- US interior corn cash basis has rallied sharply since early October, with levels still under the past few years, but greatly improved since the lows set in late summer amid old crop selling/new crop harvesting in the Delta/Southeast. Much of the demand pull is from ethanol plants that are trying to extend their coverage into early 2018. The premium cash structure will help limit the amount of cash corn that is put out for delivery in the next two weeks. It should also help bottom spot corn futures at $3.30-3.35, and we would anticipate a seasonal top in cash basis should form in December.
- There is no material change to the S American weather pattern through late November. Well above normal rainfall (upwards of 3- 6”) will impact much of Cl Brazil next week, while precipitation in Argentina will be isolated to light/scattered totals today and again next Thursday/Friday. The GFS weather model hints at high temperatures in the 90s across Argentina beyond Nov 25. This is likely overdone, but we would point out that heat is typically exacerbated by the lack of soil moisture. Argentina needs meaningful rain by early December. The S American jet stream moves northward in the next 48 hours, pushing heavy rainfall into the heart of Brazil’s soybean belt. Daily showers of .25-.50” are forecast there Sunday to Wednesday. A second round of widespread heavy showers is likely on Nov 24-26. However, this pattern will not be conducive to rainfall in far S Brazil and Argentina.
- Soy futures closed firm at midweek, with soyoil leading the Chicago soy complex higher on lower than expected NOPA stocks. Soybeans finished the day 9-10 cents higher, with funds estimated buyers of 7,000 contracts. In the soy product market, funds were estimated as buyers of 1,500 contracts of soymeal and 6,000 soyoil. NOPA reported a monthly soyoil production figure of 1.896 billion lbs, an 18% increase from September, and the largest production figure since last October. However, despite the larger production figure, monthly soyoil stocks declined 6% from September to 1.22 billion lbs, and fell well short of expectations for an increase to 1.4 billion lbs. The soyoil stocks figure lifted soyoil futures following the report release. The soyoil yield seasonally declined, and was just under both last year and the 5 year average. The near term outlook is neutral, with soybeans to hold a broad range of $9.50-10 until more is known about the S American growing season.
- December corn again took a breather after Monday’s decline and another surge in open interest, which at 1.7 million contracts is the largest since 2010. The trade is well aware that funds’ position this evening is by far record large, and the short side of the market is getting rather crowded. Argentine fob basis continues to inch higher, and the EIA’s weekly ethanol numbers again featured near record production and moderate non-domestic blending disappearance, Brazilian ethanol continues to rally and is currently quoted 30% above the US Gulf. US ethanol production last week totalled 310 million bu, down 1 million from the prior week but up 11 million from the same week a year ago. Residual disappearance continues at a record pace. Crude/gasoline stocks remain well below last year, and until large shale production is confirmed in 2018 we expect energy markets to find support on even moderate breaks. There is little to do ahead of key S American growing stages, and we anticipate weather premium to be added to price should Argentine dryness continue beyond early December. Funds are not going to stay record short foe long, if at all.
- World wheat prices ended lower as Egypt’s phytosanitary standards are still very uncertain, whether ergot will be tolerated or not, which on the margin would act to close Egyptian interest. However, following today’s break, Egypt is seeking optional origin supply for early January arrival, and the results of the tender are anxiously awaited. It is expected that Russia will again be awarded the business, but at what fob price? Otherwise abnormal warmth will persist into early December across the whole of Black Sea region allowing exports to continue unabated. US crop conditions will stay steady, though more attention will be given to developing dryness across the Plains and rain/snow fails to materialise in the next 2-3 weeks. NOAA’s winter climate forecast is due Thursday morning. Plains HRW basis is narrowing quickly, which is partially seasonal but cash wheat prices have not followed the recent break in futures. We suspect a better demand pull for HRW at export terminals.