- HEADLINES: Corn, wheat recover from morning lows; Crude drops $2.40/barrel; Argentine forecast trends drier; Brazil adequately wet.
- Corn and wheat have crawled off morning lows while soybeans sag on a lack of new export demand and the probable return of normal rainfall across Central Brazil during the second half of November. Macro market guidance leans slightly negative as spot crude drops another $2.40/barrel and equity markets at midday are slightly weaker. Both have dismissed another round of weakness in the US dollar.
- Breaking news is absent, but the rapid de-escalation in Russian-NATO tensions overnight and talk of ongoing corridor negotiations are likely to keep Ukrainian corn and Russian wheat flowing into the world market. We note that the corridor is set to renew automatically for 120 days on Nov 18 if the deal is not amended/eliminated in the next 48 hours. It is likely left to Russia to terminate the corridor and otherwise the market’s debate will centre on whether safe passage is granted to vessels for a full year rather than in 120-day increments.
- US exporters this morning sold 73 million bu of corn to Mexico, with 49 million earmarked for 2022/23 delivery. This provides some measure of relief to the pace of new demand given US corn export commitments to date are down 54% year on year and in only one week since Sep 1 have weekly sales exceeded the pace needed to meet the USDA’s forecast. We expect demand to improve slightly Jan onward as Brazilian supplies become exhausted, but it is imperative that exporters are able to sell 40-50 million bu/week throughout winter to prevent a sizeable trimming of 2022/23 corn export forecasts. Exporters also sold 6 million bu of HRS wheat to Iraq, which was largely known on Monday.
- EIA data this week leans supportive ethanol/crude and slightly negative corn. US ethanol production in the week ending Nov 11 totalled 297 million gallons, down 12 million from the previous week and down 5% from the same week in 2021. Ethanol stocks last Friday were 895 million gallons, down a sizable 37 million week on week and which explains recent strength in the cash ethanol market. Weekly ethanol production must stay above 295 million gallons to validate the USDA’s annual corn grind forecast.
- Crude stocks, less strategic reserves, on Friday totalled 435 million barrels, vs. 441 million the previous week and up 1% from the prior year. Total US crude stocks slid another 9.5 million barrels and at 828 million are down 20% year on year.
- The midday GFS weather forecast in the US is consistent with the morning run in keeping near-complete dryness intact across the US Southern and Central Plains into Dec 2. Drought deepens further across the HRW Belt.
- The S American GFS weather forecast is drier in Cordoba on Central Argentina but is otherwise unchanged. Additional rains impact Buenos Aires late in the coming weekend. A few light/scattered showers are possible elsewhere in Argentina Sat-Mon but net soil moisture draws are anticipated into the opening days of December. Developing dryness across RGDS and pockets of Parana in southern Brazil must be monitored, but a vast majority of Brazilian soy producing areas will be adequately watered in the next two weeks.
- Tuesday’s action shows that ag markets remain highly sensitive to Black Sea geopolitical issues, but until there is an actual halt to trade flows, competition for near-term corn/wheat market share remains strong. Brazilian fob soybeans are offered for Feb delivery and quoted $0.80/Bu below US Gulf origin. Brazilian soy discounts are likely to grow modestly without adverse weather in December.