- HEADLINES: Wheat drops to fill gap left on Sunday; Vessel insurance coverage resumes in Black Sea; Soy recovers on continued Brazilian unrest.
- Wheat futures in the US and Europe have extended overnight losses following confirmation that large insurance companies have resumed writing coverage for Black Sea-bound vessels. Additionally, Russia has hinted it will make its decision on extending the export corridor, or not, by Nov 18, a few days before the initial agreement expires. Russia’s resuming its participation in the corridor today raises the odds that the deal will be extended, and so the market once again assumes USDA’s Ukrainian corn export forecast (15.5 million mt) is too low and that Russia may be able to export 4.5-5.0 million mt of wheat in Nov and Jan. This perception will be rather fluid, but risk premium is being extracted this morning.
- However, Brazilian issues remain front and centre. Roads leading to the port of Paranagua remain blockaded, which along with firm global minor oilseed markets and uncertainty over mid-Nov rainfall in Brazil and Argentina has allowed Chicago soy and soyoil to reverse overnight weakness.
- Interior US soy basis has been unmoved on the recent advance, with bids in Central IL still perched at $0.20-0.25 over for Nov-Jan delivery. We reiterate that it is difficult to know just how tight near-term US corn and soy stocks will be until Sep-Nov disappearance is published in mid-Jan. Physical soybean exports remains strong; exports account for a rather low portion of physical corn demand in the first quarter of the marketing year. NASS’s yield adjustments next Wednesday are important.
- Weekly EIA data leans supportive corn and crude but slightly bearish of ethanol. US ethanol production through the week ending Oct 28 totalled 306 million gallons, up 2 million from the previous week and a new season high. However, US motor gasoline disappearance last week was 8.7 million barrels per day, down 9% from the same week a year ago. Ethanol production in recent weeks has been 11.6-12.0% of gasoline demand, which implies the blend wall is imminent. It is tough to be bullish of corn grind without a quick and substantial increase in total miles driven, in the US and elsewhere.
- Spot crude at midday is up $1.80/barrel at $90.10. Gasoline and total crude stocks remain incredibly tight despite demand contraction. Total crude stocks on Friday at 837 million barrels were down 20% year on year. Gasoline stocks were down 4%.
- China this morning published the complete list of approved Brazilian corn exporters, which gives the green light to begin sourcing Brazilian origin corn. That this process is moving forward is not a surprise to the market, and we doubt large scale Chinese purchases of Brazilian corn occur prior to next year’s safrinha harvest. But this is coupled with weak Chinese feed import margins that suggests China imports corn based on price, rather than politics, moving forward.
- The S American GFS weather forecast is wetter in Cordoba Argentina next week but is otherwise consistent with the morning run. Dryness blankets the whole of S America into Nov 10. A more progressive pattern of rainfall returns to Mato Grosso do Sul, Goias and Minas Gerais in C Brazil thereafter, though Mato Grosso (25% of soy output) is left arid throughout the next two weeks. Rains sneak into Western Argentine crop areas Nov 12-13, but it is important that this precipitation is pulled into the nearby period in the coming days. Argentina needs rain. Brazilian weather is non-threatening for now, but near-daily showers will be desired in all areas during the second half of November.
- Dec Chicago wheat has filled a gap left on Sunday night, while Dec corn is again at its previous equilibrium price of $6.80-6.90. Wheat outlooks will be challenged amid Putin’s outsized influence on daily price discovery, while broadly neutral corn/soy trends remain projected into mid-winter.