Monthly Archives: November 2022

30 November 2022

Posted on November 30, 2022 by simon

• HEADLINES: Chicago sags in corn on lacklustre export demand; EPA says RVO mandates out before weekend; Some additional falls in Argentina.

• Chicago values at midday are mixed at midday with an early rally effort failing. Soybean futures pushed to the best levels since September with the January rally to $14.785 while March corn has been unable to rise above key resistance at $6.80-6.85. The corn market appears to be forming a bear flat on the charts with the WASDE December 9 crop report expected to lower US 2022/23 corn exports by 50-150 million bu. Amid favourable Brazilian weather forecasts and some rain for Argentina (more needed) the market is at prices that by our analysis are overvalued.

• EPA has stated that it will release its biofuel mandate for 2023 by the end of the week. No exact timeframe has been provided for today or tomorrow which is making for anxious biofuel traders. EPA has announced that electric vehicles are eligible for renewable fuel credits which is one of the largest changes in the program. The trade is expecting growth in the RVO mandates due to Biden’s green lean on fuel. However, traders are waiting for the specifics.

• Chicago brokers estimate that managed money has bought 2,100 contracts of wheat and 5,800 contracts of soybeans, while selling 3,900 contracts of corn. In soymeal, funds have bought 4,300 contracts of soymeal while selling 2,200 contracts of soyoil.  Soyoil/meal spreads are being unwound following ADM’s unexpectedly delivered soyoil causing worry that cash basis levels are weaker than being reported by the media.

• EIA reported that US ethanol production reached 299 million gallons last week vs 306 million the prior week. The production was down 2% from last year and needs to reach 295 million gallons per week average to achieve the USDA annual target. US weekly gasoline consumption was down 5% from last year at 8.32 million barrels per day. It is the slowing US gasoline consumption rate that spells future worry for US corn grind demand.

• Rains are falling across Santa Fe and Buenos Aires at midday with additional morning totals of 0.25-0.75%. The midday GFS weather forecast is consistent with prior runs that rains across Brazil are near to above normal while Argentina holds in a drier flow pattern for the next 7-8 days. Argentina will endure intermittent heat of 90’s to low 100’s early next week with Brazil seeing highs in the 80’s/90’s. The Brazilian outlook remains nearly ideal. Moisture will be replenished across the drier areas of Mato Grosso and RGDS with time.

• Soymeal is not going to bull the soybean market as supplies are adequate and cash basis levels leak lower amid the record US crush total. US corn, soybean and wheat export demand stays slow which adds to end stocks with the passage of time. USDA will adjust US corn exports lower on December 9 with end stocks to rise a like amount. Interestingly, wheat values hold limited downside price potential due to stable Russian fob wheat offers.  China has bought 4-5 cargoes of Argentine soybeans for late December/January this morning.

29 November 2022

Posted on November 29, 2022 by simon

• HEADLINES: Choppiness continues amid lack of breaking news.

• Chicago values at midday are similar to the overnight session amid a lack of news. Energy values worldwide are firm amid hope that Covid in China can be controlled moving forward. More attention is being paid to extended range forecasts in Argentina, which maintain a pattern of unwanted heat and dryness into the middle of December. Landslides caused by heavy rain in Southern Brazil have blocked road access to the port of Paranagua. The port today is operating normally, but the arrival of new supplies will be sluggish. Otherwise, volume is thin, and enthusiasm is lacking.

• There is growing talk surrounding infrastructure issues in Australia following inundating rainfall in eastern Australia, including key portions of New South Wales. The worst of quality and yield issues will be avoided via recent and upcoming dryness there. But Australia’s ability to ship 25-26 million mt does require seamless logistics. Aussie vessel line-up data will be watched closely in late Dec/Jan to measure the impact on physical grain flows.

• Negotiations continue over Mexico’s planned ban on GMO corn imports in 2024 and beyond. Following the US’s threatening of legal action on Monday, Mexican President Obrador stated that the ban of GMO corn would apply to supplies used for food consumption, not animal feed. Still, there remains a lack of clarity, and just as important will be the expansion of Brazilian corn output over the next 2-3 years. Mexican imports of US corn scored a new record in 2021/22, but US corn export commitments to Mexico as of Nov 17 are down 11% year on year at 342 million bu.

• Brazilian corn futures remain unmoved and have traded in a range of $7.00-7.10 since early November. Guidance from international markets is lacking.

• Chart patterns may have an outsized influence on daily price determination as the market awaits news regarding China’s Covid protocols and December weather in S America. Strong resistance lies just above the market, with a close above $6.73, basis March Chicago corn, needed to attract new buying bulk. January soybeans’ ability to trade above its 200-day moving average on Monday lends support, but the contracts have been unable/unwilling to breach $14.70 since mid-September. Substantial technical healing is needed in US wheat futures before meaningful short covering occurs.

• The midday S American GFS weather forecast is consistent with morning output. Moderate rainfall will impact western Cordoba but otherwise warmth and dryness will be in place across Argentina into Dec 12-13. Max temperatures in Argentina will exist in the 90s and low 100s beyond the next 48 hours. Rapid soil moisture loss lies ahead. The Brazilian outlook remains nearly ideal. Moisture will be replenished across the drier areas of Mato Grosso. Brazilian temperatures will be within a few degrees of normal, with highs in the mid/upper 80s and low 90s.

• The bears will struggle for leverage until/unless a wetter/cooler pattern shift occurs in Argentina. The bulls require significant improvement in US export demand, which is highly unlikely given current world price relationships. Brazilian soybeans are quoted below the US market for delivery as early as late January.

28 November 2022

Posted on November 28, 2022 by simon

• HEADLINES: Soybeans rally with the sharp recovery in crude oil on OPEC talk of a cut; Argentine farmers step up cash soybean sales. Midday S American weather unchanged.

• Chicago values are mixed at midday with soybean futures rallying on the recovery of soyoil ahead of first notice day against December futures and news that OPEC will cut production to hold crude oil prices. Soybeans followed soyoil upwards with Midwest cash crush margins holding at historically high levels.

• Wheat/corn values are weaker on slow US export demand. The spot Chicago wheat/corn spread narrowed to $0.87 before stabilising. In the Plains, wheat is trading at discounts of $0.30-0.50 vs. KC futures while corn basis is firm at $0.60-1.35 over. The cash spread has narrowed to its tightest level of the year, but it is still not enough to allow HRW wheat feeding by feedlots.  However, US HRW wheat cannot allow itself to be fed in cattle rations on tight supplies and new crop condition woes. Wheat futures should stabilise just shy of the July lows at $7.30-7.50 spot futures. December Chicago wheat futures fell to $7.5025 this morning.

• Chicago brokers estimate that funds have are flat in corn while selling 4,900 contracts of wheat and buying 4,900 contracts of soybeans. In the products, funds have bought 3,100 contracts of soyoil and 4,800 contracts of soymeal. The move higher in soybeans came after the recovery in crude oil futures as OPEC commented that they may cut production (again) in their December meeting.

• US export inspections for the week ending November 24 were 11.9 million bu of corn, 74.3 million bu of soybeans, and 7.3 million bu of wheat. The corn/wheat export paces were disappointing while soybeans came in better than expected at 74.3 million bu. For their respective crop years to date, the US has shipped out 229 million bu of corn (down 111 million or 33%), 385 million bu of wheat (down 15 million or 4%), and 707 million bu of soybeans (down 79 million or 10%). All US grains exports for their crop years are down 232 million bu (when compared to last year) or 5.9 million mt. However, it is the US export pace of the grains that is disappointing.

• January soybean futures have pushed above the 200-day moving average for the first time since early November at $14.485. The push above $14.50 triggered a round of fund buying. January soybeans would have to close above $14.75 to turn the charts bullish in a breakout of the range.

• Argentine farmers are estimated to have sold 350-400,000 mt of stored soybeans on the new dollar soybean offer of 230 pesos this morning. The sales pace is slower than crushers/exporters had hoped for. Farm selling is measured so far on the new program offer.

• The S American forecast is little changed and consistent. Northern and Central Brazil will have a daily chance of rain for the next 10 days with accumulations of 3-6.50”. RGDS/Argentina will be dry nearby with a weak frontal pass producing 0.15-1.00” of rain in the last half of the week. The extended range forecast offers another 5-6 days of dry weather  a new frontal pass for December 10-12. Episodes of heat will impact Argentina with highs in the 90’s and lower 100’s. Argentina will need a return of soaking rains by mid-December. Brazilian high temperatures hold in the 80’s/90’s.

• There are no resting orders above or below Chicago which exacerbates daily price moves. The news that OPEC may cut production rallied crude oil and caused a flurry of short covering across Chicago. Soyoil/soybeans paced the rally. Corn is trying to follow soy, but the weight of wheat is capping gains near last week’s high at $6.72-6.74 March. WASDE is expected to trim their 2022/23 US corn export estimate by 100-200 million bu allowing for enlarged US corn end stocks in the December 9 report. Russian wheat values seem unlikely to decline but their corn offers are cheap with no export tax.

25 November 2022

Posted on November 25, 2022 by simon

• HEADLINES: US weekly export sales offer support; Argentine soy dollar news by Tuesday. December options to expire.

• Chicago values are mixed to mostly higher at midday. Early Chicago weakness uncovered option related futures buying which ignited an early session rally. Corn was the upside price leader with March getting closer to key chart resistance at $6.75-6.85. January soybean futures also tested resistance at $14.50 while US wheat futures tried to break out of a downtrend.

• The volume of trade has been holiday reduced with brokers reporting that the activity is related to the expiration of December options. World cash grain markets are showing limited change with traders ready to cut risk ahead of the end of the year.

• We look for a mixed to mostly higher Chicago close. If seasonal trends hold, we expect a selling opportunity to develop early next week. Chicago values tend to seasonally rally during the Thanksgiving week which is followed by selling of cash corn/soybeans by US/S American farmers during December.

• Chicago brokers estimate that funds have bought 3,900 contracts of corn, 1,700 contracts of soybeans, and 1,200 contracts of wheat. In the products, funds have sold 1,100 contracts of soyoil while buying 2,100 contracts of soymeal.

• Rumours persist that the Argentine Government offering up its soybean dollar (green Peso) program for cash soybean sales either this weekend or on Monday. The Peso rate vs. the US$ has yet to be announced, but it could be as much as 10% above the current levels to spur farm sales. The Argentine Government financially prodded farmers to sell nearly 5.0 million mt of soybeans back in September. That was before planting when farmers needed cash (Pesos) for inputs. This December program will be less successful with sale estimates ranging from 1.5-3.0 million mt. The sales will boost Argentine soybean exports over the next 45 days.

• US weekly export sales for the date ending November 17 were 18.8 million bu of wheat, 72.8 million bu of corn, and 25.4 million bu of soybeans. The grain sales were larger than expected while soybean sales were at expectations.

• For their respective crop years to date, the US has sold 488 million bu of wheat (down 35 million or 7%), 699 million bu of corn (down 655 million or 48%), with US soybean sales at 1,345 million bu (up 18 million from last year or 1.3%). Traders will be positioning for WASDE to lower US 2022/23 corn exports in their December report since the Ukraine Export Corridor will be open for another 120 days. We look for WASDE to cut old crop corn exports by 50-100 million bu and raise end stocks accordingly. Additional cuts are anticipated in 2023.

• The S American weather forecast is little changed and consistent with prior runs. Northern and Central Brazil has a daily chance of rain for the next 10 days with rainfall totals of 3-6.00”. Southern Brazil and Argentina are dry for the next 5-6 days before showers briefly return. Initial rainfall totals look to range from 0.25-1.00”. The extended range offers another slot of 4-5 days of below normal rainfall. Episodes of heat look to impact Argentina with highs in the 90’s with a few lower 100’s across W Cordoba. Argentina will be needing improved rainfall during December.

• Brazil is on its way to a record large soy harvest amid the recent/coming rain. Argentina is the question mark, but with the bulk of the corn and soy crops yet to be planted, it is late December-March weather which has the biggest impact on yield. The nearby dry Argentine weather could spark a test of key resistance in corn at $6.75-6.85 March. We would see any Argentine weather-related rally as a selling opportunity amid slowing world wheat/feedgrain trade. And China will push their demand to Brazil from February onwards. It will be hard to start a bull market from $14.50 March soybeans and $6.70 March corn.

23 November 2022

Posted on November 23, 2022 by simon

• HEADLINES: Sharp fall in US crude oil prices offers bearish headwinds; US ethanol grind nears seasonal peak; Argentina to offer up soybean dollar program.

• Chicago values are mixed in pre-holiday choppy trade. The sharp fall in crude oil futures is providing bearish headwinds for the bulls. The volume of trade is poor due to traders closing out positions ahead of tomorrow’s US Thanksgiving Day Holiday. Chicago will have a hard opening on Friday and then trade until 12:05pm. December option expiration will be featured which could boost market volatility heading into the weekend.

• US crude oil futures have fallen to sharp losses as G7 members discuss a price cap that will be above where the price of Russian crude is currently trading. The price being discussed is $65-70/barrel on Russian seaborne crude, which could boost Russian exports. Russia is exporting similar amounts of crude today to when the war started back in late February.

• US natural gas prices are soaring on the news that a potential restart of the Freeport Texas LNG export facility in mid-December and colder Central US weather forecasts. The lack of excessive gas supplies is elevating US natural gas volatility, unlike prior years, natural gas futures are showing huge day to day market volatility related to US temperature forecasts and demand.

• Chicago brokers estimate that funds have bought 1,900 contracts of corn, while selling 3,100 contracts of wheat and 1,900 contracts of soybeans. In the products, funds have sold bought 2,800 contracts of soyoil and bought 1,200 contracts of soymeal.

• The USDA confirmed that 110,000 mt of US soybeans was sold to China. The sale was the first of the week to date. China is shifting its demand to cheaper Brazilian soybeans. February FOB Brazilian soybeans are being offered $0.85/bu cheaper than the US Gulf.

• Rumours abound that the Argentine Government offering up its soybean dollar (Green Peso) program for cash soybean sales before the end of the week. The Peso rate vs. the USD has not yet been set but could be as much as 10% above the current levels to spur farm sales. The Argentine Government financially prodded farmers to sell nearly 5.0 million mt of soybeans back in September. That was before planting when farmers needed cash (Pesos) for inputs. This time around will likely be less successful with sale estimates ranging from 1.5-3.0 million mt. The sales will boost Argentine crush and soybean exports over the next 45 days.

• Paris wheat futures have dropped on slowing demand/liquidation as December futures open interest declined. And Ukraine continues to export wheat/corn, even as Russia tries to damage its electrical infrastructure heading into the depths of winter. World wheat end users are using the break to extend their forward coverage into 2023. Russia stays aggressive in offering its wheat at $315-318 basis fob. Amid a record crop, Russia will stay an aggressive seller.

• The S American weather forecast is little changed and consistent. Northern and Central Brazil has a daily chance of rain for the next 10 days. Southern Brazil and Argentina are dry for the next 6-7 days before showers return. Initial rainfall totals look to range from 0.25-1.00” with improved totals in the 11–15-day period. La Niña is weakening which should boost Argentine rain chances from mid-December onward.

• Sliding crude oil futures and rumours of soybean dollar in Argentina is pressuring the complex with much needed rain falling overnight across Mato Grosso and Goias. US wheat futures are in retreat on talk of additional EU imports next summer. Corn is trying to rally on firm cash basis bids across the W Midwest. All of this argues for choppiness into December.

22 November 2022

Posted on November 22, 2022 by simon

• HEADLINES: Chicago chops amid a lack of fresh news; US holiday looms for traders; Cash basis bids for corn/soy stay strong.

• Chicago values are mixed in pre-holiday choppy trade. The volume of trade is poor due to traders closing out positions ahead of the US Thanksgiving Day Holiday. Firm cash basis bids for W Midwest/Plains corn offers support while Paris wheat is rising on export demand. US soybean futures are sideways awaiting S American weather developments during December.

• Choppiness is persisting in Chicago. It is interesting that the bulls are disappointed by the size of the post-harvest rally, while the bears are disappointed by the inability of the market to sustain a break. Few traders have profited from the recent choppy Chicago which has hurt trading volume. The question from all is when do trends restart?

• We anticipate choppiness persisting through Friday’s holiday shortened close. However, if Brazilian weather is favourable, a more sustained break in the soybean market will occur as the potentially record large supply is digested. Corn should follow soybeans while wheat holds in its already defined trading range.

• Chicago brokers estimate that funds have bought 3,200 contracts of corn, 2,100 contracts of wheat, and 1,800 contracts of soybeans. In the products, money managers have bought 2,000 contracts of soyoil and 1,400 contracts of soymeal.

• Corn basis has been rising in the W Midwest/Plains with some areas seeing cash pushes of 3-5 cents. Central IL corn basis is $0.30-0.35 over or $7.00 cash corn bids. Locations where the crop was shorted due to drought last summer are showing cash basis of +$0.60-0.90 over. Amid a slow US export program, the cash market is trying to pull Eastern Midwest corn westward. This is not logistically easy and will take considerable time. Rising cash basis is another way that the US corn market is trying to ration domestic demand.

• The potential of a rail strike continues to dominate cash grain discussions across the US. Whether you are a biofuel producer, a soybean processor, exporter, or livestock feeder, all are trying to make sure that their stock of feedstocks is high with real worry tied to rail car availability to move the finished product. US ag could survive a strike that lasts a week, but a lengthy strike during the holiday season would be devastating. Few in Washington are offering any hint on whether Congress will intervene. All of this would be bearish Chicago as biofuel production and exports slow. Our hope is that a rail strike can be averted.

• The S American weather forecast is little changed and consistent. Northern and Central Brazil has a daily chance of rain for the next 2 weeks. Buenos Aires in Argentina will also have a new chance of rain mid next week, while the rest of the country stays dry. Argentine soybean seeding is speeding ahead, but due to the winter drought, regular rains are required during the heart of the growing season. The extended range 10–15-day forecast brings rainfall southward into S Brazil with fresh shower chances for Argentina. December is the wettest month of the year for Brazil. Unlike last year, we do not foresee lasting dryness for Brazilian crops.

• This is seasonally the most bullish week of the year for corn/soy futures as US cash grain sales slow. In coming weeks, it is all about S American weather and resulting crop sizes. We would point out that a 5% above/below trend soybean crop is a massive 7.5 million mt variation. This moves the needle of the market. We currently hold a sell rallies mentality on slowing US export demand. Cash basis should form a peak in early December.

18 November 2022

Posted on November 18, 2022 by simon

• HEADLINES: Chicago mixed in low volume trade heading into the weekend; Black Sea and Brazilian fob offers leak lower; US energy values fall.

• Chicago corn, wheat and soybeans are mixed at midday with short covering noted in soybeans and soymeal. The wheat market continues its decline in fresh fund selling amid a feared slowing of world demand heading into the end of the year. The aftermath of the Ukraine corridor extension weighs on wheat with Russia said to be pushing their supply at traditional US HRW markets including Brazil and Mexico. Russian fob prices are holding around $315/mt, but they are trying to be more aggressive to shed exportable supply ahead of the winter. Don’t make a bid to Russia, unless you want to own wheat. The cash premium of US wheat has talk growing that a cargo or two of EU wheat may be working into the SE US. The message is that US fob wheat is expensive and Chicago/KC futures hold downside price risk amid more aggressive Black Sea exporters.

• Ukraine corn fob offers are also leaking lower in the wake of the extension with the premium said to be sliding to 30-35 over Chicago. Ukraine fob corn for December/January was offered at $0.35-$0.40 over yesterday, but in the hunt for new demand, the offers are in decline. Ukraine again will try to push out as much corn/wheat/sunoil as possible in the next 120 days. Ukraine needs the hard currency and farmers need to move new crop harvest ahead of winter. US Gulf corn for December/January is offered at $1.80 over or $1.50/bu more. Brazilian corn is offered at $1.00 over Chicago or $0.75 cheaper than the US Gulf. The non-competitive bids for US corn keep export demand thin. We cannot confirm any fresh Chinese interest for Brazilian corn following their purchase of 1.0 million mt early last week.

• Brazil has become more competitive in their soybean fob offers this week with February offered at $0.70 over and March at $0.60 over, some $0.90-1.00/bu cheaper than the US. World soybean demand will fully shift to S America starting in early December. No one is going to pay $0.90/Bu more to secure US Gulf soybeans in that timeframe. In fact, if the Brazilian basis keeps declining, it is possible that a Gulf crusher could look at importing Brazilian soybeans for their profitable crush margins.

• US spot crude oil prices continue to drop based on supply availability and the warmth witnessed across the EU in the weather forecast. The next downside target for spot crude futures is $75-77.00, which was nearly reached this morning. A purchase opportunity for spring diesel fuel is in the making with lows projected in the next few weeks. The weakness of crude oil is hurting renewable diesel and ethanol margins.

• Argentina is looking at a second soy/dollar swap to spur farm sales/greater flow of hard currency to the Government. A similar program in September produced the sale of 4.7 million mt of soybeans. Although Argentine farmers are preoccupied with spring seeding, a favourable December Peso rate vs. the US dollar could boost cash sales by 2.50-3 million mt. These soybeans would flow to exporters and crushers, which would compete directly against US offers. An announcement of the program may come as early as next week.

• The S American weather forecast is little changed and consistent with the overnight run, which raises our confidence. Showers are possible across Argentina this weekend with much of Brazil seeing the chance of daily showers next week. 10-day Brazilian rainfall totals range from 2.50-6.00”. The heaviest totals fall across NE Brazil. Argentina returns to a more arid weather pattern with the next chance of rain not showing until the 10–15-day period.

• Our market message is the same; Don’t chase rallies or breaks. A more sustained bearish price trend should evolve following the US Thanksgiving Day Holiday with favourable S American weather. December is the wettest month of the year for Brazil.

To download our weekly update as a PDF file please click on the link below:

Weekend summary 18 November 2022

17 November 2022

Posted on November 17, 2022 by simon

• HEADLINES: Corn, soy export sales better than expected; $4.00 break in crude keeps Chicago weak.

• Chicago corn, wheat and soybeans are little changed from the overnight session, with macro markets weighing heavily on price discovery and as US grain markets reel from this morning’s confirmation that competition for corn and wheat market share stays steep into early spring. Ukrainian corn exports are likely to be revised upward by 3-5 million mt as USDA accounts for the free passage of Ukrainian grain through the Black Sea through winter. Ultimately, Ukrainian corn exports may be raised further, but the pace of monthly shipments during winter must be measured first. And relatively warm weather projected across southern Russia into early Dec limit logistical issues there. Sizeable Black Sea grain exports will continue.

• Paris milling wheat has reversed early losses and is trading modestly higher in both €uro and US dollars at midday. Dec Paris milling wheat today sits at a €4.50/mt premium to March, and cash market strength in Europe underscores the tightness of grain balance sheets.

• But Chicago markets, perhaps more than the corridor’s extension, are subject to collapsing crude oil (down $3.90/barrel at midday), a sharply higher dollar and associated weakness in S American currencies. Weakness in the Brazilian Real today is nearly offsetting Chicago soy’s decline. Soy acres will be maximised and profitability there is likely to be sustained well into the 2023/24 crop year. Market uncertainty over new President Lula’s spending plans is noted. Macroeconomic headwinds persist.

• US corn and soybean export sales in the week ending Nov 10 were far better than expected. US corn sales through the period totalled 46 million bu, vs. 10 million the previous week and the largest since March. Mexico secured 36 million bu, and US corn sales through the week ending Nov 17 are projected at 55-60 million following this week’s Mexican purchase. This does not reflect an outright change in the structure of corn trade flows, but any/all demand is welcomed. Soybean export sales were 111 million bu, vs. 29 million the previous week. Cumulative soy commitments of 1,322 million bu are up 4% year on year. Wheat sales totalled 11 million bu, vs. 12 million the previous week and right at the pace needed to meet the USDA’s annual target.

• NOAA’s updated Dec-Feb climate outlook features ongoing warmth and dryness across the Southern Plains as La Niña’s impact lingers, but an easing/elimination of drought is projected across the PNW, eastern Midwest and mid-South.

• The S American GFS weather forecast is wetter in Central Brazil in the 11–15-day period but is otherwise consistent with the morning run. Scattered showers will impact portions of Argentina’s southern and western crop areas Sun-Mon, but net soil moisture loss will be ongoing across a vast majority of Argentina into early December. Rainfall across tropical latitudes of Brazil increases in intensity beyond the weekend. This includes key producing states Mato Grosso and Goias. Lesser rain will be recorded across the southern third of Brazil. Soil moisture trends in Argentina/S Brazil need monitoring as weather begins to impact S American yield potential more directly in December.

• Sustained rallies require S American weather adversity. Risks are present in Argentina and S Brazil but building drought will be highly difficult across the heart of Brazil’s soy belt during the winter months.

16 November 2022

Posted on November 16, 2022 by simon

• HEADLINES: Corn, wheat recover from morning lows; Crude drops $2.40/barrel; Argentine forecast trends drier; Brazil adequately wet.

• Corn and wheat have crawled off morning lows while soybeans sag on a lack of new export demand and the probable return of normal rainfall across Central Brazil during the second half of November. Macro market guidance leans slightly negative as spot crude drops another $2.40/barrel and equity markets at midday are slightly weaker. Both have dismissed another round of weakness in the US dollar.

• Breaking news is absent, but the rapid de-escalation in Russian-NATO tensions overnight and talk of ongoing corridor negotiations are likely to keep Ukrainian corn and Russian wheat flowing into the world market. We note that the corridor is set to renew automatically for 120 days on Nov 18 if the deal is not amended/eliminated in the next 48 hours. It is likely left to Russia to terminate the corridor and otherwise the market’s debate will centre on whether safe passage is granted to vessels for a full year rather than in 120-day increments.

• US exporters this morning sold 73 million bu of corn to Mexico, with 49 million earmarked for 2022/23 delivery. This provides some measure of relief to the pace of new demand given US corn export commitments to date are down 54% year on year and in only one week since Sep 1 have weekly sales exceeded the pace needed to meet the USDA’s forecast. We expect demand to improve slightly Jan onward as Brazilian supplies become exhausted, but it is imperative that exporters are able to sell 40-50 million bu/week throughout winter to prevent a sizeable trimming of 2022/23 corn export forecasts. Exporters also sold 6 million bu of HRS wheat to Iraq, which was largely known on Monday.

• EIA data this week leans supportive ethanol/crude and slightly negative corn. US ethanol production in the week ending Nov 11 totalled 297 million gallons, down 12 million from the previous week and down 5% from the same week in 2021. Ethanol stocks last Friday were 895 million gallons, down a sizable 37 million week on week and which explains recent strength in the cash ethanol market. Weekly ethanol production must stay above 295 million gallons to validate the USDA’s annual corn grind forecast.

• Crude stocks, less strategic reserves, on Friday totalled 435 million barrels, vs. 441 million the previous week and up 1% from the prior year. Total US crude stocks slid another 9.5 million barrels and at 828 million are down 20% year on year.

• The midday GFS weather forecast in the US is consistent with the morning run in keeping near-complete dryness intact across the US Southern and Central Plains into Dec 2. Drought deepens further across the HRW Belt.

• The S American GFS weather forecast is drier in Cordoba on Central Argentina but is otherwise unchanged. Additional rains impact Buenos Aires late in the coming weekend. A few light/scattered showers are possible elsewhere in Argentina Sat-Mon but net soil moisture draws are anticipated into the opening days of December. Developing dryness across RGDS and pockets of Parana in southern Brazil must be monitored, but a vast majority of Brazilian soy producing areas will be adequately watered in the next two weeks.

• Tuesday’s action shows that ag markets remain highly sensitive to Black Sea geopolitical issues, but until there is an actual halt to trade flows, competition for near-term corn/wheat market share remains strong. Brazilian fob soybeans are offered for Feb delivery and quoted $0.80/Bu below US Gulf origin. Brazilian soy discounts are likely to grow modestly without adverse weather in December.

15 November 2022

Posted on November 15, 2022 by simon

• HEADLINES: Dell the rumour and buy the fact trading on Ukraine grain corridor; NOPA soyoil stocks rise/crush as expected.

• Mixed trends are the theme of Chicago values as Chicago wheat paces the decline while soybean futures rally on sell the rumour and buy the fact trading. Russia and the UN are indicating that considerable progress has been made on keeping the corridor open, which sparked the early headline selling.

• However, the grain industry has been expecting that the corridor would stay open, and Ukraine can export 3 million mt of grain/month through the far west into Europe if it closes. The continuance of grain flow through the corridor is important, just not as “earth moving” as was back during the summer. We look for a mixed to slightly higher Chicago close on firm cash corn/soybean basis bids and the fast-approaching first notice day against December futures.

• It is a holiday in Brazil and limited hedge selling is occurring in soy/corn. Brazilian farmers are enjoying their summer holiday and are not engaged. We look for the Brazilian farmer to be a much better sellers of soybeans and first crop corn in late November/early December. Chicago is lacking one of the world’s biggest shorts today, the Brazilian farmer.

• Brokers report that funds have bought 2,000 contracts of corn and 2,200 contracts of soybeans, while selling 3,800 contracts of Chicago wheat. In the products, funds have bought 2,000 contracts of soyoil and are flat in soymeal.

• Chicago open interest fell sharply yesterday as traders start cleaning up positions ahead of first notice day against December futures on the 30th. Corn open interest was down 32,683 contracts, soybeans were off 1,450 contracts and wheat was down 6,256 contracts on Monday. The massive spreading of Dec/March corn was liquidation. December corn has a hefty 373,000 contracts still open. Seasonal price trends are sideways to higher heading into the US Thanksgiving Day holiday as US farmers are not engaging as cash sellers. December position squaring and strong cash markets affords the chance for a Chicago bounce.

• The NOPA October Crush report showed a crush of 184.4 million bu, which was right at industry expectations and up 1 million from last year. NOPA soyoil stocks grew to 1.528 billion pounds, up 69 million pounds reflecting that renewable diesel demand is not (yet) draining US stockpiles. We lament that the loss of US soyoil export demand is far greater than any gain from renewable diesel.  Funds were active buyers of Chicago soyoil futures using it as a proxy for diesel fuel. The Chicago soyoil rally was largely speculative with open interest in the past month rising 16%. The CoT report shows that money managers hold a long soyoil position more than 100,000 contracts. We believe the NOPA Crush report as being neutral to slightly bearish. Soyoil futures will struggle to sustain the current bull market through December.

• The S American midday weather forecast maintains a wet forecast for Brazil for the next 2 weeks with rain accumulations of 1.00-4.50”. The moisture will be timely with high temperatures ranging from the 80’s to lower 90’s. The GFS forecast is starting to see the moisture like the EU and Canadian models for Argentina this weekend. The forecast leans favourable for Brazil with more rain needed for Argentina following the good weekend soaking.

• The US GFS weather forecast has added heavy snow for Kansas and the W Plains on the Thanksgiving week holiday. Confirmation is needed, but this could be the start of a wetter weather pattern for the Plains.

• Choppiness lies ahead into the US Thanksgiving Day Holiday with S American farmers expected to become better sellers of their new crop in December. There is little doubt that US inflationary pressures are waning, but this will not stop the US Central Bank from raising the fed funds rate another 0.5% in December and 0.25% in January before they pause. A deepening recession is ahead with US export demand to slow. Adverse American weather is needed to sustain a rally.