- Row crop futures have shrugged off early weakness, with wheat extending its overnight rally, as money continues to pour into the ag space. November beans are again flirting with a slight premium to January. Dec Chicago wheat’s premium to March has narrowed to just $0.02/bu, while spot corn is trading above $4.00 for the first time in 12 months. A strong close is expected.
- China was announced to have bought 261,000 mt of beans for 2020/21 arrival. No new Chinese interest in corn or wheat can be confirmed. Using known sales announcements, soybean sales through the week ending Oct 8 (to be published Friday) are expected in a range of 2.2-2.5 million mt. Daily soy sales this week already amount to 525,000 mt. Chinese demand is known and most important is the rate of Chinese buying in November and beyond. But, sales data continues to suggest that the USDA’s 2020/21 US soybean export forecast remains understated. Private US soybean export forecasts have risen further based on the lack of Brazilian supply expected in Jan/early Feb.
- The International Research Institute’s's updated Nov-Jan climate forecasts feature above normal rainfall across the heart of Brazil’s Ag Belt into mid-winter. But La Niña driven dryness is most probable across Argentina, Paraguay and Southern Brazil. We would caution against altering the yield of any crop not yet planted, but acute focus will be paid to Argentine rainfall and soil moisture beginning in mid-November. Climate forecasts also include lingering drought through the winter months across the US Southern and Central Plains.
- US ethanol production last week totalled 275 million gallons, vs. 271 million the previous week but still down 4% from the same week in 2019. US gasoline disappearance fell to 8.6 million barrels per day, vs. 8.9 million the previous week.
- Energy balance sheets remain loose and following a surge in Chinese crude imports in Jun-Sep a slowing of Chinese imports is expected moving forward. A new energy demand driver is needed. Spot WTI crude at midday is down $0.80/barrel, with gasoline following. Weak energy markets have weighed on global vegetable oil prices since mid-week. Even tight oil-based market such as EU rapeseed has been unable to sustain lasting rallies.
- The GFS’s Black Sea weather forecast is drier at midday. Light/scattered showers will impact key oblasts in Southern Russia this weekend but follow-up precipitation is not indicated into Oct 31. The area of concern in Russia is small but accounts for 60% of winter wheat, 50% of winter rapeseed and 90% of winter barley production.
- Compounding strong nearby demand for soybeans is heightened concern over longer term weather conditions in Argentina.
- We note that amid record interior Russian wheat prices, the incentive to maximise winter wheat area is massive. Yet, world wheat markets remain in an unusual but full-blown weather market.
- The Central US weather forecast is drier across the Central and Eastern Midwest over the next 10 days but includes a more expansive pattern of snowfall across ND, MN and WI. Moisture-equivalent totals in excess of 1″ will be confined to Ml and parts of WI. Snow doesn’t begin to fall across the Upper Midwest until Saturday. Soy harvesting in ND should be complete by the weekend. Corn harvest should reach 45-50% complete. Dryness and warmer temperatures resume Oct 25-31.
- Volatility will persist well into early 2021 amid the need for large S American crops and the need for Russian wheat production in excess of 73-74 million mt in 2021. US-Chinese tensions provide weight on rallies.