• Chicago futures started the week higher on concerning S American weather and a continued fall in the value of the US$. January soybean futures opened at $11.98 and traded as high as $11.99 while March corn scored a new contract high at $4.395 with March Chicago wheat in tow. The volume of trade was active with more than 36,000 contracts of Mar corn and 23,000 contracts of Jan soybeans changing hands.

• However, for the fifth time in three weeks, January soybeans were unable to breach resistance at $12.00 and prices retreated into the morning hours. The inability for January soybeans to penetrate $12.00 turned the charts into consolidation as traders try to gauge the impact of S American weather on yield/production. The industry has been reluctant to cut Brazilian or Argentine crop estimates with summer just starting. If there is not a dramatic change in the S American weather pattern during December, a more robust rally will unfold as the market enters a more dynamic demand rationing phase. Research argues that January soybeans will ultimately exceed $12.00.

• Chicago corn, soybean and wheat futures fell sharply on Monday on long liquidation based on the hope for better rain across some of the drier areas of N and C Brazil next week. The bulls had become frustrated with the inability of January soybean futures to push above $12.00 and with the new prospect of rain after December 7, they decided to head for the exit door. The midday speculative selling is robust and based on N Brazilian rain next week.

• Rumours regarding new Chinese interest for US corn were pushed aside as fund profit taking into the end of the month is the day’s theme. Farmers in the US and Latin America are not selling into the break, which could allow for a late week recovery. We note that N Brazil normally receives 2-2.50″ of rainfall per week, so next week’s rain prospect for 0.5-1.50″ for Mato Grosso is less than average, but not totally unexpected. We look for a lower Chicago close today with a turnaround in values forecast for Tuesday.

• Chicago brokers estimate that funds have sold 7,500 contracts of corn, 8,900 contracts of soybeans, and 4,900 contracts of wheat. In soy product futures, funds have sold 7,400 contracts of soyoil and 3,200 contracts of soymeal. The CFTC will be out with their Commitment of Traders Report this afternoon.

• US weekly export inspections were larger than expected for US wheat and soybeans. For the week ending November 26, the US exported 32.7 million bu of corn, 74.8 million bu of soybeans, and 18.5 million bu of wheat. Last week’s US soybean export total was revised up 8.2 million bu, a trend of upward revisions that extends into September. The US will have exported 1.0 billion bu of soybeans in the crop year to date through today, a record. Never has the US exported 1.0 billion bu on a single crop year quarter. China shipped out 55.0 million bu of US soybeans last week with just over 33 million bu loaded out of the Gulf.

• Research notes that Brazil has just 2 vessels in the line-up to load soybeans in coming weeks, suggesting that they are now fully sold out. And Argentina has not shipped out any soybeans in over 5 weeks with no vessels being nominated for the next few weeks. The point is that the US now has the entire world soybean crush demand from today into the last half of February.

• For their respective crop years to date, the US has exported 399 million bu of corn (up 161 million or 68%), 980 million bu of soybeans (up 393 million or 67%), and 474 million bu of wheat (up 8 million or 1%). The US corn and soybean export pace stays impressive. FAS announced the sale of 344,000 mt of US corn to an unknown destination for 2020/21. Mexico, Japan and China are rumoured to be potential buyers. No US soybeans or wheat were announced. China has slowed their soybean demand based on large purchases on the books that equate to 34 million mt known/unknown.

• The midday forecast calls for drier than normal weather for Mato Grosso, Goias, and Mato Grosso Do Sul over the next 6-7 days with limited rain offered for the southern half of Argentina. High temperatures will range from the 90′s to the lower 100′s across N and C Brazil with mid 80′s to mid-90′s across Argentina. Northern and Central Brazilian rainfall chances improve starting next Monday with the return of tropical upper air moisture which will produce daily thunder storm chances. The chance of daily showers exists into December 12.

• The new drought area will form in the southern half of Argentina where limited rains fall in the next 2 weeks. No extreme heat is forecast, but the lack of rain will produce a sharp decline in soil moisture. Our view is that S American weather remains concerning for Brazilian and Argentine crops.

• Chicago is in correction mode based on the prospect of improved Northern and Central Brazilian rains which starts next week along with the inability to rise above $12 January futures. We doubt that the bull market is over and would see any deeper correction as a buying opportunity. You must make large S American crops to assure a bearish trend. Look for China demand to reappear on weakness. $11.50 January support is expected to hold.

• December long liquidation ahead of first notice day and sloppy cash markets are producing lower Chicago trade at midday. Corn/wheat futures are providing the downside leadership while January soybeans pulled back from $12.00 resistance for the fourth time. Cash fob basis bids are steady in Brazil with traders assessing the recent and upcoming hot/dry weather across N Brazil and what it means to final crop sizes. Amid the coming US holiday, no one wants to add to risk following the recent Chicago rally. A lower close is expected on the push to exit December futures ahead of the holiday.

• US cash soybean/corn basis is sloppy with new China demand lacking. Corn/ soybean traders will be looking to Friday’s weekly export sales report to determine if China is a residual buyer or cancelled out of a few soy cargoes on rising Chicago prices. With China having already purchased an estimated 33-34 million mt of US soybeans, the slowdown in their buying was seasonally expected. We are not looking for large US switching, or cancellations as Chinese buyers are less than certain that Brazilian sales contracts will be performed, and they still have an obligation under the Phase One Purchase program. Tightening 2020/21 US corn and soybean end stocks offer support on corrections.

• Chicago brokers estimate that funds have sold; 6,000 contracts of wheat, 5,900 contracts of corn, and 2,300 contracts of soybeans. In soy products, funds have sold 2,900 contracts of soymeal while buying 3,800 contracts of soyoil.

• The FAS weekly export sales report will be released Friday due to the US Thanksgiving Day Holiday. The CFTC CoT report will be published Monday afternoon. The sales numbers will be released before the Chicago opening at 8:30 am on Friday.

• Tuesday’s Chicago final open interest report showed that there were 91,564 contacts of December corn, 24,571 contracts of December soymeal, 18,961 contracts of December soyoil, and 15,037 contracts of December wheat open. Everything but Dec corn futures has reached reasonable pre delivery open interest levels.

• US weekly ethanol production rose last week to 291 million gallons, the best since when Covid-19 erupted in the US. There is no evidence that US increasing infections has had a deeper negative impact on US gasoline consumption. Research argues that based on the weekly data that WASDE will hold the US corn grind at 5,050 million bu. As vaccines become more widely available in Q1, US ethanol use could rise 50-150 million bu.

• The midday GFS weather forecast is dry for Mato Grosso, Goias, Mato Grosso Do Sul, and Parana over the next 10 days_ There are hints of better rain in the 11-15 day period, but confidence in this rain is low. The models have been over-forecasting rainfall in the 11-15 day period for weeks. Near to above normal rainfall is forecast for RGDS with totals of 1-3.00” in the next 7 days. Drier weather returns thereafter.

• The Argentine forecast was drier beyond the next 4 days. Showers have started to drop across E Argentine, how much rain that falls into the weekend will determine soon to pollinate corn yields. 4-day rainfall totals are estimated in a range of 1.00-3.50″. It was extremely hot across Argentina yesterday with highs ranging from 99-107 degrees which produced acute first corn crop stress. Argentine corn will start to pollinate on Dec 10 across N Cordoba/N Santa Fe.

• Wheat rallied 10 cents on Tuesday and declined 15 cents on Wednesday with no change in news or fundamentals. Corn is following wheat lower on December long liquidation. The tightening supplies of world minor vegoil supplies is rallying soyoil, while the soybean market awaits the Nov 30 weather forecasts to gauge N Brazilian rain chances into mid-December. Sunday’s Chicago trade will be highly important and volatile depending on S American weather.

• Chicago futures are mixed at midday with wheat higher while corn/soybeans recover from the overnight profit taking. Threatening S American weather and the latest ENSO reading showing a strengthening of La Niña in the Equatorial Pacific have combined to produce new speculative buying. This has sparked a Chicago bounce into the midday hour.

• The liquidation of December futures ahead of first notice day on Monday and the US Thanksgiving Day holiday combined to produce the Tuesday Turnaround. Seasonally, Chicago futures tend to rally into the Thanksgiving Day holiday and then decline into December first notice day. However, the proximity of first notice day on Monday (November 30) has pulled this selling forward with many traders taking the days off on Wednesday and Friday. We look for a mixed close with the market acting well off the overnight liquidation.

• Spreading has been the driver of Chicago volume today. Traders are active buying wheat and selling corn/soybeans and buying soymeal and selling soyoil. Wheat has been used as the short leg for any long corn/soybean positions while oil/meal has been popular in recent weeks. The corn/soybean and soyoil fundamental stories are strong, it is just that traders want to bank their gains ahead of Thanksgiving. We expect that post the US Thanksgiving Day holiday that corn, soybeans and soyoil will resume their bullish trends.

• Chicago brokers estimate that funds have bought 5,000 contracts of wheat and 4,100 contracts of soymeal, while selling 5,500 contracts of soyoil, 4,000 contracts of corn, and 6,100 contacts of soybeans. We note that December soyoil is trading at an historically unusual 33 points premium to March soyoil with just a few days left before delivery. For years, soyoil spreads have been trading near to full carry amid the fear of large deliveries.

• There have been widespread rumours of China switching cargoes of February US soybean to Brazil and/or China switching palmoil purchases into other vegoils including soyoil. We hear that a few palmoil cargoes may have been switched to soyoil. However, there are few sellers of Brazilian soybeans for February off the Northern arc of Brazil. And the cost of getting out of a US cargo is extremely high. There may be a 1-3 cargoes of soybean switches, but we hear of no net cancelations. We suspect that the rumours of switches came from China to spark a Chicago correction to allow them to buy soy futures on a break.

• The FAS weekly export sales report will be released Friday due to the US Thanksgiving Day Holiday. The CFTC CoT report will be published Monday afternoon.

• The midday GFS weather model solution is like the overnight forecast with limited rain for Mato Grosso, Goias, Mato Grosso Do Sul and even Parana over the next 10 days. There are hints of better rain in the 11-15 day period, but that is too far out for confidence with many times the model just correcting for normal seasonal trends. The GFS/EU models have been over-forecasting rainfall for weeks and the rains in the 11-15 day period is not being pulled forward into the 6-10 day timeframe.

• Argentine rain starts to fall in key crop areas on Thursday with showers lingering into the weekend. Totals are initially modest ranging from 0.25-0.85″, but the stagnation of a front will allow shower totals to add up to 1.25-3.50″. The best rains include RGDS in Southern Brazil which has been exceptionally dry since October 1.

• Chicago markets have been scoring their lows in the overnight session as London Hedge funds sell call options as a hedge or sell futures outright to collect profits. The thin overnight volume exacerbates price movement. Chicago spreads and flat prices are recovering from the overnight break as speculative selling slows amid S American weather forecasts that are concerning for 10 days.

• Chicago futures are higher at midday with the market backing off a portion of their overnight gains. January soybean futures have been unable to rise above $12.00 for the third time in the past 10 days. Corn/wheat have followed soybeans to the upside in moderate volume. The Brazilian drought continues to gain the attention of the trade amid deepening crop losses. A 128-129 million mt Brazilian 2020 soy crop is gaining considerable attention as to how it would impact a US soybean balance sheet that cannot stand any additional demand. Longer term, the importance is how it impacts the 2021 winter corn crop with reports that Brazilian growers already reducing their corn seeding intentions.

• Chicago brokers estimate that funds have bought 7,400 contracts of corn, 6,600 contracts of soybeans, and 3,200 contracts of wheat. In soy products, funds have bought 4,100 contracts of soyoil and 3,400 contracts of meal. Funds have been on the buy side of the Chicago since the opening with an early morning dip related to profit taking ahead of the US Thanksgiving Day holiday. Chicago futures will trade normally through Wednesday with the markets closed Thursday (Thanksgiving) with Friday’s market closing early at 12:05 CT.

• FAS reported the sale of 334,000 mt of US corn to an unknown destination. The buyers are said to be South Korea and China. The US is the only sizeable seller of corn into April, when Argentine new crop supplies are available.

• US export inspections for the week ending November 19 were; 32.8 million bu of corn, 13.1 million bu of wheat, and 73.8 million bu of soybeans. Last week’s US soybean inspections were adjusted upwards by 8 million to 90.6 million bu.

• For their respective crop years to date, the US has exported 455.5 million bu of wheat (up 2 million or 1%), 364.2 million bu of corn (up 143 million or 65%), and 897 million bu of soybeans (up 368 million or 70%). China continues to be the shipper of size for US corn/soybeans.

• China last week sold just over 700,000 mt of Government reserve wheat in its domestic cash market. So far, the reserve wheat auctions have not had much if any impact on feedgrain prices. Chinese corn cash markets continue to climb as their harvest is just completed with Dalian futures at new highs. The strong feed demand from the rebuilding Chinese hog industry is impressive.

• The US$ index tested key support at 92.00 on expanding Covid-19 vaccine opportunities and a “risk-on” investing mentality. The US$ was able to bounce from the 92.00 support which produced some early pressure on Chicago values. However, it is unlikely that the US$ will be able to enter a lasting bullish trend amid rising US debt and investment flow into SE Asia.

• The midday GFS weather model solution is like the overnight forecast with limited rain for Mato Grosso, Goias, Mato Grosso Do Sul and Parana over the next 10 days. There are hints of better rain in the 11-15 day period, but that is too far out for confidence with many times the model just correcting for normal seasonal trends. Rain is forecast for far S Brazil (RGDS) and Argentina starting midweek and persisting for the next 9 days. In fact, with the jet stream stagnant, some areas of N Argentina will see heavy rains of 5-8.00″ which will produce low lying flooding. The dryness for Northern and Central Brazil is historic and crop losses will become acute without above normal rains in December.

• Drought concern is building across N and C Brazil with another two weeks of drier than normal weather offered. Mato Grosso rain from Sept 1 through Nov 30 is at a 40-year low. Amid a world soybean stock/use ratio that is at a 23-year low, the loss of any S American soybean crop will have an exaggerated bullish impact. We doubt that $12 can constrain the soy rally much longer. And tightening world feedgrain supplies is having it own bullish impact. A push to new contract highs is expected in the soybean complex and corn with the wheat market in tow.

• Chicago futures are mixed at midday with soybeans/soyoil recovering on US cash strength while corn/wheat hold in the red on ongoing fund long liquidation. The volume in Chicago has slowed at midday with Brazilian fob soybean basis bids stabilising while traders discuss positioning into a weekend of S American weather becoming more important to yield. S American weather drives price.

• 24-hour Mato Grosso rainfall was widely scattered and short of levels that would change deteriorating crop conditions. December Chicago options expire Friday which is adding to the day’s price pressure. We doubt that any corn/soy price decline can be sustained until large 2021 S American crop sizes are confirmed. However, the rally in US interior cash basis bids has farmers selling corn with the Dec/July corn spread priced at an 8 cent July premium. Narrowing spreads encourages US farm selling and attempts to start a demand rationing effort. To date, there is no statistical evidence of demand rationing in either US corn, soybeans or soy product prices.

• Chicago brokers estimate that funds have sold; 2,600 contracts of soybeans, 4,300 contracts of soymeal, 4,800 contracts of corn, and 4,600 contracts of wheat. The only commodity that funds are buyers is soyoil where they have purchased a net 2,900 contracts this morning.

• No new US sales were announced in the daily reporting system. FAS in their weekly sales report showed that 7.1 million bu of wheat, 42.9 million bu of corn, and 51.0 million bu of soybeans were sold in the week ending November 12. The US also sold 45,100 mt of US soyoil and 182,100 mt of US soymeal. The US soyoil sales was far better than expected. US corn and soybean sales of mid-October are record large.

• For their respective crop years to date, the US has sold 634 million bu of wheat (up 60 million or 10.4% from last year), 1,388 million bu of corn (up 866 million or 165% from last year) with US soybean sales at 1,884 million bu (up 1,017 million or 117% from last year). China added 4.44 million bu of corn and just over 40 million bu of US soybean purchases last week. Although China is not showing up in daily reporting, sheets, it has booked a known 28.6 million mt of US soybeans and likely another 6.0 million in the unknown category for a combined total of 34.5 million mt. China appears to be on its way to taking as much as 38-40 million mt in the 2020/21 crop year which will raise US soybean exports above 2,375 million bu. Such export demand cuts US 2020/21 soybean end stocks to under the pipeline of 100 million bu creating a sizeable rationing need with normal S American weather. The US has now sold 86% of its annual export forecast by mid-November.

• The midday GFS weather model is like the overnight run with the only change being a slightly warmer/wetter profile for Argentina and S Brazil next week. N and Central Brazil stays largely dry with any rain focused on NE Brazil, Sao Paulo and Minas Gerias. The drying trend across Northern Brazil is worrisome for crops with limited soil moisture noted heading into December. And the southern two thirds of Argentina and S Brazil holds in a below normal rainfall trend with rising temperatures during the 6-12 day period. The outlook for S American crops is threatening.

• We believe US 2020/21 soybean export estimates are understated by WASDE with 86% of the 2,200 million bu 2020/21 annual forecast being already sold in mid-November’ WASDE needs to raise its soy export and crush forecasts based on demand by sizeable amounts. US corn futures await improved Chinese corn buying or a worsening of S American weather. Soyoil stays the most bullish Chicago commodity as Argentina has sold out and world vegoil demand shifts to the US Gulf. It is December Brazilian weather which keys Chicago prices after the US Thanksgiving Day.

• Chicago soybeans have scored new contract highs while corn/wheat follow. Rumours that China is back booking US soybeans for February has firmed cash basis bids as spot futures to leap closer to the nearby $12.00 target basis January (high price so far at $11.8975). Chinese crushers have covered about 40-50% of their late January/February crush import needs and are starting to chase the market higher. China booked most of their Brazilian soybean purchases on basis and continue to buy Chicago futures to lock down price. The weather risks for importers/crushers are rising with each dry day across S America.

• Chicago soyoil futures leapt above the 2016 highs at $38.11 cents/pound with a weekly close above this key resistance confirming a new upside target of $45-50.00 cents. The biggest consumption of vegoil is foodstuffs, so rationing demand and/or expanding supply is difficult until the next Northern Hemisphere growing season. It is a bull story for palm, sun, canola, rapeseed oil and soyoil. Of the world’s major vegoils, soyoil is the cheapest and will gain additional demand with it being focused on the US.

• We should also mention that US corn is the cheapest feedgrain in the world, below both barley/sorghum and non-US corn. Although there has been a sizeable price rally, limited demand rationing is occurring. US Gulf corn is the cheapest source of corn supply through April (and likely May) as Argentine exporters raise their fob basis bids amid crop shortfalls. Argentina’s first corn seeding fell short by 25% meaning that their domestic market will sop up much of the new harvest in March. This reduces exportable supply and leaves the US in the prime seat for fulfilling world corn demand. The US 2020/21 corn export profile is likely to rise another 250-400 million bu in coming monthly WASDE reports as S American corn supplies are reduced. The story of corn is one of increasing US demand and tightening world stocks.

• FAS announced that 140,000 mt of US corn was sold to an unknown buyer. We would guess that the buyer is China, which has been rumoured since Monday. The weekly US export sales report is expected to reflect that the US is exporting larger supplies of soybeans/soyoil and corn that stocks will allow.

• The US EAI report showed a fall in US corn ethanol production to 283 million gallons vs 287 million gallons last week. Amid the growing hope for a Covid-19 vaccine, US corn ethanol demand estimates are no longer in retreat. This week’s corn grind would model out to a 5,110 million bu annual crop year usage rate. On that basis we would look to raise our US corn ethanol 2020/21 grind estimate with a few additional weeks of solid demand.

• Chicago brokers estimate that funds have bought 6,700 contracts of soybeans, 4,900 contracts of corn, and 2,100 contracts of wheat. In soy products, funds have bought 6,500 contracts of soyoil and 2,900 contracts of meal. December meal futures have failed to rise above $400/mt due to the weakness in domestic Chinese meal offers. Soyoil will contribute a larger share to crush margins.

• The midday GFS weather model is wetter across S Brazil and N Argentina than the overnight run. The rain for RGDS arrives on November 27 but our confidence this far out is low. Yet, the midday model keeps trying to add rain for S Brazil and NE Argentina, we will have to watch if such rain materialises. The southern half of Mato Grosso stays dry with below normal rain across Mato Grosso Du Sol. And the southern two thirds of Argentina holds in a below normal rainfall trend with rising temperatures during the 8-14 day period. The dryness across the Mato Grosso is the big crop worry, currently.

• The bull in soyoil should be enough to take January beans to $12.00. Higher prices will also require some help from meal. Corn spreads are narrowing with December corn testing contract highs at $4.28. Our market stance stays bullish amid strong demand and concerning S American weather. The upside leadership is soyoil, soybeans and corn. The wheat market is awaiting a decision from the Russian Government on an export tax. The livestock lobby in Russia is strong and often times can sway politicians.

• Chicago soybeans have scored new contract highs while corn follows. Worrisome S American weather along with the lack of demand rationing has summer row crop prices pushing upwards. US wheat is the laggard (again) as world prices hold stable and Australia stays aggressive in offering its new harvest into SE Asia. Fund managers are selling wheat as a hedge against long soy/corn.

• The soy/wheat spread has moved considerably during the past 10 days. The next rally in soybean futures will depend on whether meal or soyoil futures are able to push above their 2016 highs. Our view is that it will be soyoil based on strengthening cash basis and ongoing export demand. We look for a mixed Chicago close with the soy complex continuing its push to ration demand.

• Chicago brokers estimate that funds have bought; 7,500 contracts of corn, 11,900 contracts of soybeans, while selling 2,100 contracts of wheat. In soy products, funds are flat in soyoil while buying 3,100 contracts soymeal. The funds are adding to their long soybean and corn net market length.

• FAS reported a daily sale of 195,000 mt of US corn to Mexico. The Chinese are rumoured to be asking for US corn offers, but a sales confirmation is lacking.

• It is worth noting that overnight volume was huge in Chicago January soybeans at nearly 50,000 contracts. China was an early buyer of Chicago futures as their financial markets opened followed by London hedge funds. The London fund buying is noteworthy as the overnight Chicago price action sets the tone for the day session. London funds are becoming active and a daily feature in overnight Chicago trade.

• US farm (cash) corn/soybean selling has been active from mid-September into early November. Following the November USDA Crop report, it is estimated that cash corn sales may have equalled over 600 million bushels. The point is that with Brazilian farmers having sold 55-60% of their new crop and US farmers aggressively selling their recent harvest, the selling above the market is limited which will likely cause Chicago values to streak upwards at times. Any selling going forward must come from bulls that desire to bank profits.

• Australian wheat exporters following 3 years of drought are cutting fob prices and being active securing SE Asian wheat markets. The selling has capped a rally in world fob wheat prices with Russian values holding at $255/mt. The big question is whether Russian exporters will have to drop their fob offers to compete against the Australians. For now, Russia appears to be catching enough demand to hold its fob price offer steady. However, in coming weeks the Russians may have to follow the cheaper Aussie wheat price offer to be competitive. If there is any bearishness in world wheat pricing, it is due to competitive Australian pricing and its potential stealing of Black Sea demand.

• The midday GFS weather model is like the overnight forecast and drier than desired for Argentina and much of Central and Southern Brazil. The rain forecast for RGDS arrives on November 27 and our confidence this far out stays low. Nonetheless, amid weeks of well below normal rainfall, Southern Brazilian farmers will take any moisture that falls.

• The best chance of rain across N Brazil is in the next 3-4 days. Thereafter, arid weather returns with rising temperatures. High temperatures next week will range from the 90′s to the lower 100′s. Poor rain and rising temperatures raises crop yield worries as seedlings struggle to be established.

• The midday forecast for Argentina offers limited rain for the next 10 days with just a few showers for Buenos Aires. The remainder of Argentina’s crop area stays dry. This arid trend lasts into early December.

• Soybean futures have pushed to new rally highs at $11.78/bu with the next upside price target being $12 January. Soyoil futures retreated from the 2016 high at just above $0.38 cents, while meal futures test key resistance at $400/ton. There is no statistical evidence of demand rationing of US soybean or corn demand. The market needs to see rationing and improved S American weather to decline. For now, wheat remains the favourite short leg against long summer row longs.

• Chicago grain futures are higher at midday. The overnight rally in corn and soybeans has persisted with wheat recovering from early fund selling. The US wheat markets are having trouble sustaining breaks below $5.80 December Chicago with world wheat fob price offers holding steady or increasing. Any lasting pressure in US wheat comes from fund selling until weakness can be sustained in the EU/Russian fob wheat market. Chicago trading volume is light with fund activity slowing from last week.

• The delayed CFTC CoT report (after the close today) is expected to show that funds have increased their net long position following Tuesday’s USDA report rally to record levels. Fund managers are not willing to part with their corn/soy/wheat length heading into the heart of the S American growing season.

• We look for a higher Chicago close with commercial sources indicating that China is asking for US corn export offers following last week’s break in basis and futures. US corn is back on China’s shopping list which could support a rally to new rally highs should COFCO push the button on a fresh US purchase.

• Chicago brokers estimate that funds have bought 3,400 contracts of corn, 2,900 contracts of soybeans, and 1,200 contracts of wheat. In the soybean products, funds have bought 2,500 contracts of soymeal and 3,200 contracts of soyoil. Chicago soyoil futures have been able to push above Friday’s high which is sparking new fund buying. Cash vegoil markets continue to rise on supply tightness, a trend that goes back to late September. The next upside price target in December soyoil futures is $38.11 cents, the 2016 high. A close above this price sets up a longer-term target at $45-50 cents.

• NOPA estimated a record US soybean crush rate for any month of 185.2 million bu, surpassing expectations by some way. The industry was expecting a crush rate of 177 million bu. We note that the US soyoil yield (new crop) was 11.6711 per bushel with October soyoil production of 2,162 thousand bushels. NOPA member soyoil stocks were 1,487 million pounds, up modestly from expectations and last year. Amid such a strong US crush, domestic demand for US soyoil was record large. NOPA member October soymeal exports totaled 945,134 tons, down slightly from September, but above October of 2019. We see the NOPA crush report as bullish.

• US weekly export inspections for the week ending November 12 were; 32.2 million bu of corn, 82.3 million bu of soybeans, and 12.0 million bu of wheat. Last week’s US soybean exports were raised to a crop year high of 104.8 million bu (up 13.1 million). FAS has been continually raising US soybean exports from prior weeks amid the size of the US soybean export program and the amount of container trade. The US has now exported a record large 715 million bu of soybeans or 178% of last year’s pace through mid-November. US corn exports are up 127 million bu or 74%.

• Mato Grosso farmers report they are running out of time for soybeans to germinate and to seed a winter corn crop in early March. Mato Grosso rains seasonally decline in May and the winter corn crop must be planted by Mar 10 to have the crop pollinate with adequate soil moisture. Rain is desperately needed to aid the Mato Grosso soy crop that is struggling to be established.

• The midday GFS weather model is like the overnight forecast. The best chance of rain across N Brazil is in the next 5 days. Thereafter, the 6-14 day forecast returns arid with rising temperatures. S Brazil and Argentina hold in an arid weather trend with any rains shifted northward to Paraguay and RGDS in Brazil in the 10-14 day period. This leaves much of Argentina in a below normal rainfall trend into December. The rainfall outlook for December becomes increasingly important due to the ongoing fall in N Brazil and Argentine soil moisture.

• The US cash markets are working through last week’s large sales. However, threatening S American weather and the massive US soybean export program to China is underpinning Chicago values. A bullish outlook is maintained with US farmers slowing future cash grain sales. However, a sizeable rally may have to wait until late November when the forecasts can look forward into December S American weather conditions.

• Soy futures traded higher on Friday and closed higher for the week. S American weather remains the key focus with the forecast showing below normal rainfall in the 10-day forecast.

• US and S American soybean meal basis holds at multi-year highs. US soybean meal this week is offered at $45/ton over Chicago, the highest since early 2015. While the US is the highest offer, it has been tightness in S America and narrowing spreads that have lifted US values. Argentine meal is offered this week at $32/ton over Chicago, $8 under the US vs. the average of $28. Brazilian meal basis at $37/ton is $13 under the US against average of $22.

• Friday’s export sales report showed that the US meal export pace is running just behind last year, though total commitments are 102% of a year ago.

• While Argentine soybean stocks are large, Apr-Oct meal exports were just 86% of last year and barely above the export rate in the 2017/18 drought year.

• Fund length is at or near a record position. Yet global demand is historic, with the Brazilian harvest still 90 days away. There is no room for Brazilian yield loss.

• Chicago corn futures recovered on end user buying. Weakening cash basis and futures offered end users (and importers) the best chance to secure US cash corn since late October.

• The CFTC’s CoT report will be released on Monday. We estimate that managed funds are long a net 310,000 contracts of corn futures/options. Such length will produce a dynamic corn futures market into late 2020, when S American corn yields can be better assessed.

• US corn export sales through the week ending Nov 5 totalled 39 million bu, the lowest of the crop year. The market needs to see weekly US sales in excess of 50 million to validate a further hike in the US 20/21 corn export forecast.

• The odds of lengthy Argentine drought are rising as La Niña strengthens. Notice the pace of US sales in 2017/18 following the most recent drought in Argentina. The impact on US export demand was immediate in 2017/18.

• Fundamental corn direction hinges upon December Argentine rainfall and whether China returns as a US corn buyer. Is the current Chicago break enough to coax China back as a US corn buyer?

• US and world wheat futures recovered to end the week. Dec Chicago wheat’s premium to corn bounced off a longer-term uptrend line. Northern Hemisphere cash wheat is elevated despite looming competition from Australia and Russia’s uneventful Feb-Jun export quota. Wheat is likely to enter a neutral trend as N Hemisphere crops enter dormancy. We would caution against selling breaks until more is known about Russian/US HRW yield potential.

• Argentine farmers have been reluctant sellers in 2020/21. We note that Argentina’s wheat export tax of 12% is calculated using the government’s daily official fob wheat price. This official price is often $20/mt above market quotes, which further strips the farmer of revenue and keeps wheat in the bin.

• Also notice that the official value of Argentine Peso has weakened on a near-weekly basis over the last several years. Argentina does not look to be a major player in world wheat trade nearby, which helps sustain N Hemisphere export demand.

• Chart-based wheat support rests at $5.90, March Chicago. A more bullish trend is expected once EU feed businesses are using wheat beyond early winter.

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Weekend summary 13 November 2020

• Chicago markets are trading are lower at midday amid sustained weakness in financial markets and midday selling in crude futures. US crude stocks through the week ending Nov 6 were up 4.3 million barrels to 488.7 million. This is up 9% on last year and while this week’s news of the forthcoming Covid vaccine is welcomed, it will take some time to approve, distribute and eradicate the virus. Soy oil is holding up best on a % basis on soaring global veg oil prices and talk that an accident occurring at a soy/sunseed crush facility in Argentina will keep that plant closed indefinitely.

• It is estimate that managed funds as of Wednesday morning were long a net 363,000 contracts of corn, the most since 2012, and 280,000 contracts of soybeans, a new all-time record high. This week’s correction was needed, and it remains that bull markets must be fed on a daily basis. FAS failed to announce any new export sales this morning. Russian wheat exporters will be relatively aggressive up to Feb 15, when shipments begin to count towards a 15 million mt all-grain export quota. The S American weather forecast has trended wetter in Central and Northern Brazil but remains concerningly arid in key areas of far S Brazil and Argentina.

• This week’s ethanol data leans modestly positive corn but slightly bearish ethanol. US ethanol production last week totalled 287 million gallons, vs. 282 million the previous week and a new crop-year high. Work suggests that an average of 285 million gallons per week is needed to meet the USDA’s forecast. Assuming miles driven begins to recover next summer, ethanol’s bearish impact on the US corn balance sheet will be waning. Seasonally, ethanol production should reach an intermediate peak in the weeks ahead.

• US motor gasoline consumption though the week ending Nov 6 totalled 8.76 million barrels per day, vs. 8.34 million the previous week and the highest since early October.

• This week’s Central US drought monitor features a modest expansion in abnormally dry conditions across TX, OK and portions of the Central Midwest. The near-term Central US forecast is aligned with La Niña-based climate outlooks. Meaningful precipitation will stay isolated to the Midwest into late month. The return of moisture to the Plains is unlikely through the remainder of 2020.

• The midday GFS weather model is wetter across Western Argentina and Central Brazil relative to its overnight release. A more seasonal pattern of daily showers will be established across Mato Grosso, Goias and Minas Gerais over the next two weeks. Cumulative totals will reach upward of 2-4″. This will stabilise soil moisture there. Better rains also lie ahead next week for South-Central Brazil, including major producing states Mato Grosso do Sul and Parana. Yet, our concern is that rainfall in Southern Brazil won’t be lasting. Dryness returns to the region beyond Nov 19. The erratic nature of precipitation across the southern half of Brazil’s ag belt will weigh on crop health longer term.

• Bullish row crop fundamentals have not changed but amid extreme fund length we should expect increased volatility well into 2021. USDA corn and soy export forecasts are too low in our view. Boosting total cropped area in 2021 by 9-10 million acres, of mostly soy, will be a difficult chore.