• After an opening flurry of fund buying, Chicago prices are in retreat with wheat seeing fresh selling. US/EU wheat futures are in retreat based on the less restrictive export quota announcement by the Russian Government. The ability of Russia to keep freely exporting wheat into mid-February was bearish. The decline in wheat pulled corn lower with soy edging back to unchanged. Profit taking is noted. And traders are buying the summer row crops (corn/soybeans) and selling wheat on spreads. Volume has subsided at midday from an active opening. A mixed Chicago close is forecast on the bearish tug of wheat. However, don’t be fooled into thinking that the rallies in corn/soybeans have ended.

• Chicago brokers estimate that funds have sold 6,000 contracts of wheat and 7,000 contracts of corn, while buying a net 1,500 contracts of soybeans. Funds were early buyers of 6,000 contracts of soybeans but have sold back close to 4,500 of those purchases by midday. In soy products, funds have sold 2,600 contracts of soymeal and bought 4,500 contracts of soyoil. End users are adding to future cash coverage in vegoil markets. The rationing of US soybean crush must occur with China likely to export virtually all its current purchases.

• Russia announced that it will place a quota on wheat exports from February 15 through the end of June of 15 million mt. Research estimates that Russia will export 23.5-24.5 million mt into February 15 with crop year exports pegged at 39.0 million mt. This is in line with USDA and private export forecasts, so the impact on the marketplace is mute. However, traders were fearful of a more restrictive Russian export quota starting on January 1. This is what has produced selling in world wheat futures. The Russian Government appears that it wants to maintain its position as the world’s largest wheat exporter while making sure that it does not over-export supplies that would create a domestic shortage. Russian domestic wheat and flour prices are at record highs this morning.

• We understand that farmers across 30% of Northern Brazil have soybean seed that has been sitting in dry soil for weeks. Although soybean planting dates are equal to last year, don’t be fooled into thinking that all is normal. The extremely erratic rainfall pattern of the past month has left fields with depleted soil moisture. Some Brazilian farmers are reseeding soybeans for the third time and hoping for improved rainfall. Soybeans that were seeded in September are short and under stress. This is not the start that N Brazilian farmers desired and the impact on Brazil’s winter corn production will be important with the seeding window pushed back by 3 weeks. This means that at least half of the Brazilian corn crop will be planted beyond the optimal seeding window of Feb 15-March 10 Late planted corn will pollinate in a seasonal period of declining rainfall/soil moisture of May and early June.

• The midday GFS weather model is slightly drier for Southern Brazil with similar rains for N Brazil and Argentina over the next 10 days. The best chance for N and C Brazilian rainfall is during the 6-10 day period with limited totals into Sunday. The drying trend for S Brazil and all of Argentina is worrisome with another 2 weeks of below normal rainfall and variable temperatures expected. Heat with highs in the 80′s to 90′s will be evident over the next 4-5 days with cooling across Argentina and Southern Brazil next week. The 11-15 day forecast maintains the dry trend across Argentina and RGDS with some rainfall seeping into Parana.

• The fall in grain prices appears to be corrective with selling in wheat due to the Russian Government’s announcement that it will not be overly restrictive of their exports during 2021. The news pressured wheat and started a profit taking break in corn. However, bullish price trends remain and we doubt that Dec corn slides too far below $4.14 or Jan soybeans below $11.35. No one is going to be overly bearish amid concerning S American weather with soybeans sitting in dry soils across N Brazil.

• Chicago ag futures are mixed at midday with wheat values lower while corn/ soybeans hold in the green following an early round of fund buying tied to the promise of a Pfizer vaccine that is suggested to be 90% effective against Covid-19.

• That vaccine has sparked strong buying of US equities amid the hope for a return of normal life in 6-9 months that releases pent up economic demand. US livestock futures are sharply higher on the hope for foodservice restocking while Covid-19 hedges such as gold and bitcoin decline. We look for a higher Chicago close amid threatening weather for Argentina and the southern third of Brazil. End users and importers are hoping for a bearish USDA report to buy.

• The Chicago post overnight trade featured active fund buying. However, profit taking ahead of the USDA November crop report pared early gains. The bulls used the vaccine rally to trim back market length with a few traders arguing that some of the USDA bullishness has been factored into price. 75% of the time back to 1999, US soybean end stocks ended up being above the average trade estimate. WASDE tends to be conservative with its export and crush analysis until more is known about the coming S American crop size. Brazil’s CONAB will be out early Tuesday with their 2021 crop forecasts.

• Chicago brokers estimate that funds have bought 3,000 contracts of corn and 5,700 contracts of soybeans, while selling 3,500 contracts of wheat. And funds have bought 1,300 contracts of soy meal and 3,400 contracts of soyoil. Funds were opening buyers but have since become sellers on the midday correction.

• FAS confirmed that 123,000 mt of US soybeans were sold to an unknown buyer for the 2020/21 growing season.

• US weekly export inspections for the week ending November 5 totalled 27.2 million bu of US corn, 91.7 million bu of soybeans, and 11.2 million bu of wheat. US corn and wheat exports were less than expected while soybeans were larger. China took just over 63 million bu of US soybeans, 69% of the US total. China also loaded out 3 boats of US corn which is a trend that continues weekly. China shipments are on track to take 9.5-10.5 million mt of US corn in the 2020/21 crop year.

• Brazilian dryness has placed concern on their ability to ship out February soybean exports in line with existing sales. Most Brazilian farmers do not plant soybeans that mature in 90 days. And soybean farmers in Mato Grosso and Goias have re-seeded several times based on poor germination rates. We have the US shipping 1.7 million mt of US soybeans to China, but if the dry weather trend were to persist for another 10-14 days, that estimate could be too low by 1-2 million. The US 2020/21 balance sheet does not have the room for the US to export additional soybeans with crush rates rising on a near daily basis. The rationing of US demand will be a “fist fight” between exporters and crushers.

• The Russian Economy Minister said that Russia was discussing ways to curb sunflower seed exports. Rumours had Russia increasing the export tax from 6.5% to 30% as of January 1 and/or introducing permits for export. Either is restrictive on Russian sunflower seed exports which is needed to cool rising domestic sunoil/domestic food inflation.

• The midday GFS weather forecast is consistent with limited rain for key crop areas of S Brazil/Argentina through the weekend. An improving rainfall outlook develops early next week for N and C Brazil while Argentina/S Brazil maintain a dry forecast into November 20. The S American forecast is concerning for Argentina/S Brazil crop yield while N Brazilian farmers complain that 2020 is their worst seeding start in a decade.

• End users and importers are hoping for a bearish USDA crop report to buy, just like October, due to ongoing strong US export demand and S American crop woes sparked by weeks of drier than desired weather. The Pfizer Covid-19 vaccine is bullish to US corn/soyoil as Americans may get back to normal driving and crude oil rises sharply on supply. The bearish aspect Covid biofuel demand is in decline. WASDE should not further cut ethanol usage rates.

• Chicago ag futures are mixed at midday with corn/wheat weaker while soy futures are steady to slightly higher. The volume of Chicago trade was active after the opening but has slowed at midday. Profit taking and US farm selling has capped the early rally with nearby spreads reflecting the weakening cash basis trend. We look for a mixed close, but the risk is ongoing dry S American weather which will determine the opening on Sunday. It the dryness across Argentina and Southern Brazil that is garnering considerable trade interest.

• The USDA will release their 10 Year Baseline report at 2 PM CT. The Baseline Report is released twice a year with the last update occurring in February. The November Baseline is used for US budgetary purposes and should offer insight on future China demand. China corn demand has been a welcome late summer development, but USDA has failed to fully recognise China purchases. We look for a more optimistic assessment from WASDE in the November Baseline compared to its February estimate. The Baseline incorporates the October WASDE report and we wonder “out loud” why doesn’t WASDE wait to release the Bi-Annual Baseline Report next week, which incorporates the November Crop Report.

• FAS reported that private exporters sold 132,000 mt of US soybeans to China and another 272,150 mt to an unknown destination (rumoured to be China) for a total of 404,150 mt. There was also a sale of 206,900 mt of US corn to an unknown destination and 30,000 mt of US soyoil to South Korea. The sales help confirm that China booked US soybeans on Wednesday. There are rumours that China booked an additional 4 cargoes of US soybeans for late December-February and 4 cargoes of Brazilian soybeans early this morning. Chinese sources report that China crushers need to secure an additional 2 million mt of US soybeans for early 2021, before shifting their demand entirely to S America.

• The Ukraine corn harvest has reached 69% and the yield data, although improved, remains depressed. Modelling of Ukraine reported yields calls for a final crop of 29-30 million mt, well down on the October WSADE estimate of 36.5 million. WASDE is expected to cut their Ukraine corn crop on Monday and raise US corn exports accordingly. The decline in the Ukraine crop is a bullish surprise and hints are a 1.5-2.0 million mt decline in the Russian corn harvest. The world 2020 corn supply could fall 12-16 million mt on Tuesday. The world corn supply is in fast retreat.

• US ag markets appear to be paying less attention to the Covid-19 infection rates as a positive vaccine efficacy announcement is expected in weeks. Moreover, medical professionals appear equipped to maintain a lower mortality rate. Yet, a positive vaccine announcement is key to 2021 GDP growth.

• The midday GFS weather forecast is consistent with prior runs with limited rains over the key crop areas of S Brazil/Argentina. The best chance for rain will be across S Cordoba and La Pampa next weekend. Sporadic and below normal rainfall will persist across N Brazil with totals being some 40-65% of normal. The best rains fall across EC Brazil next week. Temperatures warm next week with cooling across Argentina after November 14.

• The big technical buy signal will be issued with a close above $0.355 in Dec soyoil today. Soyoil is breaking above key resistance which argues for $0.45-0.50. Soyoil has not closed above $0.35 since 2017. US farm selling will subside next week as the 2020 harvest ends. Seasonal trends turn bullish for Chicago into Thanksgiving. Yet, it is S American weather that will determine the extent of the Chicago rally into year end. The current dry trend is worrisome with seeding being further delayed.

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Weekend summary 6 November 2020

• Chicago ag futures are strong but have fallen from morning highs. However, sustained weakness in the US$ has allowed new speculative money to find raw material markets, while rising US export demand and adverse global weather patterns lend fundamental support.

• Soy oil has led the rally this morning as exporters sold 33,000 mt to India. Indian demand for US soy oil is rare and hasn’t happened in bulk since 2012/13, when India secured 113,000 mt. This is important as it indicates a change in global vegetable oil trade flows. A close above $9.35 this week foreshadows a more dynamic bull market in Chicago soy oil.

• US export sales through the week ending Oct 29 included a massive 103 million bu of corn, 56 million bu of soybeans and 22 million bu of wheat.

• Year-to-date US corn export commitments now sit at 1,307 million bu, up 179% from last year and a near-record large 56% of the USDA’s forecast. Soybean export commitments are a record large 1,782 million bu, up 132% from last year and already 81% of the USDA’s forecast, also record large.

• Bean sales moving forward need to average just 11 million bu/week to meet the USDA’s forecast, which is clearly too low. We have raised projected 2020/21 US soy exports to 2,325 million bu, 125 million above USDA. This leaves zero room for yield loss.

• Year-to-date wheat commitments total 616 million bu, up 12% from last year. This is more aligned with the USDA’s 975 million bu forecast, but sales have been slightly better than expected all season despite lofty Gulf prices.

• We also mention that China last week secured another 13 million bu of US sorghum. 2020/21 sorghum export commitments are now 143 million bu, a sizeable 55% of the USDA’s forecast with 43 weeks left in the marketing year. The USDA’s 2020/21 US sorghum export is 20-30 million bu too low. This indicates that domestic rationing is needed. This is being reflected in the interior cash market, with sorghum basis reaching $1.15/bu over Chicago corn futures in parts of the Central Plains. Sorghum prices are working to assure acreage expansion. This will complicate the seedings matrix across the Southern and Central US Plains.

• The US forecast has pushed rainfall early next week even farther east. Precipitation totals in excess of 1″ are now expected to be isolated to IA, IL and WI. A few light showers are possible across the far Eastern Plains, but drought will be ongoing across a bulk of the HRW Belt. Severe/extreme drought is firmly in place across CO, NM, Western KS and Western NE.

• The midday GFS weather forecast is wetter in parts of Central Argentina but is otherwise consistent with prior output. Normal rainfall will develop in Central Brazil beginning next week but areas of the far North and South will be left dry. Much of Argentina’s crop belt, too, will see well below normal rainfall into the second half of November. Decent totals will favour the far Western Argentine crop belt Nov 13-15 but dryness returns thereafter. Irregular precipitation in S America is a concern.

• Markets continue to digest the decline in US end stocks. Longer term, greater than expected US yield cuts or continued drought in Argentina triggers the need to ration soybean supplies, while even corn needs to keep 2021 seeding intentions above 90 million acres. The USDA will release its 10-year baseline projections on Friday afternoon.

• Today’s news has been filled with what seems to us to be a bad tempered, unstatesmanlike display of gratuitous accusation and finger pointing in what the world is watching. Yes, it is the US election, which has yet to see an outcome. And whatever that outcome is, it seems that it will be disputed in a legal challenge from whomsoever is deemed to have not won. Lord help us if we sink into such an electoral debacle – but it seems that whatever happens in the USA eventually finds its way to our shores. How the world stage can be dominated by either candidate, whatever the outcome, beggars belief!

• To more “normal” commentary……

• Mixed Chicago futures are the theme at midday. The grains (corn/wheat) are lower while soybean prices rise on concerning S American weather amid a US September soybean export estimate that was larger than expected. Traders are active bull spreading July/November ‘21 soybean futures or buying soybeans and selling either wheat/corn. The soybean market is reacting more vigorously to concerning S American weather forecasts with sold out fund managers wanting to re-establish their length. Fund managers appear more active in trying to position long in the complex on tightening US and world stocks. We look for a mixed close with contract highs in January soybeans at $10.885 being the next upside price target.

• The US DOW has rallied a sharp 700 points as it is risk on as traders try to get back into asset positions with a blue wave for the US Senate highly unlikely. That blue wave means that imposing higher tax rates or changing the current tax legislation will be difficult or impossible. Deciding who the next US President is still being counted/worked out with each side still claiming that they have a way to be in the White House over the next 4 years. Unfortunately, the 2020 election will widen the divide between the two US political parties.

• Chicago brokers estimate that funds have bought 8,000 contracts of soybeans, 4,100 contracts of soymeal and 5,200 contracts of soyoil. In the grains, funds have sold an estimated 4,800 contracts of corn and 3,100 contracts of wheat.

• The US Census Bureau estimated that the US exported a record 285.9 million bu of US soybeans in September, some 49 million more than export inspections had indicated. A year ago, the US exported 142.9 million bu of soybeans. And US Sept soyoil exports were massive at 180.2 million pounds with soymeal exports at just under 800,000 short tons. We note that in September of 2019, the US shipped out just 48,500 mt of US soyoil along with 754,000 mt of soymeal. US 2020 soybean/soyoil exports were well above expectations and considered bullish. The US exported 149.7 million bu of corn and 98.7 million bu of wheat. This compares to 79.8 million bu of corn and 85.0 million bu of wheat (excluding flour) in 2019. US corn and wheat exports were close to weekly inspection totals.

• Weekly US ethanol production equaled 283 million gallons vs 277 million last week, or down some 5% from last year. The US needs to equal some 285 million gallons going forward to reach the WASDE annual forecast for 5,050 million bu of corn consumed. US ethanol stocks rose slightly to 827 million gallons vs 823 million last week.

• The forecast lacks the regular rain for Central/Northern Brazil to maintain the soybean seeding pace. Sporadic rains will drop across N Brazil with even more diminished totals for S Brazil and Argentina. It is the lack of rain that is creating yield concern.

• And temperatures warm on the weekend with 80’s and 90′s becoming more frequent next week. Temperatures are currently cooler than normal across most of S America.

• Improved rainfall is desired across S America with our concern being that a La Niña pattern could maintain this dry weather trend into early December. The models continue to offer the potential for improved rains in the 11-15 day period. Until the rains in the extended forecast are pulled forward, our confidence in their development is low

• Dry S American weather along with the desire of fund managers to position long ahead of next Tuesday’s NASS/WASDE report has soy futures higher. A close above $10.88 Jan soybeans will open the market up to a target of $12.00. Corn and wheat are not finding the same type of speculative buying. However, it is imperative that Argentina produce a 2021 corn crop of at least 47 million mt.

• Chicago futures are higher at midday as the US$ sinks sharply amid the uncertainty of the US election and movement of foreign cash back home. The weak US$ has rallied a host of raw material markets including Chicago grain futures. CME meat markets are weaker on profit taking, but otherwise, the CRB index is pushing against last week’s high. Chicago soybeans and soyoil are offering upside leadership while the July/November 2021 spread reaches above a $0.75/bu premium. US old crop soybean stocks continue to be draw down via strong demand and the risk of lower US soy crop estimate next week. December corn futures are back above $4.00, while KC wheat futures react to improving world demand and firming European wheat values. A higher close is expected with the overnight election to produce financial market volatility.

• Chicago brokers estimate that funds have bought 6,400 contracts of soybeans, 4,300 contracts of corn, and 2,600 contracts of wheat. In soy products, funds have bought 3,400 contracts of soyoil and 900 contracts of soy meal.

• IHS Markit is forecasting the US 2020 corn yield at 175.7 bushels/acre and soybeans at 50.8 bushels/acre. The former lnforma firm cut their corn yield 2.1 bushels/acre from October. The IHS Markit soybean yield was down 1.1 bushels/acre from their October estimate and such a yield would really tighten US 2020/21 soybean end stocks with any fresh Chinese demand following the election. The US soybean balance sheet cannot afford a US soybean yield much below 51.5 bushels/acre or stocks virtually run near US pipeline requirements. We note that late season corn and soybean yields were not as good as the early harvest and the drag is likely to produce a lower crop from NASS on October 10.

• Ukraine livestock producers are asking the Government to apply an annual export quota for corn much like is already in place for wheat to prevent the country from over-exporting corn and raising already high domestic corn prices. The Government will debate the request from its livestock industry in coming weeks. Ukraine fob corn is offered at $1.85 over for January vs the US Gulf at $1.46 over. The near $0.40 premium of Ukraine corn vs the Gulf has slowed demand, except to the EU where Ukraine corn is in demand as being GMO approved.

• There were no US daily sales reported by FAS/USDA today. China has been a slow buyer of US ag goods ahead of the US elections but is expected to pick up their purchase pace next week. Chinese crushers are short bought of soybeans.

• If China was more serious about importing ethanol and DDGs, it would lower its duties (70%) to allow greater purchases by private industry. However, this does not preclude state companies from making purchases/imports and paying the duty to itself. Yet, US traders will be watching for additional China demand with a cargo of US ethanol and numerous DDG containers afloat.

• The forecast is like the overnight run with limited rainfall for Argentina and S Brazil over the next 10 days. The forecast is slightly wetter for La Pampa and the southern portion of Buenos Aires. The remainder of Argentina and the southern third of Brazil is dry with warming temperatures starting on the weekend. Daily rain chances will be ongoing across N and E Brazil. Showers will allow Brazilian soy planting to accelerate. Temperatures across S Brazil/Argentina are cool this week, but warm to the 70s/80s and 90s next week. Better rains are shown for Argentina and S Brazil in the 11-15 day period but confidence this far out is low. The models have been showing rain in this timeframe for week.

• It is a Chicago macro trading session with corn, soybeans and wheat following gains in a host of other financial assets. Any Chicago break following the US election will produce a new purchase opportunity amid the arid weather forecast for Argentina and Southern Brazil. We note that rising US Covid-19 cases are being ignored today, due to politics. We do not advise chasing this rally.

• Chicago futures are mixed at midday in diminished volume as traders/fund managers await US election results and their impact on the macro financial markets. Crude oil futures have recovered from sharp overnight losses as values score seasonal lows on diminished US production. However, amid the large fund ag length, it is taking Chicago somewhat longer to bottom with cash grain markets being the final arbiter. It is cash grain basis heading into first notice day that will provide bullish heart beyond the middle of November.

• US corn futures are sagging on the worry over new US regional lock downs to flatten the health care curve as US Covid-19 cases surge. Although a national US lockdown is unlikely, US ethanol demand could sag as Americans drive fewer miles amid the need to lower infection rates. The 30-day lockdown in the UK has spooked corn bulls into new worry regarding future US ethanol demand amid state by state stay at home orders. US wheat futures are higher as nearly 1.0 million mt of new world wheat demand is working with Turkey’s TMO returning with a tender for 500,000 mt. Syria and North African wheat demand are also working which will be focused on EU/Russia. This new world wheat demand and Brussels lowering their 2020 corn crop estimate (60 million mt vs USDA’s 66 million) has us wondering how the EU will be able to cope with tightening feed supplies. The EU cannot import large tonnages of US corn (besides some small tonnages into Spain) due to unapproved GMO traits, and with the Ukraine nearly sold out of exportable corn supply and a new S American harvest months away, the function of the EU wheat/corn market is to price itself above the world milling/feed markets to preserve domestic feed stores. We worry that with the EU exporting wheat/corn that its feed shortfall is becoming all but unsolvable.

• US export inspections for the week ending October 29 were; 28.4 million bu of US corn, 76.5 million bu of soybeans, and 10.5 million bu of US wheat. Soybean, corn and wheat export estimates were slightly less than expected. We note that last week’s US soybean export inspections were revised up to 103.6 million bu, a gain of nearly 6 million. China accounted for 44.5 million bu or 58% of the week’s total shipments. China also accounted for 50% of the US corn exports on the week or 14 million bu. China continues to actively ship out both US soybeans/corn.

• FAS reported the sale of 204,000 mt of US corn to an unknown buyer. US corn sales have been featured daily since Ukraine fob offers shot up last week. Chicago brokers estimate that funds have sold 5,300 contracts of corn and 3,200 contracts of soybeans, while buying 2,800 contracts of wheat. In the products, funds sold 1,200 contract of soyoil while being flat in soymeal.

• The midday forecast is like the overnight run with limited rainfall for Argentina and S Brazil over the next 10-12 days. Daily rain chances will be ongoing across N Brazil. Showers will allow Brazilian soy planting to accelerate across major producing states Parana and Mato Grosso do Sul. A rapidly strengthening La Niña is a concern as dryness features across Argentina and S Brazil into early 2021. Temperatures across S Brazil/Argentina are cool this week, but warm in the 10-14 day period to the 80′s and 90′s. Drying soils are a worry into mid-November.

• The premiums of November-January and November-March soybean futures bought enough cash soybeans in a nearby position that produces the need for an East Coast processor or exporter to mop up deliverable receipts. Once those receipts are taken, the outlook brightens considerably for US soybeans. And there may be regional Covid lock downs. but US corn is in strong demand from importers. With rising Russian wheat and flour prices, it is difficult to be bearish amid concerning dryness across a good portion of Argentina and at least half of Brazil.