• HEADLINES: Fund buying cools at midday; US/EU wheat stay positive.

• Chicago ag futures have eased off morning highs. Fund buying at midday has cooled following a flurry of new influx due to ongoing ideas of long-term inflation and as fresh wheat input remains bullish. Expect elevated wheat market volatility amid extreme exporter stocks tightness and as US and European futures have quickly become overbought, technically. The wheat outlook remains bullish, but choppy trading will be the mantra into late year at decade-high prices.

• Additionally, there is much confusion surrounding Brazil’s biosafety commission approving the import of GMO wheat flour this morning. First, only flour has been approved and already Brazilian millers aim to fight the ruling politically. Arbitrigo, Brazil’s wheat industry association, has asked the Brazilian administration to further analyse the decision with the hope of having it reversed.

• Ultimately, this is an issue of consumer preference, which globally does not favour the consumption of GMO wheat/flour and which will not change in the 2021/22 crop year or for many years in the future. Our message is that the risk that N African/Mid-East importers reject cargoes of Argentine wheat due to the finding of GMO is intact. This issue must be monitored closely as Argentina’s wheat export program ramps up seasonally in Dec-Jan. We also note that the long-term wheat outlook is bullish into mid/late winter even if there are no disruptions to Argentine grain flows.

• Soaking rainfall of 2-4” has impacted South Australia and key portions of New South Wales and southern Queensland in the last 48 hours. Additional rain falls across eastern Australia into Friday and concerns over wheat quality remain elevated. A drier pattern does become established next week, but odds are high that above normal precipitation returns to E Australia late Nov and throughout Dec as La Niña strengthens. E Australia’s Jan wheat future rallied to a new contract high of 374 $AUD/mt ($273/mt) overnight.

• Spot rapeseed/canola futures in Canada and Europe have rallied to new contract highs with ease this week. Feb rapeseed in Europe looks to settle today at $808 per tonne, which compares to Jan Chicago soy at $449. Cash rapeseed oil in Europe is quoted at $0.85/lb for Dec-Jan delivery. Soaring global rapeseed/rapeseed oil prices will act as a buoy for the Chicago soy complex on breaks. Rapeseed prices must work to shift demand to other oilseeds, including soy and sun.

• Finally, we hear that China is booking US soybeans for Dec-Jan shipment. Official sales announcements will be watched for on Friday morning when the federal government reopens.

• The midday US weather forecast is consistent in keeping rain/snow over the next 10 days confined to the far Upper Midwest and Great Lakes. No threats to the completion of harvest are forecast across the Plains and principal corn/soy belt. Model guidance is colder across the Midwest & East Coast Nov 21-26, which should act to keep natural gas prices elevated in the near term.

• The S American weather forecast is slightly wetter in RGDS in S Brazil early next week, with needed rainfall of 0.50-1.00” projected there. Otherwise, soaking rain occurs in Argentina this weekend. A drier pattern develops next week, and Argentine weather moving forward must be monitored closely. Favourable conditions persist into late month across Central and Northern Brazil.

• US/world wheat markets will continue as the bullish leader into the winter months as any slowdown in Russian shipments only implies stocks tightening in other exporting countries. Corn market focus shifts to S American weather exclusively beginning in late Nov. Soybeans stay the laggard, though we would mention that RGDS and Parana in S Brazil do account for 30% of total Brazilian soy production. The risk of drought in S Brazil is elevated.

• HEADLINES: China rumoured to be buying/bidding for Ukraine corn for Jan-June; Russia wants to slow wheat trade; Brazilian GMO decisions on Argy wheat Thursday.

• Rising US inflationary pressures have rallied Chicago corn, soybean, and wheat futures this morning. The upside leader has been the grains while traders are reluctant to chase a soybean rally due to slowing Chinese demand. We look for a strong Chicago close with a test of recent contract highs in wheat due later this week. Note that due to the US Veteran’s Day Holiday on Thursday, the FAS Weekly Export Sales report will be released on Friday. The market tone is bullish with fresh inflows from managed money being felt across the screen.

• Chicago brokers estimate that funds have bought 4,300 contracts of wheat, 6,500 contracts of corn, and 2,100 contracts of soybeans. In soy products, managed money has secured 3,100 contracts of soyoil while selling 1,200 soymeal. The funds are adding to their commodity exposure, a trend that we argue will prevail into the end of the year.

• There are rumours that China is bidding for Ukrainian corn for January-June shipment. Yesterday, 200-250,000 mt of Ukraine corn was sold to China. New sales are pending as negotiations continue. We note that China is expected to release new TRQ Import licenses before the end of the year, which at hefty import margins, should find willing private buyers of US/Ukraine corn. S American corn does not have a phytosanitary certificate and is excluded. The rise in domestic Chinese corn prices during and post-harvest has world exporters raising their import estimates of 2021/22 Chinese corn.

• Reuters is reporting that Russia will soon be setting an annual wheat export quota for January-June of 2022. This is about 6 weeks earlier than prior expectations (mid-February). And Russian Ag minister Patrushev is becoming frustrated that its export tax calculation is not pushing Russian wheat out of world trade. Today, even with the export tax, Russian fob wheat is reported to be the cheapest in the world and the ag ministry is threatening to change how the tax is calculated to somehow slow trade. Russian domestic wheat/flour prices are perched near record highs while domestic Russian food inflation is running at 6-7% annually. And Russian farmers are in no hurry to sell stored wheat based on regional drought conditions impacting their new seedlings.

• Brazil is expected to determine Thursday whether it will approve drought tolerate GMO wheat that was seeded on 60,000 Ha in Argentina. The decision will be important. However, Brazilian millers won’t care what the Brazilian Government declares, we understand they will test and reject any Argentine GM wheat that is found.

• US weekly ethanol production was 305 million gallons, down 20 million from the prior week, but up 6% on last year and 1% on 2019. US ethanol stocks rose 7 million gallons to 852 million which was up 1% on last year, but down 3% on 2019. The EIA ethanol grind was not as big as expected with the data slightly bearish for corn. Yet, key Midwest ethanol producers are raising cash corn basis bids with reports of some Central Illinois plants paying 30-35 cents over December.

• The midday Central US weather forecast is like the overnight run with showers to push eastward into the W Midwest in the next 24 hours. W Midwest rainfall totals look to range from 0.25-1.25” with locally heavier amounts. Dry and cooler weather follows with the next chance of rain being late next week over the Ohio Valley. The Plains stays in an arid weather trend into Nov 23.

• It is a “risk-on” day with world wheat values surging on the potential that Russia may further restrict trade through taxes/quotas while wet weather is causing downgrades to the E Australian wheat harvest. New contract highs are expected. Corn is surging on rising cash basis bids from US ethanol producers and rumours that China is securing Ukraine corn. Soy is a follower of the grain rally. Upside wheat price risk is sizeable if Brazilian millers seek US HRW on Argentine GM worries.

• HEADLINES: USDA surprises soybeans with cut in US yield, World wheat stocks decline on trade; Focus now on demand into 2022.

• The USDA November crop report was bullish with soy futures leaping to sharp gains while corn/wheat follow. The big surprise was a decline in the 2021 US soybean yield of 0.3 bushels/acre to 51.2 bushels/acre. The trade was expecting a gain in the US soybean yield to near or above 52 bushels/acre, which was not uncovered. The smaller yield will prevent 2021/22 US soybean end stocks from ballooning much higher until more is known about S American crop production and Chinese demand.

• Research maintains a bullish view in wheat, moderately bullish view in corn and neutral outlook in soybeans. Key support should hold at $5.40-5.50 basis spot corn and $11.75-12.00 soybeans. Wheat is scoring a trading low as Russian wheat exports seasonally slow. The report allows the market’s focus to return to demand. The supply side of the US market is largely known into 2022.

US End Stocks (million bu)

                      Oct        Nov

            2020        2021        2021

Corn            1,236        1,500        1,493

Soybeans        256        320        340

Wheat            845        580        583

• NASS estimated the 2021 US corn yield at a record 177 bushels/acre, an increase of 0.5 bushels/acre from October. The yield gains came from MN at +4.5 bushels/acre, SD at +3.0 bushels/acre  and KY at +2.2 bushels/acre. The IL corn yield fell -1.4 bushels/acre to 207 while IN was down 2.6 bushels/acre to 189 bushels/acre. NASS indicated that it harvested 94% of its yield plots.

• WASDE lowered 2021/22 US corn end stocks by 7 million to 1,493 million bu with the crop growing 43 million bu while ethanol demand was raised 50 million bu. The average farmgate price held steady at $5.45. We would note that WASDE is too low in its ethanol demand forecast by as much as 150 million bu which would push 2021/22 US corn end stocks to 1,343 million bu, some 100 million bu larger than last year. Amid smaller 2022 US seeding due to soaring fertiliser prices, corn has a longer-term bull story.

• US 2021 US soybean production was lowered 23 million bu to 4,425 million with a yield of 51.2 bushels/acre. The final 2021 US soybean yield could equal last year at 51.0 bushels/acre which would allow for another cut of 18 million bu.

• WASDE cut 2021/22 US soybean export demand by 40 million to 2,050 million bu. The cut was needed and most of the bears would argue that it is too small. However, even if the cut is another 60-80 million bu, crush rates will be elevated which keeps 2021/22 US soybean end stocks below 450 million bu. The worst-case bearish outlook was extracted today from soybeans with downside price support at $11.75-12.00. Soybeans will struggle on rallies above $12.75 keeping the market in a range trade into 2022.

Global End Stocks (million mt)

                    Oct        Nov

               2020/21    2021/22    2021/22

Corn            290.0        301.7        304.4

Soybeans        99.2        104.6        103.8

Wheat            288.4        277.2        275.8

• USDA wheat data leans bullish and the ongoing tightening of the exporter balance sheets which suggests that lasting highs will not be scored until mid, or even late winter. US wheat end stocks were raised 3 million to 583 million bu as reduced imports and higher projected seed use were more than offset by a 25 million bu cut to exports. We view the USDA’s trimming of exports as premature as Russian shipments continue to slow amid a soaring export tax there. The USDA’s EU export forecast of 37.2 million mt is also unsustainable in our opinion, and work maintains that some measure of world demand finds the US from February onward.

• More importantly, USDA raised 2021/22 global import demand by 3 million mt to a new record high 201.1 million mt. Higher global wheat demand lowered exporter stocks/use to 12.1%, vs. 12.6% in October. Additional tightening of the exporter balance sheet occurs in December if Aussie production gains fail to offset expected production losses in Canada. The US and global wheat markets must encourage acreage expansion and a lasting bearish trend requires confirmation of trend/above trend N Hemisphere yields next summer.

• Soybeans will remain the Chicago laggard, but supply concerns associated with the USDA’s November WASDE have come and gone. Recall seasonal price trends in all major global ag markets are positive into winter/early spring. It is noteworthy that Chinese corn futures have scored newer seasonal highs at $10.80/bu and that Brazilian corn prices have stabilised at $6.50. All eyes now turn to S American weather and US demand. US ethanol and crush rates will be record large further boosting USDA forecasts. Wheat is the bull leader followed by corn, and soyoil.

• HEADLINES: Soybeans test key support at $11.75-12.00 January, Wheat rallies on tightening world stocks; Corn caught in-between.

• Chicago ag markets are mixed at midday with wheat futures higher while soybeans sag to fresh lows on pre-USDA report positioning. The trade is expecting a bearish USDA November crop report as the US soybean yield rises at least 0.5 bushels/acre and demand is cut by USDA adjusting exports lower by 50-75 million bu (according to traders). The positioning for a bearish USDA report has punished Chicago soybeans by $0.60/bu over the past 4 trading sessions and dragged corn/wheat values lower. The supply side of the equation has outweighed demand with domestic US ethanol and soybean crush margins at or near record highs as cash soy products trade at a sizeable premium to Chicago.

• Grain futures are more mixed with soybean shorts wanting to be long of corn/wheat as an offset. We note that a considerable amount of bearishness has already been digested by Chicago, but you just never know what the USDA will do in terms of yield. End users are waiting for the USDA crop data before extending forward coverage. Chicago lows should be scored early this week.

• Participants in the China International Import Expo signed purchase agreements for 8.4 million mt of soybeans. The buyers are rumoured to be China’s state-owned importers, Sinograin/COFCO, while the sellers to include the ABCD’s of the world grain industry. The framed contracts could push US exporters to announce large sales in the USDA daily reporting system.

• Weekly FGIS export sales were massive for soybeans at 97.3 million bu while grain exports were disappointing. For the week ending November 4, the US exported 22.2 million bu of corn and 8.5 million bu of wheat. Last week’s US soybean exports were revised upwards to 95.8 million bu. For their respective crop years to date, the US has now shipped out 237.7 million bu of corn (down 62 million or 21%), with US wheat shipments at 364 million bu (down 66 million or 15%) and US soybean shipments at 509 million bu (down 227 million or 31%). China shipped out 66.5 million bu of soybeans or 68% of last week’s export total.

• The USDA is expected to cut 2021/22 Russian and raise EU wheat exports based on pace analysis. The vessel line-up for Russian wheat is in fast retreat. The EU marketplace cannot decline too far (Paris wheat), or another push of EU wheat export buying looms. Paris wheat futures price must ration future demand.

• Brazilian wheat importers/truckers will be testing Argentine wheat for GM material starting next week. Argentine farmers seeded 55,000 HA of GMO wheat which is worrisome with Brazilian/world wheat millers mandating that Argentine wheat be GMO free before offloading.  The odds are high that an importer will find GM material in an Argentine wheat cargo which would set in motion a rash of phytosanitary concern. This needs close attention in future world wheat trade.

• The midday GFS weather forecast is faster with a storm system pulling across the Central US late this week. The system produces showers across the NW Midwest midday Thursday into Friday. Dry/cooling weather follows. We estimate that that 86-88% of the soybeans and 82-84% of the US corn crop was harvested through Sunday. The forecast this week is mild/dry which will push the last of the crop into the bin. The extended range forecast stays dry for the US Western Plains for the next 2 weeks.

• Fear of a bearish USDA November Report has pushed soybeans to sharp losses in recent days with values becoming oversold. Longer term, it is the price of fertiliser, energy and chemicals that places a peg under Chicago grain futures. In the bull leadership role will be corn as world producers cut future seedings due to cost. We are returning to a more bullish outlook on wheat/corn following the needed supply focused correction.

• HEADLINES: Grain rally fails; Fresh US export news absent.

• Chicago ag markets are mostly lower at midday as corn and wheat’s attempt to crawl back to unchanged has been met with ample selling interest amid morning strength in the US$. Harvest activity resumes across the Eastern Midwest this weekend, and following decent movement of corn this week, elevators are less anxious to build stocks. Chicago soybeans continue to drift lower, with Jan targeting strong chart-based support at $11.95-12.00. Key heading into the weekend is whether speculators opt to buy corn/wheat weakness at the close.

• FAS failed to announce any new export sales this morning, Chinese state-owned firms quietly/slowly adding to US soy purchases. World wheat tender news is also absent following Jordan’s purchase earlier in the week. Pakistan made no purchase from its tender. There is just a general lack of news, which will allowed for modest long liquidation across US and global ag markets.

• Soybean planting in Mato Grosso this week is likely to reach 92-94% complete, vs. 83% last year and vs. 92% in 2019. Soybeans from Central Brazil will begin to make their way towards ports in late Jan/early Feb, which places a much heavier burden on the pace of US soy export sales between now and late December. The market is aware that as of today, beans are offered from Southern Brazil for Feb shipment $9 per ton below the US Gulf. We have previouslyreported that backlogs at the Panama Canal are the latest logistical issue working against US soy exports.

• However, global crude futures have mounted a comeback, with spot WTI up $2.50 per barrel at midday. Spot RBOB gasoline has found buying interest at early October’s low ($2.30 per gallon). Ethanol economics remain highly supportive of record/near record production in the weeks ahead. The Dow is up 240 points. Energy markets moving forward look to be a battle of unchanged OPEC production against slowly rising US output. It is clear, for now, crude below $80 is cheap while rallies struggle to exceed $85 amid uncertainty over economic growth and the spread of Covid during the winter months.

• The Aussie forecast at midday is wetter in New South Wales, with the GFS now in much better agreement with its Eu counterpart. Next week’s rainfall of 1-3” by itself will not threaten milling wheat quality in E Australia, but the odds of additional excessive precipitation in late November remain elevated. Crop quality loss in Australia would be a big deal for wheat and canola markets.

• The midday GFS weather forecast is wetter in Southern Argentine crop areas, with 1-2” offered to key areas of La Pampa, southern Cordoba and Buenos Aires Nov 14-15. It is important that this rain falls, but model consistency in recent days has boosted confidence in its arrival. Normal tropical showers continue in Mato Grosso do Sul, Mato Grosso and Goias, which account for 40% of Brazilian soy production.

• We do note that closer attention must be paid to weather in far southern Brazil, including major producing state Parana. Limited precipitation will impact the southern third of Brazil beyond the weekend. Soil moisture there is adequate for now, but the return of widespread heavy rain will be needed by late month.

• Chicago soybeans are nearing oversold territory. Jan soy is expected to hold major chart-based support at $11.95-12.00. Additionally, we estimate that managed funds have established a modest net short position in soybeans. It is the wrong time of year to be overly bearish in our view. Recent price action has dialled in corn/soy yield hikes in next Tuesday’s USDA report.

• HEADLINES: Chicago slides sharply on China demand concern for US soybeans; Corn/wheat follow on fund selling.

• An early Chicago rally failed with corn, soybean and wheat futures sliding lower into the midday hour. Soybeans have been the downside price leader on slowing Chinese demand as the wait times to pass through the Panama Canal rise with Brazil offering new crop cargoes for sale for late December. Heading into the USDA November Crop report, traders are understanding that the window of export opportunity is closing on the US Gulf with any additional demand to be sourced off the PNW (to China).

• The US export sales pace in corn, soybeans and in wheat is under last year, but domestic margins for US soybean crush and ethanol production continue to rise, and are record large for ethanol. This is producing fancy cash basis bids for spot corn/soybeans. The market rallied on the strong domestic margins but slid recently on unexciting US export demand. It is a battle between the strong domestic market and weakening demand for US soybeans from China.

• Chicago brokers estimate that funds have sold 9,000 contracts of soybeans, 7,600 contracts of corn, and 1,500 contracts of wheat. In soy products, funds have sold 4,900 contracts of soyoil and 4,700 contracts of soymeal. The fund selling has been aggressive in the soy complex from the opening bell.

• US weekly export sales for the week ending October 28 were; 14.7 million bu of wheat, 48.2 million bu of corn, and 68.5 million bu of soybeans. The soybean and corn sales were larger than expected. For their respective crop years to date, the US has sold 478 million bu of wheat (down 138 million or 22%), 1,221 million bu of corn (down 86 million or 6.5%), and 1,187 million bu of US soybeans (down 591 million or 33%). The US soybean sales pace argues for a US soybean export estimate of 1,900 million bu or less compared to the USDA forecast of 2,090 million bu.

• The Panama Canal is the next supply chain snarl with traffic causing backlogs of 14-16 days that are expected to lengthen to 19-23 days by early December. The canal backlogs are raising the cost of exporting US product to SE Asia. The additional ocean freight cost is adding up. China is comfortable with its US soybean supply afloat, and they are turning their any new purchases to the PNW. Note that Brazil is offering their new crop soybeans for late December out of the Northern ARC (northern export terminals) export terminals which will cost about $0.20/bu less on a CIF basis to China. Therefore, Chicago is concerned about declining US soybean exports in early 2022 and the slow pace of sales to date. January soybean futures have fallen to initial support at $12.10-12.20 with the next level being the October lows at $11.96.

• The midday GFS weather forecast is like the overnight run with widely scattered showers that will develop across the E Midwest during November 12-14. Cumulative rainfall of 0.5-1.50” is offered for IL, IN and OH.  Dry and warming weather follows in the 11–15-day period.

• Boosts in soil moisture occur in C and N Brazil indefinitely. Needed rain impacts Argentina this weekend. The GFS forecast continues to hint at the return of Argentine rainfall Nov 14-16, but whether this is pulled into the nearby period will be monitored closely in the days ahead.

• Commodity values are falling across the spectrum as risk off is the mentality as world energy prices decline. We suspect that the break might be temporary, and that inflationary buying will return following the USDA November Crop Report. Key support rests below $5.50 in December corn and $12.10 in January soybeans. Wheat remains a bull market with KC wheat having support below $7.80. A trading bottom should occur early next week. The US farmers will be virtually finished their corn/soybean harvest and seasonally, it is historically the wrong time of the year to be overly bearish. Lastly, S American weather can’t get much better.

• For what it is worth, a recently released EU publication was accompanied by the following note:

Soaring fertiliser prices, in part driven by a strong run-up in natural-gas prices, are poised to add more uncertainty to global food markets well into the 2022/23 season. With international prices of most food crops (with the exception of rice) already at multi-year highs and their exportable supplies barely adequate to meet demand, any weather or input induced shortfall in 2022 could have worrying implications for global food security. To reverse the alarming rise in hunger in a pandemic-ridden world calls for concrete actions to guarantee supplies and access to food, particularly for the most vulnerable. 

• To us at least, this is a very telling statement!

• HEADLINES: Weak macros outweigh positive weekly ethanol data.

• Profit taking is theme of the morning in Chicago as macro weakness trumps another round of bullish energy/ethanol data. WTI crude futures are down $2.70-2.80 per barrel, with chart-based resistance at $85 intact for now. RBOB gasoline at midday is down $0.10 per gallon. Weak US GDP data last week and general concern over inflation and the return of elevated Covid cases in China has triggered a ‘get me out’ mentality at midweek. We would also highlight that corn and wheat futures worldwide were heavily oversold as of Monday. Managed funds since mid-Oct have a bought an estimated 65,000 contracts of corn, 35,000 contracts of wheat and 15,000 contracts of beans. New buying will be on pause until NASS’s objective yield data is released next week. FAS again failed to announce any new export sales this morning.

• IHS Markit (formerly Informa) estimates US corn yield at 178.7 bushels/acre, with production pegged at 15,204 million bu. This compares to NASS’s Oct production forecast of 15,019 million bu and if realised will offset projected gains in industrial use. IHS Markit estimates US soy yield at 51.5, with production put at 4,454 million, marginally above USDA’s 4,448 million bu forecast.

• US ethanol production through the week ending Oct 29 totalled 325.5 million gallons, vs. 325.2 million the previous week and a full 30 million above the pace needed to meet the USDA’s ethanol grind forecast. The industry remains at 97% of capacity and still stocks have failed to build. US ethanol stocks last Friday totalled 845 million gallons, vs. 8 million from the prior week but still historically low for late Oct relative to consumption. Our view is that weekly ethanol production continues in a range of 315-325 million gallons well into the winter months. Pace analysis indicates US industrial corn use will exceed USDA’s forecast by 150-200 million bu.

• Cumulative world wheat trade as of early November is calculated at 59.8 million mt, record large and up 3 million mt (6%) from last year. Importantly, combined wheat exports this week are up slightly on the prior week. This is more evidence that suggests high prices are not yet curtailing importer interest.

• However, a correction in world wheat prices is needed. December Paris milling wheat is down €3 per tonne at midday. Global rapeseed prices, too, are correcting from heavily overbought technical levels

• The midday GFS weather forecast is wetter across the Great Lakes and eastern Midwest in the 7-10 period as a deep low-pressure trough sinks into the eastern US late next week. Cumulative rainfall of 1-3” is now offered to E IA, WI, IL, IN and OH Nov 11-13. Active harvest/fieldwork occurs in all areas through early next week but harvest and SRW seeding delays return thereafter.

• Boosts in soil moisture occur in C and N Brazil indefinitely. Heavy rain impacts N Argentina over the next 48 hours. The GFS continues hint at the return of Argentine rainfall Nov 14-16, but whether this is pulled into the nearby period will be monitored closely in the days ahead.

• The lack of sustained active Chinese buying of US soybeans has kept major fundamental resistance intact at $12.50, basis spot, and we have in recent days has highlighted that a few cargoes of Brazilian soybeans have found the world marketplace amid the timely planting of the 2021 crop there. We maintain a long-term bullish US/global grain outlook, but whether USDA begins the process of trimming US corn stocks next week hinges solely upon yield. We would advise waiting post-USDA weakness next week to add to forward wheat/corn supply coverage.

• HEADLINES: Chicago retreats from higher start as fund buying fades; Chicago soymeal nears upside target as funds flatten short position.

• Chicago grains (corn/wheat/oats) rallied to new contract highs this morning before fund demand faded and prices retreated. At midday, corn/wheat values are lower while December oats hangs in the green. Paris wheat futures scored a new all-time spot futures high at €297/mt before declining. Corn, soybean, and oat markets are extremely overbought by any technical measure. A correction can occur with prices moving sideways over time or with a price break.

• Research argues that Chicago values scored a trading top following the market opening that will produce a sideways to lower price profile into next Tuesday’s USDA November Crop report. Although soybeans are holding in the green, a larger yield and cut in US exports should produce the most bearish aspect of 2021/22 US end stocks. A US soybean end stock total close to 450 million bu is possible with US corn/wheat end stocks offering limited change. A gain in the 2021 US corn yield would help offset ethanol demand gains.

• FAS did not report any new US grain or soybean sales today. It is downright disappointing that China is not securing more US soybeans or sorghum. Chinese importers do not need TRQ/import licenses to book US sorghum. And with Chinese cash corn prices pushing back to $10.50/bu, you would expect that US sorghum would be flying off the shelf. However, the Chinese Government has not produced a “green” light for purchases which is frustrating to US farmers. We see no chance that the US Phase One Trade Agreement will be honoured leaving US ag in a difficult negotiating position on January 1.

• Chicago soymeal is closing in on a spot futures upside price target of $340/ton which was summer support and has now become autumn resistance. As US soybean crushers are ramping up due to the new soybean supply and historically rich crush margins ($2.27/bu), the supply of meal will be rising into the end of the year. Current spot futures at $333.50 is near key chart resistance. We doubt that December soymeal can rise too far above $340/ton unless a weather problem were to develop across Latin America. For now, both soybeans/soymeal look to have limited upside potential. We would currently see any 20-30 cent further rally in January soybean futures as offering a new sales opportunity.

• World ocean freight rates are in sharp decline on decreased demand and increased availability as the world supply chain tries to mend. The fall in ocean freight has some commodity fund managers nervous that peak year end demand has already occurred. Chinese demand for iron ore and steel has helped in breaking world freight rates. This could aid US ag exporters before year end.

• Cash corn movement expanded dramatically on Monday’s rally and continued this morning. End users report being covered up on cash corn into early 2022. We look for cash basis levels to retreat on the increased corn movement.

• Chicago brokers report that funds have sold a net 4,300 contracts of corn and 2,700 contracts of wheat, while buying 4,500 contracts of soybeans. In soy products, funds have bought 4,200 contracts of soymeal while being flat in soyoil. We calculate that fund managers are net flat in soymeal futures.

• Chilly/dry weather will be featured across the Central US into the weekend. A warming trend will start in the Plains on Saturday and push eastward next week. High temperatures will return to the 50’s/60’s which will allow for improved drying conditions. This allows producers to advance harvest and seed SRW wheat in the E Midwest.

• Managed money are diminished buyers who has taken away recent Chicago upside momentum. Our upside price targets have been reached in wheat and nearly so in March corn at $6.00/bu. The post-harvest high in January soybeans is pegged at $12.75-13.25. We would reward this rally with sales and look to reload following a potentially bearish November USDA report.  We note that Argentina is back offering March corn at a $0.60/bu discount to the US Gulf during March/April.

• HEADLINES: Wheat/oats/canola score new contract highs; Funds active buyers of grain; Soybeans lag.

• Chicago grain futures are sharply higher at midday with managed money active buyers of the corn/wheat futures on the morning rally. Soybeans have been the laggard on large US yield/stocks talk and that as Chicago rallies amid Brazilian premiums that are sliding. Wheat/oats remain the bullish stalwarts in Chicago. However, with December Chicago wheat testing $8.00 and December oat values above $7.50/bu, it is hard to initiate a long new position. The morning has set new contract highs in wheat/oats/canola.

• Brokers estimate that funds have bought over 12,000 contracts of corn, 4,500 contracts of Chicago wheat, and 3,500 contracts of soybeans. In soy products, funds have bought 5,600 contracts of soyoil while selling 2,100 contracts of meal. Funds are selling soymeal as the US crush seasonally ramps up.

• US cash ethanol swaps have gained another 3-4 cents/gallon this morning which has helped underpin the bullish US ethanol outlook as crude oil futures surge near $85.00/barrel. Crude endured a correction last week that appears to have ended. The next upside price target for WTI spot crude oil futures is a test of the $88-90.00.

• US farmers are not in the fields across the soggy E Midwest, and it will require another 2-3 days for soils to firm enough to support heavy harvest machinery. The lack of harvest has limited cash selling from the producer on the rally. We suspect that cash related selling could increase once farmers return to harvest operations later this week.

• US weekly export inspections for the week ending October 28 were; 24.3 million bu of corn, 83 million bu of soybeans, and 4.2 million bu of wheat. For their respective crop years to date, the US has exported 213 million bu of corn (down 59 million  or 22%), 354 million bu of wheat (down 64 million or 15%), with US soybean exports at  354 million bu (down 65 million or 15.5%). The US corn, soybean and wheat export pace continues to struggle based on Hurricane Ida and the delays that it produced. Brazil is offering January soybeans at $0.54/bu under the US, so the US export window for soybeans is limited to the next 10-11 weeks. The forthcoming USDA report is expected to reduce 2021/22 US soybean exports next week Tuesday, while leaving both wheat/corn alone.

• USDA announced the sale of 132,000 mt of US soybeans to China for 2021/22. China is securing US soybeans in bits and pieces; total tonnages are disappointing at the beginning of November. China’s compliance with the Phase One agreement is doubtful amid the lack of time that exists before Dec 31.

• Chilly/dry weather will be featured across the Central US this week. The cold temperatures will start to modify on the weekend with a warmer and drier trend to prevail thereafter. The harvest should score solid progress from Wednesday onward. High temperatures will range from the 40’s to the lower 60’s with lows in the 20’s/30’s/40’s.

• It is a flow day with speculative funds coming into Chicago in the new month. We doubt that the speculative flow will continue, and corrections appear likely into the November USDA report next Tuesday. We look for the USDA to cut 2021/22 US soybean exports by 50-75 million bu and raise US corn ethanol use by 50-75 million bu. No other changes are expected which means that any modest increase in US corn/soy yield could be bearish. For farmers that need to make sales for cash flow or storage considerations, Chicago is nearing a top. This not a place to be chasing a rally.