Monthly Archives: November 2022

14 November 2022

Posted on November 14, 2022 by simon

• HEADLINES: Soy sags on S American weather; Wheat bounces on Iraq demand; Risk willingness fades ahead of holidays.

• Chicago grain futures are mixed at midday with the soy complex in decline while the grains are trying to hold gains from late last week. Few are willing to place any new risk into the market which means that macroeconomic influences are having an oversized role in today’s price action. The US dollar is strong, stocks are struggling, and crude oil is down $2/barrel. Concern over future US and world raw material demand is hanging on like a bad cold.

• We look for a mixed Chicago close with soy complex under pressure while the grain markets chop. Few want to place on new risk amid headlines on the Ukraine export corridor that will be out in the next few weeks. Guessing what Putin and the Russians will allow has been impossible task in recent months, and few are willing to place any large bets on whether the corridor stays open or closes. The strength in the US wheat market today is based on Iraq making a larger than expected purchase of US HRW wheat in a weekend tender of 200,000 mt under US export financing. The volume of trade remains curtailed with resting orders lacking on either side of the marketplace.

• Chicago brokers report that funds have bought 3,000 contracts of corn and 3,200 contracts of wheat, while selling 3,000 contracts of soybeans. In the products, funds have sold 2,000 contracts of soyoil and 3,000 contracts of meal. Funds are standing down from adding much risk.

• US weekly export inspections for the week ending November 10 were 19.0 million bu of corn, 68.2 million bu of soybeans, and 2.8 million bu of wheat. The wheat exports were one of the smallest in years, while US corn exports post-harvest remain disappointing.

• For their respective crop years to date, the US has exported 194 million bu of corn (down 81 million or 29%), 539 million bu of soybeans (down 71 million or 12%) with US wheat exports at 364 million bu, down 15 million or 3%). The US export pace of corn/soybeans is not keeping pace with USDA annual projections. US wheat export estimates are already at multidecade lows.

• US President Biden and Chinese President Xi meet without much fanfare. The US renewed their pledge on a one China policy and stated that he did not expect that China would invade Taiwan nearby. Whether or not the meeting helped defuse tensions between the 2 nations has yet to be seen. However, we doubt that the meeting will boost US grain or soybean export demand nearby. Brazil will be the origin of choice for China’s soybean/corn purchases in 2023 due to their price competitiveness and advantage that they hold via freight. Estimated Nov 1 Brazilian corn stocks are forecast at a record large 31 million mt.

• The S American midday weather forecast maintains a wet forecast for most of Brazil for the next two weeks with rain of 1.50-4.50”. The moisture will be timely with high temperatures ranging from the 80’s to lower 90’s. The heaviest rain falls across the Northern Brazil with just 0.5-1.50” for RGDS in Southern Brazil. The Argentine forecast is dry with high temperatures in the 80’s and 90’s this week. The Canadian model has weekend rains. Some nice Argentine rain fell on the weekend, but regular rainfall is needed in the weeks ahead. We look for the Argentine area of drought to contract in December, but a few weeks of arid weather conditions are offered into Nov 25.

• December is the wettest month across Brazil and the recent rains have improved soil moisture for a favourable soy crop outlook. And the weekend Argentine rains have caused a speedup in planting. There remains headline risk of the Ukraine export corridor, but with traders cutting risk, few are willing to position on what Russia might or might not do. The latest GFS weather run has a blizzard for W Kansas in the 11–15-day period, but the confidence in accumulations is low.

11 November 2022

Posted on November 11, 2022 by simon

• HEADLINES: Chicago soybeans recapture prior day losses; Volume horrible amid the US holiday; China buys US/Brazilian soybeans.

• Chicago grain futures are higher with soybeans gaining as crude oil prices surge amid cold US weather forecasts and the sharp fall in the value of the US dollar. The falling greenback has offered a peg of support to a host of commodity markets after being ignored by the grain markets on Thursday.

• Soyoil prices are rising in tandem with the $3/barrel gain in crude, which is causing the recovery of January soybean futures above $14.50. Oil/meal spreading has been active as oil share increases to 48%. The approaching summer highs near 50% is the initial upside price target. There is talk of the allowance of refined Canadian canola oil to be used on renewable diesel, but traders argue that such talk is based on soy oil’s recent sharp rise. The new crop soybean/corn ratio has pushed out to 2.30, which is still not high enough to encourage record large US soybean seeding in 2023. It is the relationship between energy/soyoil that will prove to be so important going forward. The net result will be the US’s near total loss of soyoil export demand.

• Chicago brokers report that funds have bought 5,400 contracts of soybeans, 4,800 contracts of corn, and 1,900 contracts of wheat. In the soy products, funds have bought 5,900 contracts of soyoil and 2,200 contracts of soymeal.

• Russia announced that it is planning to place a duty on fertiliser exports when prices rise above $450/mt, to aid their domestic farm industry. Russia accounts for 13% of the world fertiliser production on an annualised basis. Current export prices would cause such taxes to become immediately active with world fertiliser prices rising amid tightening supplies. The tax looks for further raise prices to world farmers.

• Tunisia booked 100,000 mt of wheat and 100,000 mt of durum wheat in a tender that concluded overnight. The price on the soft wheat is estimated at $377.34/mt basis CIF for shipment between December 5 and January 25.

• The Brazilian Real has gained back some of yesterday’s sharp losses (5.28:1 US$) as the market awaits news on President elect cabinet choices and future budget proposal. Lula has a history of excessive Government spending which if continued could cause additional Real weakness. We note that farmgate prices for soybeans jumped sharply today with the rise in Chicago and yesterday’s fall in the Real. Farmers are rewarding the market with sales. And the encouragement of profitability could inspire additional spring seeding. CONAB expanded their 2022/23 Brazilian soybean area estimates yesterday. We estimate spring soybean seeding at 65-70% completed.

• China is rumoured to have bought 5 cargoes of US soybeans (300,000 mt) for January and 5 cargoes of Brazilian for March. There is also talk that China has booked 2 cargoes of Argentine soybeans on basis for May. We estimate that China has covered 85-90% of December and 60-70% of their needs for January. China shifts their buying to Brazil starting in February.

• The midday S American weather forecast maintains a wet forecast for most of Brazil/Argentina for the next 5-6 days with rain totals of 1-3.50”. The moisture will be timely with high temperatures ranging from the 80’s to lower 90’s. The Argentine forecast is drier following Tuesday which must be monitored. A La Niña climate is still hanging around and Argentine soil moisture needs to be replaced following months of drought.

• Open interest has risen a hefty 66,000 contracts in Chicago soyoil futures in the past month with speculators placing bullish bets on renewable diesel. The large December open interest of 94,000 contracts places the market in liquidation risk. Weekend headline risk exists on the Ukraine export corridor amid the Geneva negotiations.

10 November 2022

Posted on November 10, 2022 by simon

• HEADLINES: Charts break down in soybeans/meal; Corn falls to two month low; Argentina to try another soybean US dollar sale in December.

• Chicago grain futures are sharply lower at midday with soymeal/soybean futures leading the decline. The USDA did not provide any bullish input for fund managers that are long on seasonal considerations, and prices are declining today on the improving S American weather forecast and tired demand for US corn/wheat. China will still use breaks to finish covering LH December and FH January import needs, but the export window for US soybeans is narrowing. We see key support as resting at $6.40-6.50 basis December corn and under $14.00 in January soybeans. Wheat will all depend on what Russia decides in terms of keeping the Ukraine export corridor open.

• Chicago brokers estimate that managed money has sold 3,700 contracts of wheat, 9,200 contracts of corn, and 8,700 contracts of soybeans. In the products, funds have sold 7,800 contracts of soymeal and bought 4,000 contracts of soyoil.

• FGIS reported that for the week ending November 3, the US sold 11.8 million bu of wheat, 10.4 million bu of corn, and 29.2 million bu of soybeans. The US corn sales during the month of November was one of the lowest of the past decade. US soymeal sales were 170,200 mt with soyoil sales of just 2,700 mt. US soyoil sales are resting at historical lows due to the massive 19-21 cent premium of US Gulf soyoil to S American offers.

• For their respective crop years to date, the US has sold 459 million bu of wheat (down 29 million or 6%), 580 million bu of corn (down 683 million or 54% from last year), and 1,216 million bu of soybeans (down 5 million or 3%). The US corn export pace is falling woefully behind the USDA annual export target and sharp reductions in US corn exports appear to be assured. Brazilian, Ukraine and Argentine corn are all offered well below the US Gulf through early 2023.

• Rumours abound that Argentina is looking at a second soybean US dollar export program that could start as early as December. The last program allowed farmers to sell soybeans at a discounted Peso rate. The Argentine Central Bank is said to be needing hard currency (US dollars) at an alarming rate which is pushing the Government to consider a second currency subsidy export program. The last soybean dollar export program was highly successful with as many as 65 cargoes of soybeans sold into the world market. China was the big buyer of the Argentine cargoes. And the program could also include corn according to multinational exporters. This would add pressure to US corn exports. An announcement could come as early as the last week of November.

• The midday S American weather forecast maintains a wet forecast for most of Brazil and Argentina for the next 2 weeks with rainfall totals of 1-3.50”. The moisture will be timely with high temperatures ranging from the 80’s to lower 90’s. Brazilian and Argentine farmers are accelerating their spring seeding ahead of the rain. Notice that the northward moving jet stream will allow for improved Argentine rainfall starting this weekend. No lasting bouts of extreme heat are foreseen.

• Chicago values are sharply lower on improved S American weather, concern that Russia will approve another 120 days of export operations of the Ukraine corridor, with Argentina offering round 2 of soybean dollar trade to boost farm sales. The US Government will be closed on Friday for the Veterans Day Holiday, which will limit market participation ahead of the weekend.  The meal/soybean markets have broken down on the charts with the US Thanksgiving Day Holiday just two weeks away. The seasonal harvest rally appears to have prematurely ended with adverse S American weather needed to spur a recovery to the recent highs. We hold a mildly bearish stance.

9 November 2022

Posted on November 9, 2022 by simon

• HEADLINES: USDA data raises US corn/soybean yields slightly; Leaves market to focus on South American weather into December.

• The USDA November Crop Report was slightly bearish with US corn/soybean yields rising slightly and suggesting that US summer row crops will get larger by the final NASS report in January. We maintain that the final 2022 US soybean yield will rise to 50.5 bushels/acre with corn rising to 173.5 bushels/acre. Favourable harvest weather limited yield losses and bumped up 2022 summer row crop yields.

• The yield gains are not sizeable, but important amid tight US corn/soy end stocks. Chicago futures fell post the report, but we doubt that any sharp break occurs until more is known about 2022/23 S American weather/crop sizes.

• WASDE estimated that 2022/23 US corn end stocks grew to 1,182 million bu, up 10 million bu from last month. Shockingly, WASDE left US corn exports unchanged at 2,150 million bu, even with US corn export sales running 50% behind last year. We would argue strongly for future corn export cuts.

• Illinois reported a record corn yield of 215 bushels/acre, up 5 from last month, with Indiana up 4 to 191 bushels/acre, and Iowa up 2 to 202 bushels/acre. It is just remarkable that IL could produce a record corn yield amid late seeding dates and the challenges of 2022 summer weather. The IL corn yield strongly hints that the 2023 US corn yield could easily score a new record above 180 bushels/acre with normality in summer growing conditions.

• USDA held their farmgate corn price at $6.80/bu with a stocks/use ratio of 8.3%. Such stock to use ratio argues that the upside in spot Chicago corn futures is limited to $7.00-7.20 without a dire S American drought.

• WASDE raised their 2022/23 US soybean end stock total by 10% to 220 million bu amid the rise in yield/production. The increase was due to a 0.4 bushels/acre jump in the US soybean yield to 50.2 bushels/acre. Iowa/Indiana soybean yields were raised 1 bushel/acre with Illinois left unchanged at 64 bushels/acre. We anticipate a further gain of 0.3 bushels/acre in the final US soybean yield to 50.5 bushels/acre in January.

• US 2022/23 soybean exports held steady at 2,045 million bu with the Brazilian soybean crop left unchanged at a record large 152 million mt. We would statistically argue that US 2022/23 soybean exports should decline amid the competitive position of S American new crop offers. China’s soy import estimate was left unchanged at 98 million mt with no change the use of US soyoil for biofuel. The WASDE report was viewed as slightly bearish and will not support spot Chicago futures above $14.75-15.00.

• USDA wheat revisions lacked surprises. US wheat end stocks were trimmed a modest 5 million bu amid higher projected feed use. This upward revision to consumption was weighted heavily toward spring and SRW. 2022/23 HRS stocks were lowered million bu to 124 million bu; SRW stocks were lowered 4 million to 87 million bu. HRW stocks were lifted 4 million amid lower projected seed disappearance. Exports were left unchanged at 775 million bu, as recall the US’s share of world trade in crop year 2022/23 will be a record low 10.4%. The season average cash price too was unchanged at $9.20/bu.

• Exporter wheat stocks/use, including Russia and Ukraine, was lowered fractionally, from 13.8% to 13.7%, vs. 15.0% in 2021/22. A 1.5 million mt hike in projected Aussie production was more than offset by a 2 million mt reduction in Argentina and a 450,000 cut to EU crop size.

• Non-Black Sea exporter stocks/use continues to sit at a record low, but whether this drives price discovery hinges upon the details of the coming export corridor extension and Russia’s ability to exceed expectations in finding new markets. Wheat data is viewed as neutral relative to current prices. Geopolitics will continue to dominate.

• US crop production is known. Weak US corn/wheat export demand caps rallies. A shift in global soy trade flows is imminent. All that is left is determining the pace of residual disappearance in the Sep-Nov quarter. The longer-term outlook for Chicago grain futures is becoming bearish amid slowing world export demand and improving weather across Brazil and Argentina.

8 November 2022

Posted on November 8, 2022 by simon

• HEADLINES: Grains slide; Soy adds premium following morning export sales; US$ breaches chart support.

• Chicago ag markets are mixed at midday as soy adds modest premium following a tranche of sales made to China, Mexico, and unknown destinations. The wheat market battles a stagnant European market, aggressive Russian fob offers, which show no sign of ending, against firm Aussie values and probable Plains drought expansion into the winter months. Much more pressure is being placed upon spring rainfall across the principal US HRW Belt. The Dec KC-Chicago wheat spread this morning has reach a newer contract high $1.16/bu.

• Wheat stays tied to geopolitics, namely next week’s G20 meeting, which Ukrainian President Zelensky will take part in, following by the decisions on renewing the Black Sea export corridor on Nov 18. Turkey has proposed extended the deal by a full year, rather than 120-day increments, but the reality of Black Sea grain flows remains in Putin’s hands. Key will be whether Russia is offered improved banking conditions in exchange for grain/fertiliser.

• Macro input leans positive. The US$ is down 0.8% and fallen below initial chart-based support and the Dow up 375 points as financial markets bet on a split US congress and a slowing of fiscal stimulus.

• Yet, international markets have adjusted to currency changes on a near daily basis. Spot Brazilian corn has stagnated at $6.90-7.10/bu. Paris milling wheat futures are down slightly in US$ terms this week. Weakness in the dollar index, on balance, is not aiding the position of US wheat and corn in the world marketplace.

• US exporters sold 414,700 mt of soybeans to China, Mexico and unknown destinations, and 338,600 mt of corn to Mexico, all for 2022/23 delivery. Mexican corn demand is desperately needed as total export commitments sit a worrisome 53% below last year as of late October. Soy export demand remains on track to meet the USDA’s forecast, and changes to the US soy balance sheet on Wednesday hinge entirely on yield adjustments. Corn exports in 2022/23 are fully expected to be lowered 100 million bu.

• Short-term moisture deficits in Argentina will be eased considerably next week and will be erased completely in small but important regions of La Pampa and Cordoba. The sheer intensity of coming Argentine rainfall is a surprise given La Niña’s modest strengthening since mid-October. More than enough rain will fall to satisfy early season moisture demands.

• The S American GFS weather forecast maintains cumulative rainfall in Argentina of 1-3” Nov 11-14, with a pattern of soaking rain to resumes across all but southern Mato Grosso and Rio Grande do Sul in Brazil. If the forecast verifies, Nov 1-20 rainfall in Central Argentina will be 90-125% of normal. The replenishment of soil moisture in Central Brazil has been more sluggish that anticipated but forward guidance lacks threats moving forward. Soy replanting will be needed in far S Brazil following recent frosty temperatures, but this region does not produce safrinha corn, and so planting dates there are less of a concern.

• Seasonal trends are broadly positive but the massive addition of premium in 2021 and 2022 has been based on real fear of shortages. This fear is being diminished by improving S American weather and Russia’s ongoing contribution to world wheat trade.

7 November 2022

Posted on November 7, 2022 by simon

• HEADLINES: Corn/soybeans sag on slowing US export demand; Wheat rises on HRW wheat conditions and spread unwinding.

• Chicago futures are mixed at midday with wheat futures higher while corn/soybean futures hang in the red. The market appears to be waiting for the USDA Baseline report later today, the US midterm election on Tuesday, the USDA November Crop report on Wednesday, and the US Labor Department report on inflation (CPI) on Thursday. It is a large amount of data to digest and there will be market reactions that follow. Traders are not willing to extend their market risk amid all the headlines that are ahead.

• Chicago brokers estimate that money managers have sold 2,300 contracts of corn and 1,900 contracts of soybeans, while buying 2,400 contracts of wheat. In soy products, funds have sold 3,400 contracts of soymeal while buying 1,200 contracts of soyoil.

• US weekly export inspections were 9.1 million bu of corn and 6.6 million bu of wheat.  Both were well under the weekly average needed to reach the USDA annual export estimates. US soybean exports were again solid at 95.2 million bu with China taking 66 million bu or 70% of the total.

• For their respective crop years to date, the US has exported just 175 million bu of corn (down 66 million or 27% vs last year), 361 million bu of wheat (down just 3 million or 1%), and 471 million bu of soybeans (down 51 million or 10%). The US export pace of their combined respected crop years is down 131 million bu or 11%. This is not the way that the US wanted to start the year’s exports.

• The USDA will release its 10 year Baseline report following the Chicago close. The report will offer future forecasts for US demand, supplies and stocks into 2032. We note that the report uses old balance sheets as a starting point (October). But the report will be interesting in terms of measuring renewable diesel demand in future years. Also, will WASDE continue to use trendline corn yields which are 6-7 bushels/acre above last year’s record yield. We see the report as an important starting point to gauge 2023/24 US corn, soybean and wheat balance sheets.

• Traders are awaiting the results of the Egyptian GASC tender. The lowest fob wheat offer for a panamax size vessel was $356.45/mt for Russian wheat. The cheapest CIF offer was for 40,000 mt of Russian wheat at $369.95/mt. We have raised the estimate of costings to $19-20/mt as rising interest rates has made the opening of an LC more expensive. The price ex Novo works back to around $320/mt fob.

• US wheat condition ratings are expected to stay depressed amid the acute drought which batters W KS. Wheat prices are rising on world demand and the lack of rain for the far Western US Plains.

• The S American midday GFS weather forecast is like the overnight run with cool/dry weather for most of the Brazilian and Argentine crop areas for another 3-4 days. Showers and warming temperatures are featured thereafter which will aid crops. Even Argentina has a chance of 1-2” of rain into mid-November which should quicken their spring seeding pace. The extended range forecast offers needed rain for Southern Brazil and most of Central Argentina. Following a few more days of dryness, improving rains should be witnessed.

• Cash soymeal values are weak amid increasing domestic supplies and a slowing US export profile out of the Gulf. And US soyoil export demand is non-existent amid prices that are 19-21 cents premium to S American offers.

4 November 2022

Posted on November 5, 2022 by simon

• Soybeans follow energy markets higher: Soybeans rallied 25 cents on Friday, with January marking the highest weekly close in 10 weeks. Support came from a strong rally in crude oil prices that lifted December soybean oil to the highest price since early June, a fresh contract high weekly close.

• The Commitment of Traders report showed that funds bought another 26,000 soybean contracts in the week ending November 1. The net long position rose to a 6-week high of just over 101,000 contracts. In soybean meal, funds bought nearly 7,400 contracts for a net long of 93,400 contracts, and in soybean oil, funds bought nearly 4,600 contracts, taking the net long to just over 100,000 contracts, the most since March 2021.

• The GFS weather model has recently proven to be the most accurate for S American weather. The latest forecast projects 1-2” of rain for Argentina and much of Southern Brazil. This will aid growing crops in Brazil and improve conditions for planting in Argentina.

• Without a S American crop problem, the soybean outlook is bearish as the US export pace falls further behind what is needed to meet the USDA forecast. US exports could fall to 1,950 million bu if the pace does not soon quicken, which should top January soybeans at $14.77-14.90. A key USDA report is ahead.

• Chicago corn ends firm on soaring energy prices; market to stay range bound amid return of Ukrainian supply: Dec Chicago corn ended slightly higher, with equilibrium still pegged at $6.75-6.90. In the very near-term the bulls need a downward revision to US yield next week while the bears need a lasting period of Argentine rainfall and a relaxation in energy markets. A neutral trend remains probable into mid-winter.

• Corn at $6.80 is viewed as fairly priced when compared to crude at $85-95. Cash ethanol prices this week have followed crude/gasoline higher. Ethanol in W IA this evening is quoted at $2.51/gallon, vs. $2.36 last week, with spot production margins in the cash market rising amid stagnant corn values. We reiterate that Sep-Dec disappearance is heavily weighted towards domestic consumption, which places greater value on the performance of energy markets into early winter.

• The lack current and future export demand leans bearish Feb onward. Confirmed S American crop loss will be needed to sustain spot Chicago above $6.80 in late winter and spring. Coming Argentine rain boosts soil moisture, with second crop planting to begin in the opening week of December.

• US wheat recovers: EU market ends weak; focus shifts to corridor renewal in mid-November: US wheat futures ended slightly higher on Friday amid a plunge in the US$ and otherwise supportive macro markets. Wheat-specific news is lacking. A neutral trend remains probable as the market reconciles this season’s collapse in Argentine output against very aggressive Russian fob offers, which have been unmoved at $315-325/mt since early October. This compares to Gulf HRW at $425/mt.

• Price action this week demonstrates just how sensitive the market remains to potential changes in Black Sea grain flows. Russia’s decision to resume participation in the export corridor Tuesday was done separately from whether it opts to extend the deal for another 120 days on Nov 18. Odds are high that the deal is renewed but geopolitics is unforecastable. Managed funds in Chicago on Tuesday were short a net 37,000 contracts, vs. 36,000 the previous week, and we estimate fund position Friday at 40-42,000 contracts. There is a risk of coverage based on Black Sea headlines over next weeks.

• Managing risk will stay difficult. Declining world trade is a concern. US winter wheat crop ratings will stay historically low, but autumn conditions correlate poorly with final yields.

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

Weekend summary 4 November 2022

3 November 2022

Posted on November 3, 2022 by simon

• HEADLINES: Wheat recovers amid lingering uncertainty over export corridor extension; Row crops falter on unexciting export demand.

• Row crop futures are weak but off session lows at midday, while wheat in the US and Paris sit near unchanged. Export sales were ho-hum across the board, but Russia reiterating its decision to resume participation in the export corridor does not mean the corridor will be extended beyond Nov 18 lends support. Daily wheat price discovery hinges almost fully upon Russia’s decision over the export corridor and we would strongly caution against chasing daily moves.

• The US dollar index is up 0.7%. Crude is down $1.20/barrel at $88.80. The Dow this morning, too, is off session lows but still down 80 points.

• US corn export sales through the week ending Oct 27 totalled 15 million bu, vs. 10 million the previous week but still some 20 million below the pace needed to meet the USDA’s target.

• The weak pace of export sales and shipments continues to reflect US corn’s non-competitive position in the world market, which remains intact into Dec amid elevated Gulf basis levels. Additionally, we note that spot Brazilian basis has been unmoved in recent weeks. Brazilian supplies will be tightening Jan onward but supplies there are abundant today. There is also talk of China buying decent tonnages of Brazilian origin corn, with delivery split between winter and spring.

• US soybean sales in the week ending Oct 27 were 31 million bu, vs 38 million the previous week and right at the average needed to meet USDA’s forecast. Meal sales totalled 122,000 mt, the lowest of the young crop year as premiums to S American origin have widened to $20-25/mt, vs. $5-15/mt in mid-October. Wheat sales totalled 13 million bu, vs. 20 million the previous week.

• The USDA is fully expected to trim the 2022/23 US corn export forecast by 100 million bu in next week’s November WASDE. Soybean and wheat exports will be left untouched. Recall US wheat exports are already projected at the lowest level since 1969/70. Soybean export demand is fine but sales of 30+ million bu are needed into late winter, and this will prove difficult without weather threats in Brazil in Dec-Jan and associated increase on quoted fob basis levels there.

• This week’s drought monitor showed another round of expansion/intensification in KS and across the Dakotas. This along with the lack of projected rainfall across the W Plains bodes poorly for winter wheat crop condition improvement.

• Despite coming rainfall across the far E Plains and Upper Midwest, lasting/material improvement in Mississippi River water levels is unlikely. A modest boost in gauge readings is forecast next Tues-Thurs across the central Mississippi river, but not elsewhere, and river level contraction resumes Nov 11-12.

• The midday S American GFS weather forecast is much wetter across Western Argentina and key areas of Cordoba in the 6-10 day period. Cumulative rainfall of 3-4” will impact this region Nov 10-13, and while confidence in forecast details is low (the GFS is likely overdone) there is broad agreement that needed rain will expand into Argentina late next week. Mato Grosso in central Brazil stays arid. Normal showers return to South-Centre Brazil beyond the next 6-7 days.

• Markets will struggle to see beyond the week ahead amid outsized geopolitical influence and the uncertain timing of La Niña’s end this winter. A lasting change in direction is unlikely prior to late Dec/Jan when S American yield potential is better known.

2 November 2022

Posted on November 2, 2022 by simon

• HEADLINES: Wheat drops to fill gap left on Sunday; Vessel insurance coverage resumes in Black Sea; Soy recovers on continued Brazilian unrest.

• Wheat futures in the US and Europe have extended overnight losses following confirmation that large insurance companies have resumed writing coverage for Black Sea-bound vessels. Additionally, Russia has hinted it will make its decision on extending the export corridor, or not, by Nov 18, a few days before the initial agreement expires. Russia’s resuming its participation in the corridor today raises the odds that the deal will be extended, and so the market once again assumes USDA’s Ukrainian corn export forecast (15.5 million mt) is too low and that Russia may be able to export 4.5-5.0 million mt of wheat in Nov and Jan. This perception will be rather fluid, but risk premium is being extracted this morning.

• However, Brazilian issues remain front and centre. Roads leading to the port of Paranagua remain blockaded, which along with firm global minor oilseed markets and uncertainty over mid-Nov rainfall in Brazil and Argentina has allowed Chicago soy and soyoil to reverse overnight weakness.

• Interior US soy basis has been unmoved on the recent advance, with bids in Central IL still perched at $0.20-0.25 over for Nov-Jan delivery. We reiterate that it is difficult to know just how tight near-term US corn and soy stocks will be until Sep-Nov disappearance is published in mid-Jan. Physical soybean exports remains strong; exports account for a rather low portion of physical corn demand in the first quarter of the marketing year. NASS’s yield adjustments next Wednesday are important.

• Weekly EIA data leans supportive corn and crude but slightly bearish of ethanol. US ethanol production through the week ending Oct 28 totalled 306 million gallons, up 2 million from the previous week and a new season high. However, US motor gasoline disappearance last week was 8.7 million barrels per day, down 9% from the same week a year ago. Ethanol production in recent weeks has been 11.6-12.0% of gasoline demand, which implies the blend wall is imminent. It is tough to be bullish of corn grind without a quick and substantial increase in total miles driven, in the US and elsewhere.

• Spot crude at midday is up $1.80/barrel at $90.10. Gasoline and total crude stocks remain incredibly tight despite demand contraction. Total crude stocks on Friday at 837 million barrels were down 20% year on year. Gasoline stocks were down 4%.

• China this morning published the complete list of approved Brazilian corn exporters, which gives the green light to begin sourcing Brazilian origin corn. That this process is moving forward is not a surprise to the market, and we doubt large scale Chinese purchases of Brazilian corn occur prior to next year’s safrinha harvest. But this is coupled with weak Chinese feed import margins that suggests China imports corn based on price, rather than politics, moving forward.

• The S American GFS weather forecast is wetter in Cordoba Argentina next week but is otherwise consistent with the morning run. Dryness blankets the whole of S America into Nov 10. A more progressive pattern of rainfall returns to Mato Grosso do Sul, Goias and Minas Gerais in C Brazil thereafter, though Mato Grosso (25% of soy output) is left arid throughout the next two weeks. Rains sneak into Western Argentine crop areas Nov 12-13, but it is important that this precipitation is pulled into the nearby period in the coming days. Argentina needs rain. Brazilian weather is non-threatening for now, but near-daily showers will be desired in all areas during the second half of November.

• Dec Chicago wheat has filled a gap left on Sunday night, while Dec corn is again at its previous equilibrium price of $6.80-6.90. Wheat outlooks will be challenged amid Putin’s outsized influence on daily price discovery, while broadly neutral corn/soy trends remain projected into mid-winter.

1 November 2022

Posted on November 1, 2022 by simon

• HEADLINES: Grains recover; Brazilian unrest fuels soy rally: Black Sea uncertainty continues.

• Chicago ag markets are again firm as wheat and corn recover despite relative strength in the US$ and as equity markets stay negative. Soybeans continue to lead the recent ascent amid unrest in Brazil, including the blockade of the primary road leading to the port of Paranagua, additional strength in the Real, and as recent cold temperatures in Southern Brazil and the return of prolonged dryness in Argentina at least warrant attention.

• ENSO forecasts continue to feature a warmer equatorial Pacific by mid-winter, but La Niña strengthens slightly in the weeks ahead. The beginning of Argentina’s soybean seeding season is imminent and it is critical that the better rain chances included in 8-14 forecasts verify.

• Argentina is likely to announce that exporters can reschedule previous wheat commitments at no cost, which disrupts/slows exports and which underscores the intensity of current drought conditions there. Updated data indicates subsoil moisture in Argentina remains limited following recent rainfall.

• There are reports of a call between Turkish and Russian officials that yielded nothing with respect to grain export execution in the Black Sea, with the UN reporting that Turkey and Ukraine have agreed not to plan vessel movement today. Over time, the market will have access to exact Black Sea export tonnages on a monthly basis, but debate will go on with respect to Ukraine’s ability to adequately ship corn from the interior to logistical hubs. Infrastructure damage is noted, and there is broad consensus that corn will be left to dry in the field to save costs. War in Ukraine remains disruptive.

• Paris milling wheat futures are up €3.00/mt at midday. Spot WTI crude is up $1.65 at $88.20 ahead of Wednesday’s EIA report that will again feature a decline in total crude and motor gasoline stocks. The Brazilian Real has rallied another 1% this morning, which places Brazil’s spot corn future at $7.17/bu, vs. $7.08 on Monday.

• The midday GFS weather forecast is further eastward with Plains rainfall this weekend. Totals of 1-2” are offered to far E OK/KS, but GFS output places the greatest accumulation across AR, MO, IA and WI.

• The midday GFS weather forecast in S America is wetter in Northern Argentina, including important regions of Cordoba, in the 10–15-day period. There has been general agreement between the EU and GFS models that better rain chances lie ahead of Argentina at mid-month, but confidence in forecast details beyond the next 8-10 days is low, and forecast are at odds regarding the intensity of Argentine rainfall Nov 10-14. Otherwise, Argentine dryness lingers in the near term. Dryness blankets all of Brazil into Nov 9-10, with a more progressive pattern of rainfall projected thereafter.

• The soy complex has found bullish vigour amid a strengthening Brazilian Real, uncertainty over S American politics nearby and as NASS’s critical Nov crop report looms. Wheat and corn will be tied to the market’s perception over Black Sea grain flows. Rallies will continue to be rewarded as it is difficult to identify the catalyst needed for sustained rallies outside of S American yield loss.