- HEADLINES: Soy leads rally on strong export demand; Argentine forecast trends wetter.
- Chicago ag futures are high at midday amid supportive macro input, better than expected soybean export sales amid this week’s flood of importer wheat demand. Saudi Arabia’s tender for 535,000 mt of optional origin supply for spring arrival has been added to tenders from Turkey, Pakistan and Iraq. All told, some 1-2 million mt of demand is in play, and purchase results will be critical to the world cash wheat market’s direction. Russian wheat offers remain aggressive but are most reliable on a spot basis only, and Saudi Arabia’s tolerance for Black Sea risk 5 months from now will be monitored with interest. The US$ remains weaker amid strength in the €uro and £Stg following the resignation of Liz Truss as UK Prime Minister. Crude is firm but off session highs, with the Dow up 50 points. The Dow has rallied just over 800 points this week.
- US soybean export sales in the week ending Oct 13 totalled 86 million bu, 66 million were sold to China, vs. 27 million the previous week and the largest one-week total since mid-Oct a year ago. US soymeal sales were 542,000 mt. Both meal and bean commitments remain in line with the USDA’s forecast, and downward revisions to annual exports are not anticipated in WASDE’s Nov report, which in the short-term places more pressure on yield gains to boost projected end stocks. Exporters sold another 12 million bu to China and unknown destinations this morning. The US’s window to maximise exports will be closing rapidly beyond mid-December, but there has been a boost in world trade. We note that Canadian bean exports off the West Coast have been similarly strong.
- Grain exports were far less exciting. Corn sales in the week ending Oct 13 totalled 16 million bu, vs. 8 million the prior week but sales must average 35 million bu/week to validate the USDA’s current target, which still appears to be 100-150 million bu too high. US wheat sales totalled 6 million bu, vs. 8 million the prior week. Wheat sales must average 11 million to meet the USDA’s forecast. Gulf HRW maintains a premium of $2.30/bu to comparable EU origin. US Gulf corn offers for Nov-Dec arrival are quoted $1.30-1.80/bu above S American origin. Gulf corn basis is up another $0.05/bu this morning and is prohibitively high.
- Corn futures and cash prices have found support instead from rising ethanol margins the market’s need to shift supplies from the Eastern Midwest to deficit regions of the Plains. We do note that ethanol plant revenue this week is slightly above all costs.
- The midday US GFS weather forecast continues to struggle with the placement and intensity of Central US rainfall due Oct 25-27. Midday output has shifted soaking rainfall westward into OK, eastern KS and MO, with totals there pegged at 2-4”. Confidence in forecast details is low. Drought relief lies ahead, but which regions benefit will be fine-tuned in the days ahead. A warmer temperature profile begins on Friday, with maximum readings across the Plains and Central/Western Midwest this weekend pegged in the 70s and 80s.
- The S American GFS weather forecast is wetter in Central Argentina, with precipitation Sun-Wed estimated at 1-4” in Cordoba, Santa Fe and Buenos Aires, all key crop producing provinces. Here too the model is struggling with rainfall amounts and key will be whether the EU model adds precipitation to its Argentine outlook this afternoon.
- The markets lack clear goals in the very short run. US soybean export demand improvement has followed rising pig producer margins in China. Corn is incredibly expensive in the export market but priced fairly in the biofuel market. We fear a more pronounced period of long liquidation Dec onward without S American weather threats.