- HEADLINES: Chicago turns higher on drier midday GFS forecast for northern Brazil; NOPA out on Wednesday; Mexico secures more US corn.
- Corn, soybean, and wheat futures are mixed at midday. Any selling has been concentrated in soybeans/soymeal with the grains trading either side of unchanged. Soyoil has been the bullish stalwart of the morning on oil share spreading with December futures rising to their best levels since October 23.
- However, Chicago trade volume has trended lower from an active opening as traders await news on the Biden/Xi Summit at the APEC meeting, the US House vote on a continuing resolution that includes an extension of the 2018 Farm Bill, and the Weekly FAS US Export Sales report on Thursday that is expected to show that China booked a massive 90-118 million bu of US soybeans last week.
- A mixed Chicago close is forecast as the market consolidates Monday’s gain. Technically, vegoil values are breaking out to the upside on the charts. Be it palmoil, soyoil or canola, they all appear to be at a bullish technical turning point. Soymeal futures market spreads argue that soybeans are consolidating.
- FAS announced that Mexico purchased 101,745 mt of US corn. No additional sales of US soybeans were announced sold to China/unknown destinations.
- Chicago brokers estimate that managed money managers have purchased 1,000 contracts of Chicago wheat, 2,000 contracts of corn, and 3,700 contracts of soyoil. Fund managers have sold 3,200 contracts of soybeans and 4,700 contracts of soymeal.
- NOPA will report their October member crush and soy product stocks tomorrow. We are looking for a record large crush rate of 188 million bu with soyoil stocks pegged at 1.28 billion pounds. Crush margins have pushed NOPA processors to be running at full capacity. US soyoil yield is best determined with the November report as it reflects the first month of all new crop soybean supply. We doubt that the NOPA data will pressure WASDE to raise their annual crush estimate until there are few additional months of crush. We note that ADM Spiritwood North Dakota plant should become operational before the end of November, adding capacity of an estimated 150,000 bu/day when fully operational. The ADM Spiritwood plant is a joint venture with Marathon.
- The US inflation rate was 3.2% in October, down from 3.7% in September and 9.1% last year. US gasoline prices were the driver of the lower inflation rate and the rising expectation that the US Central Bank has reached its zenith on its interest rate hikes in its war against inflation. The US dollar has declined to its lowest level since the opening days of September with money managers looking at raw materials as investible for 2024. The US Dow rallied to gains of 460 points while the yield on the US 10-year note has fallen to 4.45%. The Brazilian Real has rallied to 4.85:1 US$.
- The midday GFS weather forecast is drier than the overnight run for Northern and Eastern Brazil. Exceptional heat and dryness blankets Central and Northern Brazil into Nov 20 with showers returning next week. We estimate 6–10-day rain accumulations across Northern and Central Brazil in a range of 0.4-2.50”. A concerning pattern of dryness resumes in the 11–15-day period as the high-pressure ridge rebuilds aloft. The coming showers will not be enough to arrest crop stress if another period of hot/dry weather returns in the closing days of November and December.
- Southern Brazil endures additional flooding rain totals of 3-9.00” as a stuck weather pattern holds aloft. The rain adds to crop woes amid saturated soils. More than 30” of rain has fallen across S Brazil since September 1.
- The drier midday Brazilian forecast has rallied soybeans/ soymeal back in the green. The market is myopic on S American weather due to its importance on future US corn/soy export demand. Cash soymeal and soyoil are trading well above Chicago values which prevents a sizeable decline ahead of first notice day. Corn has the best bullish potential if estimates are correct with a Brazilian total corn production of 123.5 million mt with future declines likely on abandoned acres.