• HEADLINES: Crude oil futures plummet on coordinated release of strategic reserves; Wheat rallies on Aussie wet weather; Corn/soy mixed.

• Chicago futures opened lower, but quickly uncovered investor demand based on strong ethanol/soybean crush margins. Soybeans and wheat rallied while corn futures bounced off their overnight lows. Sinking crude oil futures has capped the rally, but the tone of Chicago remains bullish.  Investment funds have a sizeable amount of capital to place in the commodity space before the end of the year. Grain and livestock breaks uncover support from managed money and institutional investors that want to add “stuff” to their portfolios. It is investor flows that will support a rally in grain/commodity values into the holidays.

• Brokers estimate that funds have bought 2,200 contracts of wheat, 3,300 contracts of corn, and 2,100 contracts of soybeans. In soy products, funds have bought 1,300 contracts of soymeal while selling 2,300 contracts of soyoil. The prospect that the EPA will announce 2020, 2021 and 2022 biofuel mandates either today or no later than November 30 has sparked selling in soyoil futures on the risk of bearish headlines. Again, we would remind that we expect that EPA will raise the 2022 biofuel mandates which will be longer term bullish to US soyoil demand.

• European traders indicate that China booked 200-250,000 mt of French feed wheat in the past 36 hours. Last week, China booked 700-900,000 mt of Ukraine corn with total Ukraine 2021/22 purchases estimated at 7-10 million mt. The Chinese buying of French feed wheat has raised eyebrows just as China harvested a record corn crop of 270-273 million mt. China’s domestic corn market is resting near historical highs. It is the huge margin between China’s domestic cash corn market and world feedgrains which is facilitating the buying. We estimate that China has now booked 19-21 million mt of world corn, on its way to another year of importing 28-32 million mt. This is a key reason why the downside in Chicago corn futures is limited, the risk that China secure US cash corn next.

• Wheat futures have rallied to strong gains on the forecast for additional soaking rains for Eastern Australia. Farmers here were able to get a few days of harvest completed, but next week’s deluges look to cause fresh worry over wheat quality and yield. As we have previously reported, W Australian protein levels are low, which places added importance on E Australian wheat quality. The world cannot afford to lose E Australian wheat quality due to a shortage of high protein milling wheat as world spring wheat crops were knifed due to dire droughts in the US, Canada, and Kazakhstan.

• Soyoil futures have fallen to key trendline support connecting the lows of June, September, and early November. Renewable diesel demand will be ramping up in 2022, and the bull market in vegoils is ongoing. Sunoil prices have rallied sharply in prior weeks, with shortages of palm and canola ongoing.

• The midday GFS weather models are having trouble with a short wave that is expected to pull across Argentina next Thursday/Friday. The EU model has the front (and rainfall) further north, while the GFS is moving the system in this same direction, but at a slower pace. Note the rain across Central Brazil late next week with totals of 0.25-1.50”. Research argues that the GFS is overdoing the rainfall. The models will have the next week to decide on rainfall locations and amounts more fully.

• Moderate to heavy rainfall will persist across N Brazil with totals of 3-6.00” into Nov 29. Brazilian farmers prefer more sunshine and drier weather conditions to slow emerging disease pressure on soybeans.

• The big fall in US energy values is keeping fund managers from chasing Chicago values on the upside with meal/oil spreading pressuring soyoil. The volume of Chicago trade is modest today as traders will be taking off for the US Thanksgiving Day Holiday next week Thursday. December options expire in the holiday shortened trade session next Friday. Yet, US ethanol/crush margins are fantastic, limiting the downside on the premium cash basis bids heading into first notice day against December. Don’t sell breaks or chase rallies for now.

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