• Chicago futures at midday are weaker by varying degrees. Soybeans have paced the decline following solid weekend S American rainfall and as nearby US/China trade deal optimism wanes. Macro markets are mostly weaker, with the Dow down a modest 40 points and spot crude sustaining losses of $0.30-0.40/barrel. EU wheat futures are lower, with the market unable to find follow-through buying despite EU wheat export improvement.

• USDA reports this week will be delayed 24 hours amid today’s Veterans Day holiday. This includes FAS daily export sales reporting.

• We expect weekly export inspections on Tuesday to include 12-15 million bu of wheat and corn shipments, while an average weekly pace of 37 million bu of corn is needed to validate the USDA’s new 1,850 million bu forecast.

• Weekly soybean export shipments are expected in a range of 48-53 million bu, down slightly from recent weeks but still reflective of recent Chinese interest.

• Fresh ag-specific news is limited to midday weather updates. The US forecast is broadly unchanged. Pesky snow will impact the Northern Plains and Great Lakes region into mid-week. Accumulations of more than 2″ will favour N IN, NOH and Ml. Dry weather persists elsewhere. We would mention that model guidance, including NOAA’s, features a much warmer temperature profile beginning late in the coming weekend. Follow-up rain/snow is absent from the Central US outlook Nov 14-25.

• Key in the weeks ahead will be the response of interior corn basis across the E Midwest once harvest is complete there. Spot basis in Central OH has rallied to $0.35 over Chicago futures. This compares to $0.50 under futures a year ago in early November.

• A drier and relatively warmer pattern lies ahead for Central Europe. The pace of winter wheat planting has been a concern there since early Nov. However, speedier planting lies ahead. The wheat market, following a new high in global stocks, is searching for new bullish input outside of ongoing severe dryness, and damaging wildfires, in Eastern Australia.

• Chicago brokers estimate that funds have sold a net 2,500 contracts of corn, 1,000 contracts of Chicago wheat and 4,500 contracts of soybeans.

• The midday S American weather forecast is slightly wetter in Goias and Minas Gerais in Central Brazil. Otherwise the outlook is unchanged from early morning releases. A pattern of near-daily showers will be ongoing across Brazil’s primary Soy Belt into Nov 20. An expansion in rainfall reaches into the drier areas of NE Brazil beginning this weekend. Some 95% of Brazil’s soy region will be well watered by late November. Isolated but heavy showers impact critical areas of Cordoba in Argentina in the next 72 hours. And a rather expansive pattern of moisture is offered to Argentina in the 9-15 day period. The outlook is favourable.

• Yields on the remainder of US corn still unharvested will be watched closely. But a major change in Chicago price trends require new supply dislocation. US/China uncertainty is expected to linger and remain into late year.

• With the USDA’s November data void of surprises, or tight US balance sheets, it’s back to watching South America’s climate pattern and ongoing US-Chinese trade progress. The EU weather model has been trending increasingly wetter in Argentina, with early corn pollination there to begin in December.

• The USDA’s November WASDE report was surprisingly dull, with US corn, wheat and soy balance sheets barley changed from October. Corn yield will very likely be lowered slightly again in January, but today’s data confirmed that meaningful rallies from current values require S American supply loss or new demand from China.

• The issue throughout the season has been the lack of a demand driver, which actually has been case since 2017. The USDA in its Nov WASDE pegged US major crop consumption at 20.09 billion bu, down 127 million from October and down 457 million from 2018/19. US weather issues have less bite without enlarged export demand.

• NASS pegged US corn yield at 167 bushels/acre, vs 168.4 in October. This was marginally below trade expectations but not nearly enough to trigger a new supply-driven bull market. Total US corn consumption was cut 100 million bu amid reduced feed, exports and ethanol disappearance.

• Following yield cuts in November, there is a strong tendency for NASS to further reduce US corn production in January’s final report. Yet, US corn yield changes from Nov to Jan are rather small as NASS has greater access to mature corn samples. The average annual reduction from Nov-Jan sits at 0.9%, which in 2019 would equal 1.5 bushels/acre. Mathematically a final yield of 165-167 is most probable.

• This extrapolation will keep the market supported on breaks. However, a much-improved pace of export sales is needed to sustain March above $4.00.

• US exports will be lowered another 50 million bu in Dec without better nearby demand, though we are in general agreement with the USDA’s outlook. Longer term, hanging over the market will be a boost in US corn seedings. The return of trend yield requires a surge in consumption to prevent 2020 stocks from ballooning to levels in excess of 3.0 billion bu. Domestic use will grow slightly, but more important will be capturing a greater share of world trade in the next several years.

• Only S American supply dislocation can change the US’s position in the world corn market. Our bet is that normal precipitation will be established in Brazil and Argentina into December.

• The November Crop Production and WASDE reports offered no surprises to the soybean trade. Soybean futures held within the week’s range through Friday but gave back all of Thursday’s gains to end 4-5 cents lower.

• A late-season harvested area survey of ND and MN produced no changes to the USDA estimates, while the USDA maintained the October yield forecast of 46.9 BPA. Production remained at 3,550 million bu, down 20% from last year. Changes to the demand end of the balance sheet were almost as uneventful as the supply side. Crush was lowered 15 million bu to 2,105 million. No other changes were made to the old crop balance sheet, and ending stocks increased by a like amount to 475 million bu. The season-average price forecast was also held unchanged at $9/Bu or $0.52 over last year.

• Our initial projection at the 2020/21 balance sheet, has stocks increasing to 600 million bu, and price to fall $1.10/bu.

• Of the 29 states that NASS provides yield estimates for, 16 of the state yields were different from October. However, the National yield was incredibly unchanged. Most of the yield declines were noted outside of the Corn Belt, the exceptions being Ml and ND, where yields were lowered 2 bushels/acre. Yield increases of 1 bushels/acre were estimated in IN, KS, MN, and NE.

• In the objective yield data, the 7 state pod count actually declined. An average pod count of 1,632 pods was 20% less than last year and the lowest since 2013. While the pod count went down, both the 7 state average yield and the implied pod weight increased. The implied pod weight was already at an unprecedented level in October, and the November increase lifted weights to an almost unbelievable figure, a testament to the skills of the modern-day soybean breeder.

• Along with a lower soybean crush rate, the USDA lowered its estimate for annual soybean meal exports by 350,000 short tons. Total meal exports of 13.35 million tons would also be 2% less than last year and the lowest annual soymeal export rate in 3 years. Thursday’s Export Sales report showed that in the first five weeks of the year the meal export rate has been just above last year and record large. However, outstanding export sales are lagging a year ago by 17%, which along with lower production led to the lower export forecast. Yet, the USDA has strong history of underestimating annual soymeal exports in November. Argentine meal exports have recently slowed, under weak crush margins. But we expect the world soymeal market will remain highly competitive in the year ahead.

• US 2019 wheat stocks were lowered 29 million bu to 1,014 million amid lost spring and durum production follow in abnormal October snowfall across the Northern Plains. US domestic use was lowered slightly. We estimate 2019/20 feed use a bit lower than the USDA. US wheat stocks will be abundant.

• New crop US wheat stocks do tighten assuming the loss of an additional700,000 acres and a return to trend yield. Yet, the price of US wheat longer term will be determined by non-US markets, namely the Black Sea, and whether there are threats to further stocks reduction via better export potential.

• Eventually the US wheat market will need to stabilise seedings, but this fight for acres isn’t due until beyond 2020.

• US and European futures on Friday were focused on a new projected record in global wheat stocks. World stocks were raised another 500,000 tons as production was lifted in Russia, Ukraine and Europe. Combined production there was raised 3 million mt, which more than offset a combined reduction in the Southern Hemisphere worth 1.2 million mt. We would mention that global wheat trade was raised 1 million mt amid better than expected shipments in Europe. Trade this month was raised for the first time since June.

• But fear of current and future shortages will remain absent. Incremental increases have been made to EU and Black sea wheat exports. EU/Black Sea exports are now forecast to reach 90 million mt in 2019/20, the second largest on record.

• We look for range-bound trade nearby, with strong chart -based support noted at $5.08-5.10, basis March Chicago. US wheat lacks the demand driver to turn outright bullish.

• Chicago grain futures are lower at midday while beans trade near unchanged amid better than expected export sales. Open harvest weather in the US, ongoing weak US corn and wheat export demand, and still a lack of confirmation of US-Chinese trade progress continues to act as a weight on ag markets. Macro markets remain elevated, with the Dow at new record highs and crude trading $1.20/barrel higher. Yet, concern that US row crop yields will be little changed in Friday’s NASS report have dominated early trading in Chicago.

• Through the week ending Oct 31 US exporters sold 19 million bu of corn, vs. 21 million the prior week; 13 million bu of wheat, vs. 18 million the prior week; and a sizeable 66 million bu of beans, vs. 35 million the prior week. China booked 35 million bu of beans, with EU destinations buying 14 million. Unknown destinations secured 9 million bu of corn.

• But otherwise US grain business was made only with traditional buyers. Corn export commitments to Taiwan, Mexico and Japan remain down 30% from last year.

• Pork export sales were a routine 16,600 mt, with China securing just 2,800 mt.

• For their respective crop years to date, the US has sold 468 million bu of corn, down 47% from a year ago; 774 million bu of beans, down 2%; and 549 million bu of wheat, up 9% from late October 2018. We doubt annual US and wheat and soy projections will be lowered in Friday’s release, but pace analysis suggests US corn exports will be reduced significantly.

• Corn export commitments to date account for just 25% of the USDA’s forecast, the lowest since 2006. On average, corn export sales as of late Oct account for 42% of the USDA’s estimate. Corn exports will be lowered 100-150 million bu to better fit the seasonal trend .

• We would caution against chasing today’s break in grains. Survey-based yield estimates in recent weeks have been placed very close to NASS’s forecasts in October. But recall NASS will resurvey harvested acres in ND and MN amid abnormally early snowfall. Interior basis levels remain elevated. This is likely to due to slow drying/harvesting. But a 3-4 bushels/acre decline in US corn yield and 1.0-1.5 bushels/acre soy yield can not be dismissed, though NASS’s yield estimates will largely put US supply debates to rest.

• The midday GFS weather forecast is drier in Argentina and wetter in NE Brazil in the 11-15 day period. High pressure ridging in NE Brazil is projected to ease beyond Nov 17, allowing seasonal rains to expand further across fringe areas of Brazil’s Soy Belt. Confidence in NE Brazilian rains is low, but model updates will be watched closely in coming days.

• Otherwise, the broad pattern is little changed. Daily showers will continue across some 65-70% of Brazil’s primary ag belt. Cumulative 10-day totals will be a seasonally normal 2-4″. Precipitation in Argentina will be more regional in nature. Argentina’s moisture demands are low, but a much wetter pattern will be needed by late month. Whether the EU model follows this drier shift in Argentina will be key this afternoon.

• Near-unchanged yields on Friday amid improving S American weather raises the burden on Chinese demand if rallies are to be sustained next week and beyond.

• Row crop markets are steady to weaker amid the coming acceleration in harvest as FAS’s daily export reporting system stays quiet. US and world wheat markets are firm as a reduced Australian crop is digested as export demand is being found in Europe. Volume remains mediocre. The USDA’s November reports are awaited.

• There is renewed uncertainty over the extension of bio diesel credits as the cost of some 30 tax credit extensions is being debated within Congress. Support for those extenders lacks enthusiasm. Recall US biodiesel production has been below year-ago levels for three consecutive months amid weak/negative margins. The USDA in October forecast biodiesel’s soy oil demand draw to rise 500 million lbs in 2019/20.

• US ethanol production through the week ending last Friday totalled 298 million gallons, up 3 million on the prior week but down 16 million gallons (5%) on the same week in 2018. Weekly US ethanol stocks, however, were up 33 million gallons to 919 million. Spot ethanol futures are down slightly at midday, with futures-based ethanol margins retreating as Dec takes over the spot position.

• US crude stocks less reserves, as expected, were up 7.9 million barrels. Current US crude stocks are up 4% from a year ago, and look to exceed 2017 levels by late Nov/early Dec. Spot WTI crude has extended overnight losses to $0.90/barrel. The rise in US crude stocks in recent weeks has occurred despite ongoing cuts to oil rig counts, which are down 186 since Jan 1.

• The Brazilian Real continues to lack follow-through buying and is trading 1.7% lower today. Brazil’s pension reform bill will support on breaks, but today Brazil held an auction for oil drilling rights, which was met with tepid demand. Brazil aimed to make upward of $107 billion Reais from the auction but only found $70 billion, most of which was from state-owned Petrobras. Brazil still faces a need for cash. Ongoing weakness in the Real will further boost new crop domestic soybean prices.

• The midday US forecast is wetter in the Central and Eastern Midwest beyond Nov 19. The GFS forecast includes potentially heavy snowfall across IA, MN and ND in the 12-15 day period, with rainfall of 0.50-1.50″ offered to IL and WI.

• We view the GFS as being overdone with any coming pattern shift, but the EU model will be watched closely this afternoon for confirmation.

• The midday S American forecast is wetter in Mato Grosso and Goias in Central Brazil and much wetter in Central Argentina than previously. A pattern of daily showers will be established across the heart of Brazil’s Ag Belt into Nov 19. The model also features temporary but important shifts in S America’s jet stream that will allow soaking rainfall to impact Cordoba and northern Argentina next Tues-Thurs and again Nov 19-22. This rain needs to materialise following lingering dryness in Argentina.

• Chicago markets are mostly weaker in tepid volume at midday. Midday forecasts are little changed, with favourable dryness offered to the US Corn Belt into Nov 20 and with a vast improvement in Brazilian soil moisture forthcoming.

• The trade is also losing interest in waiting on confirmation of Chinese demand for US ag goods in the near term. At this week’s import expo in China, Chinese President Xi discussed the need for the US and China to eliminate tariffs simultaneously in proportion to trade progress made so far. This raises confusion as markets are not fully aware of the details of mid-Octobers Phase One agreement. Chinese demand needs to be seen and felt before premium is added.

• Egypt’s GASC this morning purchased 175,000 mt of French and Russian wheat at an average fob price of $215/mt vs. $218 last week. This follows the trend of weaker EU cash prices in the last week, and a pausing of the rally in Russian cash wheat prices. EU wheat futures have rallied €1.00/mt ($0.03/bu) following purchase of French origin but spot EU wheat remains €3.25/mt off highs posted in mid-Oct.

• Other news is lacking. Sources do indicate that Australian wheat in South Australia in competitive with Russian origin into far Southeast Asia on a fob basis. Recent rainfall in New South Wales and Queensland in Eastern Australia will do nothing to boost wheat yield, but will improve pasture conditions there. And domestic Australian markets are benefitting from newly harvested wheat and barley crops.

• Ahead of the USDA’s November WASDE, the market’s average guess on US corn yield is 167.2 bushels/acre, vs. 168.4 in October. The average guess on US soy yield is 46.6, vs. 46.9 in October. Such yields, if realised, are viewed as bearish corn and neutral beans. Potential sizeable Chinese demand for beans this winter will remain priority number one, while near-unchanged US corn product ion requires a major improvement in export demand to keep spot corn above $3.80.

• The midday GFS forecast keeps meaningful snowfall in the next 48 hours a bit northward into southern MN, WI and northern Ml. No additional meaningful rain/snow is then projected is featured throughout the next two weeks.

• In S America, the GFS weather forecast is slightly wetter in southern and western Argentina but otherwise unchanged. Note that soaking rainfall of 2-5″, which is seasonally normal, will impact a vast majority of Brazil’s Soy Belt into Nov 15. Concern over lingering dryness is shifting to Argentina, where the correlation between precipitation and early-planted corn yield rises substantially in December. A wetter pattern is hinted at Nov 16-20. It is important that this moisture materialises.

• Ag markets lack new input to drive price lower or higher. The global market will have access to Brazilian beans in just 90 days.

• Ag markets have done little since the end of the overnight session, with beans up slightly on Chinese trade optimism and with grains steady to slightly weaker on a lack of demand and improving S American weather forecasts . Soy oil has led the complex rally at midday following new seasonal highs posted in Malaysian palm oil futures. EU rapeseed oil has followed in recent days, and so global vegetable oil markets are rising as Malaysian palm oil stocks are steadily reduced.

• There is an otherwise lack of fresh news. No new sales were announced by FAS this morning. Markets simply await NASS yield data and clarity as to whether China will accept the US’s invitation to finalise Phase One of partial agreement in Iowa at some point this month.

• US export inspections through the week ending Oct 31 included 11 million bu of corn, vs. 15 million the previous week; 11 million bu of wheat, vs. 21 million the previous week; and 54 million bu of soybeans, vs. 58 million the prior week. Soybean shipments were in line with expectations, while grain shipments were a bit weaker.

• For their respective crop years to date, the US has shipped just 148 million bu of corn, down 62% from last year; 402 million bu of wheat, up 21%; and 351 million bu of soybeans, up 11% from this week a year ago. We expect the USDA to leave annual wheat and bean export forecasts unchanged in Friday’s WASDE, but with corn shipments to date accounting for just 8% of the USDA’s current forecast, the lowest on record, a 100-150 million bu reduction in 2019/20 corn exports is probable.

• We also note that with ethanol production still well behind last year, the USDA is likely to lower total US corn consumption 125-175 million bu. This will act to offset completely any 1.5-2.1 bushels/acre reduction in yield. US corn disappearance remains concerning.

• Paris grain futures have followed the US to modest losses, with spot corn there fall ing €6.75/mt ($0.19/bu) ahead of November’s expiration. Deferred EU corn futures are down slightly. Leaking EU wheat and corn markets suggest that the rally in Russian fob wheat prices was overdone. The corn market is prepped for enlarged Black Sea corn exports beginning in late 2019.

• Yet, macro financial markets are undoubtedly positive. Spot WTI crude has rallied $1/barrel to a new 6-week high. The Dow is set to post a new all -time record high near 27,500 as US/China tensions erode. The next few weeks will be marked by a battle between oversupplied grain markets against improving general raw material outlooks.

• The midday S American weather forecast maintains a pattern of normal/above normal across Central Brazil and Northern Argentina into the latter part of November. Most important is that meaningful high-pressure ridging does not return to Brazil during the period. Seasonal rainfall will be allowed to move northward in the next 72 hours. Vegetation health improvement lies ahead.

• Ag markets have traded in rather narrow ranges. This narrow, choppy trading likely continues into Friday. Key will be the performance of interior US basis levels as harvest accelerates amid Central US dryness.

• Chicago is mixed at midday with corn futures slightly lower while soybeans/wheat hold firm. November soybean futures have been the upside leader on Cargill’s stopping of November deliverable receipts which has narrowed the November-January soybean spread to a 12 cent January premium. Corn remains a laggard amid tepid US corn export sales and the narrow window for the US to recapture lost demand amid aggressive Ukraine fob corn offers. December corn once rejected resistance at $3.92. Chicago is holding in a choppy sideways trade with cash merchant’s hopeful for improved grain sales as farmers restart their harvest next week amid cold/dry weather. We are not expecting much pre-weekend hedge pressure amid all the rain/snow that has fallen in recent days. Midwest fields are saturated.

• Chicago brokers estimate that funds have bought 3,400 contracts of soybeans and 3,100 contracts of wheat, while selling 3,600 contracts of corn.

• FAS reported the sale of 132,000 mt of US soybeans to China for shipment in the 2019/20 crop year. The sale shows that Chinese crush interest is noted on breaks, but no Chinese importer appears to be willing to chase a rally.

• There has been considerable talk about tightening S American corn fob offers with prices no rising on a seasonal basis. Brazil has committed to export a record amount of corn and interior corn prices spiked earlier in the week, but have since retreated. Brazilian farmers still have old crop corn to sell and it appears that USDA has understated last year’s crop or has overstated domestic use. We do not see a dire shortage looming for Brazilian farmers are we are doubtful of Brazil shifting corn export offers to the Ukraine. Brazil normally ends its corn export program in December or early January and that same trend should exist this year. We do not sense domestic Brazilian corn shortages into year end.

• Brazil has changed its biodiesel blending requirements 1% each year into 2023. B12 will be mandated in March of 2020, B13 in March of 2021, B14 in March of 2022, and B15 in March of 2023. Soyoil exports will be trimmed and it should produce future gains in crush that will add to exportable soymeal availability/supplies. The Brazilian legislative biodiesel mandates should further rally oil/meal margin contributions to crush over time.

• The WTO indicated today that China can impose tariffs on up to $3.6 billion of US goods over the failure of the US to abide by anti-dumping rules. The Chinese win was third largest in history from the WTO arbitrator. China has a host of claims against the US, but today’s award took seven years from its filing to wind through the complex WTO trade progress. It all takes lots of time.

• Consistent with the overnight run is the 122 forecast with largely dry/cold temperatures for another 7-9 days. A ridge of high pressure will build across the Western US which will lift the jet stream northward across the Western US and allow the flow of Pacific air to flow eastward with time. This will allow temperature moderation after November 9 from west to east. Cold Canadian is pushed north and east. Precipitation will be limited across the Central US into mid November allowing the harvest to accelerate. Corn cutting will be featured.

• It has been a technical Chicago trading session today with the charts and the stopping of November deliverable receipts delivering the direction. We have heard rumours that China is showing interest in US sorghum and Hi Pro wheat. Tonnages sought are said to be moderate at this time. Corn prices are pressured via the favourable forecast for advancing the Midwest corn harvest.

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Weekend summary 1 November 2019