the load in keeping US cash/futures-based soy crush margins elevated, which has worked against strength in oil. Some suggest US soyoil prices are undervalued, but not until there is confirmation of trend soy yields in Argentina will the spread fully re-align itself. Otherwise, today is all about dire weather in Brazil and low odds that the climate pattern changes prior to early/mid-December.
- Brazilian soy planting is projected to have reached 55-57% complete, vs. 66% a year ago. This year’s discrepancy to last year will widen further as producers across much of the country pause fieldwork. High temperatures in Mato Grosso do Sul, Mato Grosso, Goias and Sao Paulo Tues-Sat will reach 102 degrees or higher. These states account for 50% of total Brazilian soy area/production. Excessive rainfall will continue to batter the southern quarter of Brazil this week. The primary risks, for now, centre on a lack of available of soy supplies in early/mid-February, and guaranteed safrinha corn seeding dates. The US soy export window is being extended, and the yield risk associated with safrinha production next spring/summer is massive.
- In fact, yield risks today are higher for corn than soybeans in Brazil, but there is no doubt a pattern of regular soaking rain is needed in Central and Northern Brazil no later than Dec 1 to salvage soy potential. Better rain chances do occur in C/N Brazil in the 8–15-day period, but longer-term climate guidance indicates no meaningful change in Brazil’s climate pattern into late year. Brazilian weather stays abnormal. Crop concern is high.
- We also note that Brazilian corn futures have soared today. January corn in Brazil at midday is up 5.3% at $5.88/bu. Jan Brazilian corn’s premium to Dec Chicago has widened to $1.07/bu, and since late October Brazilian corn’s premium has widened, not contracted, steadily. The global corn market lacks a major supply threat today, but it is clear the Brazilian market is working to funnel winter/spring importer demand to the US.
- It is just tough to be bearish of row crop markets given the need for record Brazilian soy yields and as S American corn supplies will not be fully replenished until early/mid-summer 2024. Ukrainian corn exporters will be there on rallies, but Ukraine still isn’t a reliable supplier given the escalation in conflict within the Black Sea and as tighter government controls on exports there slow the pace of new shipments.
- US corn export inspections in the week ending Nov 9 totalled 24.0 million bu, vs. 22.6 million the previous week. Wheat inspections were 7.6 million bu, vs. 4.2 million the previous week. US soybean export inspections totalled 61.2 million bu, vs. 80.2 million the previous week.
- In their respective crop years to date, the US has inspected for export 243 million bu of corn, 23% above last year, 273 million bu of wheat, down 26%, and 516 million bu of soybeans, down 6% year on year but a sizeable 29% of the USDA’s annual forecast. Following recent Chinese demand and the lack of late Jan/early Feb supply availability in Brazil, the near-term US soy export outlook has brightened.
- The midday GFS weather forecast is consistent with morning output. Exceptional heat and complete dryness blanket Central and Northern Brazil into Nov 21-22. 5-day precipitation accumulation in RGDS in S Brazil is estimated at 3-8”. Moderate rain expands northward into Mato Grosso do Sul and Mato Grosso Nov 22-25, but concerningly, a pattern of dryness resumes thereafter into Nov 29.
- There is little/no room for much additional US soy export demand should adverse weather continue in Brazil into December. And in the long run, the size of Brazil’s safrinha corn crop is a big deal for US, world and exporter corn supply and demand. Weather-based volatility lies ahead, but it is imperative that a major/lasting shift occurs in Brazil in the next 2-3 weeks.