Monthly Archives: November 2023

30 November 2023

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  • HEADLINES: Weekly export sales surprise in US holiday week; China buys US wheat/corn; Midday GFS weather forecast like prior runs with the rains backloaded.
  • Chicago ag markets are mixed at midday with soybean/soybeans lower while corn/wheat push higher. The corn market finished its December liquidation and has finally awoken to the fact that US corn values are competitive in the world market due to large export purchases over the US Thanksgiving Day holiday. 2023/24 world feedgrain trade is record large helped by China’s massive imports of Brazilian corn in recent months.
  • Chicago soymeal values are struggling on slowing US export demand due to historically high prices (new weekly sales of just 64,600 mt) and the competitive nature of Brazilian old crop meal fob offers. Cash soymeal is bid at $18/ton over and offered at $20 over on the Illinois rail. This is underpinning Dec soymeal futures and firming calendar spreads with no soymeal registered against December delivery.
  • There are only 62 contracts of soyoil registered for Chicago delivery, but with cash soyoil at 3-3.5 cents over on the Illinois rail, we doubt that deliveries will be large. The December/January soyoil spreads have been wild with values soaring late last week and then collapsing in recent days with December soyoil trading at a discount.
  • The USDA reported 134,000 mt of US soybeans that were sold to China which helps in confirming cash connected rumours of demand in recent days. We hear that China has booked another cargo of US soybeans for February this morning along with 2 cargoes of Brazilian soybeans for March.
  • The FAS/USDA weekly export sales report showed better than expected totals for US corn, sorghum, wheat, and soybeans. The US sold 75.9 million bu of corn, 69.6 million bu of soybeans, 22.9 million bu of wheat, and 7.3 million bu of sorghum. USDA reported that China booked just under 200,000 mt of US wheat with their crop year commitment rising to 1.0 million mt. China is on pace to secure 1.5-1.8 million mt of US wheat in 2023/24 which would raise US annual export commitments by 25 million bu. The US has sold 466 million bu of wheat (down 28 million or 6%), 963 Mil of corn (up 241 million or 33%), and 1,137 million bu of soybeans (down 225 million or 16%). The US soybean export sales pace was down over 300 million in late October and has gained 100 million bu in the past 30 days. China booked 2 cargoes of US corn last week with 725,000 mt sold to unknown which could be China, it is something that is being discussed.
  • The world freight market is on fire with rates soaring in tightening vessel supplies and strong line-ups for a host of commodities. A soaring freight market is often a harbinger of a strong world economy, but a portion of the gain is likely related to the low water levels and high cost in going through the Panama Canal. Some vessels are going south around the horn of S America which is likely taking freight tonnage off the market. A sinking world demand profile does not add up when world trade appears to be so strong. Most freight brokers a forecasting further gain into Q1 2024.
  • Chicago brokers estimate that funds have bought 11-12,000 contracts of corn and 6,700 contracts of wheat, while selling 2,200 contracts of soybeans. In the products, funds have sold 5,400 contracts of soymeal and 1,500 contracts of soyoil.
  • The midday GFS weather forecast is consistent with prior runs with ongoing dry weather for another 3-4 days. Then totals of 1-2” are forecast across N Brazil next week with drier weather in the 7–12-day period. The extended range model offers near normal rain, but our confidence this far out stays low due to a lack of verification in recent weeks. A trend of above normal temperatures and below normal rainfall persists across N Brazil.
  • Unwanted rainfall of 3-5” impacts RGDS and Parana in S Brazil. Argentine weather is favourable with additional rain into Monday. Dry/mild conditions follow into Dec 9 which will aid the spring seeding push.
  • The Brazilian weather pattern is like recent runs and abnormal in our view.
  • OPEC announced Q1 2024 production cuts that were largely expected, and crude oil futures fell $3.00 on profit taking. Market volatility is ramping up in a host of commodities including energies, ags, and livestock on managed money flows. US weekly grain export sales were surprising over Thanksgiving which underscores that price is buying demand. And N Brazilian December weather is of the utmost importance following the record dry start of the growing season. The grains are forming seasonal lows. The talk that China has secured 3.0 million mt of US sorghum and is again buying corn and wheat must be paid attention to.

29 November 2023

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  • HEADLINES: Chicago steady/higher at midday; Crude and soyoil reverse morning losses; GFS and EU weather models stay at odds over Brazilian rainfall.
  • Chicago ag markets are steady to higher, with KC wheat pacing the recovery on continued short covering. Soyoil has followed crude in reversing early weakness, despite a further build in US crude stocks. Renewable diesel production, stocks, and implied disappearance for the month of September will be published Thursday. And S America’s corn market continues its task of funnelling demand away from Brazil and to other origins, with US fob corn the world’s most reliable supply.
  • Brazilian corn futures are up another 2-6 cents following Tuesday’s surge, March corn in Brazil sits at $6.30/bu, and we note the Brazilian market has been a leader of world values since late summer 2020. Spot corn in Brazil was the first to embark on a lasting rally in August 2020 and was the first to collapse in spring 2023. Brazilian corn’s premium to Chicago has widened to $1.60/bu, basis March. Key is whether Brazilian market strength stays in place despite a deflated US market. Work suggests US corn export potential is rising.
  • EIA ethanol data leans a bit bearish. US gasoline use in the week ending Nov 24 totalled 8.21 million barrels per day vs. 8.48 million the prior week and down 1% from the same week in 2022. Commercial US crude stocks last Friday totalled 449.7 million barrels, vs. 448.1 million the previous week and up 7% from last year. Even the US’s strategic crude reserve was up 400,000 barrels week on week.
  • Ethanol production was 297 million barrels, down 3 million from the previous week and a 7-week low. Notice that a pretty clear seasonal jump occurs just after Thanksgiving, but weekly ethanol grind since mid-Nov has been rather dull marketwise. Margins remain highly profitable, but the market is balanced today.
  • March Paris milling at midday is up €3.25/mt as the Baltic/German cash markets fell to reach parity with Russian fob offers. EU and Russian cash wheat markets were at level money in August, only for Russian values to drop quickly. We maintain that stable/higher Russian offers in the next few weeks confirms a bottom in wheat. The US and EU do need improved export demand. Key is how importers respond to weather/logistical challenges in the Black Sea and reduced high quality milling wheat availability in Australia.
  • The midday GFS weather forecast is consistent with morning output in allowing better rain chances to expand into Central Brazil beginning Dec 4-5. Totals of 1-2” are forecast to blanket much of the driest regions of Mato Grosso and Goias, though totals above 2” will be highly scattered/regional in nature. A moderation of temperatures in Brazil occurs this weekend. Yet more unwanted rainfall of 3-5” impacts RGDS and Parana in S Brazil. Argentine weather stays favourable, with soaking rainfall due in the next 48 hours. Dry/mild conditions follow into Dec 9.
  • We would note the GFS forecast remains much drier than its EU counterpart in C and N Brazil next week and implies only modest soil moisture boosts across the northern third of Brazil’s soy belt. Rain gauges matter most Dec 4-6.
  • The short side of global corn and wheat markets has become overly crowded, at a time of rising Russian wheat and Brazilian corn prices and as S American corn production is highly uncertain. Soybeans and oil have the best fundamental story amid strong crush margins and expanding biofuel production. Potential Brazilian soy yield loss adds to upside potential in Dec-Jan.

28 November 2023

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  • HEADLINES: Chicago soy, wheat recover; Corn preps for Dec delivery period.
  • Corn futures continue to lag, but Chicago soybean/wheat futures are higher at midday. Soybeans/soyoil continue to pace the rally on concerning Brazilian weather and declining crop prospects. Brazilian ag consultant MB Agro estimated the Brazilian soybean crop at 155 million mt, down 10 million from an early forecast due to the drought across Northern Brazil. The firm also cut Brazil’s 2024 soybean export forecast to 96 million mt from just over 100 million previously. Many traders argue that Argentina will make up for any Brazilian soy crop losses in 2024 and in crush and soy product exports that will be the case. However, it is Brazilian crop size and exports that directly impacts US soybean exports, which has a more direct impact on Chicago soybean futures than crush margins or soy product pricing.
  • Liquidation is ongoing in December grain contracts in Chicago as traders get positions down before first notice day. There are over 2,950 grain certificates registered and 4 contracts of corn that could be delivered as of this morning. It is expected that corn registrations could increase before Thursday.
  • We note that the market needs to get beyond first notice day before any sustained recovery can occur.
  • The USDA announced the sale of 123,300 mt of US soybeans to an unknown destination which helps confirm that China booked 3-5 soybeans yesterday. We believe that China is asking for February US soybean offers this morning, but no new purchases can be confirmed.
  • Chicago brokers report that managed money has sold 2,500 contracts of wheat and 4,600 contracts of corn, while buying 2,900 contracts of soybeans. In the products, funds have bought 1,500 contracts of soymeal and 2,100 contracts of soyoil.
  • CONAB late Monday pegged Brazilian soy planting at 75% complete, vs. 86% a year ago in late November. The drought across Northern Brazil is worsening with 13.8% of the crop flowering, and 3.1% of the crop in the pod formation stage. Understandably, the 2023/24 Northern Brazilian soy crop is now being pushed by abnormal warmth. Producers in the south are still trying to seed with additional rain further slowing the process. Another 1.00” of rain fell across Passo Fundo in Rio Grande do Sul today which pushed the total since September 1 near 60.0”. RGDS soy planting is only 37% complete, vs. 65% a year ago. We also note Brazil’s first (summer) corn crop is only 55% seeded, vs. 69% last year. Major delays persist in Bahia and Goias.
  • The midday GFS weather forecast is like the overnight forecast across Northern Brazil with limited rainfall for at least the next 5 days. The model offers a better chance of rain on Monday with increased afternoon thunderstorms. Rain accumulations increase to 0.25-1.50 from Monday through Wednesday of next week. High temperatures range from the upper 80’s to the lower 100’s which is 4-9 degrees warmer than seasonal averages.
  • Southern Brazilian weather stays wet with rains of 2.5-6.00” that fall every 2-3 days. The overall S American pattern stays the same. Better Brazilian rain needs to be pulled forward in the forecast as forward model guidance in Northern Brazil has been too wet thus far in the growing season.
  • Record domestic US soybean demand, expanding renewable diesel production and Argentina’s absence from the global meal market until spring 2024 lean supportive of global oilseed markets. Possible Brazilian soy crop loss adds to upside potential in Q1 2024. Corn and wheat lack a compelling story today, but strength in the Russian wheat market is important. US corn is the world’s cheapest, whilst profitable domestic ethanol production margins remain intact.

27 November 2023

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  • HEADLINES: Chicago corn and wheat push to new lows on fund selling prior to first notice day against December futures; China buys 3-5 cargoes of US soybeans for February.
  • Chicago futures are weaker at midday with corn/wheat futures pushing to new contract lows. Fresh news is lacking for the drop, but the breaking of contract lows in the grains ahead of first notice day triggered resting sell stops. Wheat and corn futures sit at multiyear lows. The US wheat drop followed the fall in Paris wheat futures last week. The last time that Chicago wheat was this low was August of 2020 during the height of the pandemic.
  • Traders are discussing large deliveries against December Chicago wheat and corn, which has pushed out calendar spreads and pressured flat prices. Traders remember the large Chicago wheat deliveries that circulated during the September delivery period.
  • Soybeans/soymeal futures are lower on the prospect of improving Northern Brazilian weather amid the prospect of better rains after December 4. Light showers have been occurring, but the crop conditions are in decline across Northern Brazil as measured by the NVDI indexes. Soyoil is rallying on cash strength and the ongoing search for new renewable diesel feedstock as new plants prepare to come into operation in early 2024.
  • There were no new daily sales announcements, but China is said to have purchased another 3-5 cargoes of US soybeans on the morning break off the Gulf/PNW.
  • The USDA reported that in the week ending November 23, the US exported 16.0 million bu of corn, 53.0 million bu of soybeans, and 10.2 million bu of wheat. The wheat and corn inspections were below trade expectations while soybeans were in line. In their respective crop years to date, the US has exported 286.1 million bu of corn (up 57 million or 20%), 614.3 million bu of soybeans (down 78 million or 11%), and 298.5 million bu of wheat (down 90 million or 23%). US wheat exports are struggling even though the sales pace has improved.
  • Chicago brokers report that managed money has sold 8,500 contracts of wheat, 8,200 contracts of corn, and 2,300 contracts of soybeans. In the products, funds are flat in soymeal and have bought 2,300 contracts of oil.
  • Newswires are confirming cash talk that China delayed a few cargoes of French wheat from December into March. The reason for the delays is not known, but the Chinese wheat import program slowdown has raised European eyebrows that China may wish to delay other shipments. China has a massive corn import program underway from Brazil which along with an active late season soybean program may be delaying wheat imports. China has pledged to secure 9.2 million mt of wheat annually as they became WTO members back in 2001. The US challenged and won a WTO case against China and won, and since China has become the world’s largest wheat importer of over 10 million mt.
  • The midday GFS weather forecast is drier across Northern Brazil with limited rainfall for at least the next 6 days. There will be spotty afternoon thunder storms, but organized and meaningful rain will be lacking. High temperatures range from the upper 80’s to the lower 100’s which is 4-9 degrees warmer than seasonal averages.
  • Better rain is forecast to fall after December 4 across N Brazil, but heavier totals are pushed back into the final 2 days of the 10-day forecast. N Brazilian soybeans require improved rainfall totals as the bloom period starts.
  • Southern Brazilian weather stays wet with rains of 2.5-6.00” that fall every 2-3 days. The overall S American pattern stays the same, better Brazilian rain needs to be pulled forward in the forecast.
  • The CFTC CoT report will be released this afternoon as the funds pile into a larger net short grain position on the new contract lows in corn/wheat. The break to new lows has the fund algos sell, it is almost that simple. Farmer selling from the US, Brazil or Argentina is non-existent. First notice day against December futures looms which is forcing additional liquidation. US and world soy stocks are tightening, corn will follow but the bottoming process takes time.

22 November 2023

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  • HEADLINES: Soybean/corn spread unwinding Chicago holiday feature; OPEC+ delays quarterly meeting on supply cut disputes; GFS weather forecast wetter across southern third of Brazil.
  • Chicago noon ag futures are mixed with the grains higher and soybeans lower. The volume of trade is holiday reduced with the big news being that the OPEC+ quarterly meeting that was planned for the weekend was postponed until November 30 as delegates could not decide on proposed production cuts. Saudi Arabia is said to be dissatisfied with the proposed cuts of other OPEC members. Crude oil is down 19% from its September peak and OPEC+ is looking to raise values through tightening supply.
  • CME crude oil futures fell sharply on the news with December down $3.80/barrel at $74.08 as OPEC+ may not be able to hold onto prior production cuts or make new ones to lift energy valuations. The weakness in crude oil weighed on soyoil due to it being a bioenergy crop, which in turn pressured soybeans. We look for a mixed Chicago close into the US holiday with the market to reopen on Friday morning.
  • USDA/FAS announced the sale of 110,000 mt of US SRW wheat to China, and 128,000 mt of US corn to an unknown destination. Some US exporters argue that the unknown corn sale was to China, but we cannot confirm. China has been a massive importer of Brazilian corn to date. No US soybean sales were announced, but these sales can show up on Friday under the 48-hour business day rule. We understand that China’s Sinograin purchased 4-6 cargoes of US soybeans off the PWN for January shipment yesterday.
  • US exporters report that another 2-4 cargoes of US SRW wheat were sold to China including the sale that was announced this morning. US SRW wheat prices fell back to levels that sparked Chinese demand back in early October.
  • Brazil’s private consultancy Agroconsult estimated the 2023/24 Brazilian soybean crop at 161.7 million mt, which is up 3.7 million from USDA’s 158.0 million mt crop of last year. Agroconsult estimated that Brazilian farmers will seed 2.9% more soybeans than last year. However, soybean yield potential was cut in Mato Grosso due to irregular rainfall and record heat. Brazil’s first corn crop was forecast at 28.7 million mt and the winter corn crop at 100 million mt for a total of 128.7 million. The industry is moving Brazilian corn and soybean production lower, it is just a question of degree.
  • Chicago brokers estimate that managed money has bought 2,700 contracts of wheat and 3,100 contracts of corn while selling 2,100 contracts of soybeans. In the products, funds have sold 2,600 soyoil and bought 1,900 contracts of soymeal.
  • Weekly US ethanol production was 301 million gallons which was down 2% from last year. US ethanol stocks rose by 29 million gallons to 909 million gallons which was down 5% from last year.
  • There is talk that a Cargill soy crush plant in the Upper Midwest was experiencing mechanical difficulties which caused them to repurchase soymeal in the cash market.  This rallied the December/March soymeal spread.
  • The midday GFS weather forecast is similar to the overnight run across Northern Brazil and wetter across Southern Brazil. The prior pattern of a high-pressure ridge across N Brazil and a low-pressure trough across S Brazil will return by the weekend with the mean position of the ridge being further east. Any extreme heat will reside across NE Brazil, and it will push westward with time. Rainfall totals keep increasing across the southern third of Brazil which is worrisome (flooding) amid soils that are already saturated. 12-day rainfall totals equate to 6-9.00” across Parana and Santa Caterina where early December flooding could become widespread. Near normal rainfall drops across Argentina for spring seeding progress.
  • It is a slow pre-holiday trade with traders unwinding long soy/corn spreads. Soyoil is lower on the sharp fall in crude oil while China booked more US SRW wheat. China has now purchased 1.0 million mt of US wheat, with a total of 1.5-1.8 million estimated for the crop year. We would argue that the WASDE 2023/24 US wheat export estimate is 25 million bu too low. The US weekly export sales report will be released on Friday before the Chicago opening with corn/soybean sales building. December Brazilian weather is the key for future Chicago values. This week’s rainfall to date has been disappointing in its coverage. The European model has been far too wet, and the GFS model is favoured going forward. Crop stress is ongoing across N Brazil and further cuts in yield/production are expected.

21 November 2023

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  • HEADLINES: Chicago soyoil breaks out of key chart pattern; China books additional US soybeans: GFS midday weather forecast wetter for Southern Brazil.
  • Chicago grain futures are higher at midday with corn, wheat and soybean gaining on chart-based buying amid economic stability worry across Argentina and falling crop ideas in Brazil. Declining Brazilian corn/soy crop estimates underpins Chicago on breaks. And December soyoil futures have pushed above the neckline of a head-and-shoulders bottom which sets a target of $58.40. The 50-day moving average crosses at $54.49 December soyoil which is the next upside price target. The oil share spread appears to have formed a lasting bottom at 35% with the next upside price target being 39%. Corn appears to be following the soybean rally with wheat following news out of the Black Sea.
  • We look for a mixed Chicago close with an inflow of new fund money noted on the opening. Traders wonder if additional days of inflows are ahead.
  • Chicago brokers estimate that funds have bought 2,000 contracts of wheat, 3,000 contracts of corn and 4,100 contracts of soybeans. In the products, managed money has purchased 3,200 contracts of soyoil and sold 2,500 contracts of soymeal. The soymeal spreads weakened on the rally with traders fearing another week of tepid US soymeal export sales.
  • There are rumours that Ukraine’s Odessa port endured infrastructure damage in a drone/missile attack late day from Russia. The Russians continue to target Ukraine’s grain export ability with European farmers placing blockages on the entry of Ukraine grain into eastern border countries. The struggles of Ukraine grain exports are weighing on the margins of interior Ukraine farmers which will likely cut their use of inputs or planted acres next spring. No Ukraine farmer planned for the war to enter its third year in late February. World wheat prices rallied on the news of a Russian attack, but details are awaited.
  • China’s state buyer Sinograin is rumoured to have purchased 5-8 cargoes of US soybeans off the PNW for Jan/February. A few of the cargoes traded late yesterday, but a daily sales announcement is expected from USDA in the coming days. There is talk that China is also asking for US SRW wheat offers, no sales can be confirmed.
  • Private Brazilian corn/soybean crop estimates are in decline. Brazilian farmers are struggling with drought across the north and flooding across the south. Their cropping options are not what they had hoped for. Mato Grosso/Goias farmers have the option of reseeding soy fields to get a better stand or planting full season cotton. However, if sparsely populated soybean fields are torn up and replanted, the opportunity to plant a second crop of corn is lost. In Southern Brazil, the window is open to seed soybeans into early January, but the harvest is pushed backwards into late April or May. The point is that Brazil will no longer harvest a record large soy crop and winter corn acres could be cut by an amount that drops production by 6-8 million mt.
  • The midday GFS weather forecast is similar to the overnight forecast across Northern Brazil and wetter across Southern Brazil. The prior weather pattern of a high-pressure ridge across N Brazil and a low-pressure trough across S Brazil is returning. This will leave N Brazil wanting more rain while S Brazil struggles to seed spring crops amid flooding rains. The best chance for N Brazilian rain will be from through Saturday before drier/warmer weather returns. Unfortunately, S Brazil just stays wet with the 11–15-day period exceptionally wet with another 3-6.00” of rain. Southern Brazil is becoming as concerning as Northern Brazil amid all the rain and impact on crops from Parana south.
  • Funds are sizeable shorts in corn/wheat but there are no other notable sellers. Farmers in the US, Brazil and Argentina will not sell corn/wheat in a down market. And US farmers have sold a large percentage of their crop on the rally. We remain bullish of soyoil and soybeans, while the grain markets forge seasonal lows. The US weekly export sales report will be released Friday morning before the Chicago opening which could produce liquidation of long soymeal futures.

20 November 2023

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  • HEADLINES: Mexico buys more US corn; Timing of Milei policy enactments unknown, farmers halt cash sales; GFS midday weather forecast drier N Brazil and wetter S Brazil.
  • Chicago is mixed with intraday surges of volume at midday. The grain watercooler talk is centred around the election of Argentine President Milei, and his next actions, and Brazilian weather and crop sizes. Chicago volume is thin, and traders have to be careful with large orders as they will move the market in pre-holiday US trade. There are limited resting orders, and it does not take much to push the market in either direction.
  • We have previously suggested that we were expecting trading lows to be set early this week. It appears that soybeans/soy product markets bottomed in the overnight trade when selling pressure swelled on the Milei Argentine presidential win. Melei will not be installed as president until December 10, but already the industry is trying to decide what will be his first order of business (how disruptive it will be to Argentine exporters or producers). We note that Milei needs the support of the Argentine Congress to pass new legislation, and he has no coalition. This makes ending taxes or going to US dollar economy and getting rid of the Argentine Central Bank extremely difficult in his early days. However, Milei has a political tailwind from the election that he must use effectively. Argentine politics will be impossible to understand, as if that was anything new!
  • Chicago brokers estimate that managed money has sold a net 2,000 contracts of Chicago wheat and 3,100 contracts of corn, while buying 3,700 contracts of soybeans. Funds have bought a net 1,200 contracts of soymeal and 3,200 contracts of soyoil. Fund managers have been net buyers across the soy complex. However, it is the large net long soymeal long (131,000 contracts) vs the net soyoil short (6,000 contracts) that should support long oil share spreading.
  • FAS/USDA reported that another 104,000 mt of US corn was sold to Mexico. Already Mexico has taken a record tonnage of US corn and looks to remain an active buyer on breaks. The weekly USDA export sales report will be released on Friday due to the US Thanksgiving Day holiday on Thursday.
  • US weekly export inspections for the week ending November 16 were 59.1 million bu of soybeans, 21.8 million bu of corn, and 13.1 million bu of wheat. For their respective crop years, the US has shipped 584 million bu of soybeans (down 53 million or 8%), 268 million bu of corn (up 51 million or 24%), and 287 million bu of wheat (down 91 million or 32%). Based on the weekly export and shipping pace, we see no reason to alter WASDE annual export forecasts. Last week’s big rise in US soybean sales helped to shore up the US early 2024 export pace.
  • Argentine farmers are celebrating the Milei win and will not make any new cash sales until more is known on his presidential platform for the Argentine grain industry. The soy/dollar program expired late last week and is not expected to return. And the falling Blue Peso rate will ignite new rounds of inflation. It is a holiday across Argentina, but the Peso will drop even more until there is clarity on Milei’s initial policy steps. Argentina politics will provide greater volatility for Chicago on policy unknowns.
  • The midday GFS weather forecast is drier across Northern Brazil and wetter across Southern Brazil with the precipitation changes occurring in the week 2 forecast. The prior weather pattern of a high-pressure ridge across N Brazil and a low-pressure trough across S Brazil will be returning next week. This will leave N Brazil wanting more rain while S Brazil struggles to seed spring crops. The best chance for N Brazilian rain will be through Friday, before drier/warmer weather returns across N Brazil. Unfortunately, S Brazil just stays wet.
  • Funds are sizeable shorts in corn/wheat but there are no other notable sellers. Farmers in the US, Brazil and Argentina will not sell corn/wheat in a down market. And soybeans are enjoying demand on Argentine political uncertainty and an expanding US export window during February. The US dollar is in a bear market that should pull new investment into commodities by yearend. We see the grain markets as bottoming. A close above $0.53 January soyoil futures confirms a seasonal bottom and acceleration of the rally.

16 November 2023

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  • HEADLINES: Crude oil prices tank, ag futures follow lower; GFS weather forecast slightly drier in 1–10-day period, wetter in 11–15-day period; US soybean weekly export sales record large at 144 million bu.
  • The sharp fall in US WTI crude oil futures produced selling across the ag sector including soybeans/soymeal where speculators had built up a sizeable, long position following the October Crop report. Soybeans/soymeal had fallen to sharp losses while corn, wheat and soyoil are trying to recover/bounce. Corn futures are back into the green at midday due to the strong potential of Brazilian farmers seeding less corn and the 33% rise in US corn sales to date.
  • WTI crude oil is down $3/barrel to $73.50 December futures on the oil stock build in Cushing, Oklahoma and worry future energy demand from China. The US Biden/Xi summit was reported have gone well for Biden, with some saying that China’s negotiation softness was based on their weak economy. We have no way of knowing if China was trying to calm the political waters due to their weak economy or that they understand the intermingled economic and political ties between both countries heading into a new US presidential election. Yet, the summit is being called successful from the US’s perspective with talk that China has purchased additional US soybeans and is again asking for offers on US SRW wheat. The drop in US/French wheat prices has pulled prices back down to prior Chinese purchase levels back in October.
  • Chicago brokers estimate that managed money has sold a net 3,200 contracts of Chicago wheat, 900 contracts of corn (sold 7,000 early and bought back 6,000 on the rally) and 8,800 contracts of soybeans. Funds have sold 6,600 contracts soymeal and 3,400 contracts of soyoil.
  • USDA/FAS reported massive soybean sales which were largely expected due the daily reporting system announcements (buy the rumour sell the fact). The US sold 144.0 million bu of soybeans (US record sales for any week), 71.2 million bu of corn, and 6.5 million bu of wheat. For their respective crop years to date, the US has sold 1,035 million bu of soybeans (down 282 million or 21%), 831 million bu of corn (up 205 million or 33%), and 437 million bu of wheat (down 33 million or down 7%).  WASDE is forecasting an 8% decline in US wheat exports, so the sales pace justifies their forecast. Corn and soybean sales are also on track to reach the USDA 2023/24 forecasts with the unknown being S American production.
  • FAS/USDA reported that 220,000 mt of US soybeans were sold to an unknown destination in the 2023/24 crop year. The buyer is said to be China which is starting to add to their purchases for late January/February. Brazilian fob offers are hard to find in size until the last half of February.
  • The Argentine presidential election is Sunday with Melei and Massa in a runoff. The polls have the candidates in a dead heat with 10% of the vote undecided. Argentine farmers favour Melei due to his campaign pledge to end taxation of ag exports and the eliminate the Argentine Central Bank. Whether such promises can be kept is unknown, but Melei would cause mass uncertainty in financial volatility should he be elected president this weekend.
  • The midday GFS weather forecast is slightly drier than the overnight run in the 10-day forecast period, but wetter in the 11–15-day timeframe. Another round of heavy rain is forecast for S Brazil into the weekend with some areas enduring 250-300% of normal rain since Sept 1. The midday EU model will be delayed or non-available due to a power outage.
  • The bulls are taking profits on long soybeans/soymeal to enjoy their Thanksgiving Day holiday with needed rain in next week’s N Brazilian forecast. Corn has again bounced off contract lows with wheat values trying to follow. EU wheat production will be down 15-20% next year on diminished seeding due to wet weather. Soyoil will gain on soymeal into yearend on rising domestic demand and falling supplies.

15 November 2023

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  • HEADLINES: NOPA soyoil stocks fall to 1,099 million pounds, lowest since December 2014; EIA weekly ethanol grind rises 4%; GFS weather forecast like overnight run for S America.
  • As expected, it has been a mixed Chicago trading session with debate ongoing as future S American weather and the crop damage that has occurred, the weekend Argentine Presidential election and coming US export demand. US Gulf corn is competitive in the world market (as recent US daily sales have shown), while Russian wheat offers are only mildly higher. Soybeans are a supply driven bull while the grain markets are gauging/encouraging world trade. The spot Chicago soybean/corn ratio has pushed out to 2.93:1 with the new crop ratio at 2.5:1. The widening soy vs corn ratio is trying to incentivise US farmers to seed an additional 2-4 million acre of soybeans next year. The need for additional US soybean acres is tied to expanding renewable energy production, but it is the size of 2024 Brazilian soybean harvest that determines if price has rationed enough demand. We see a mixed Chicago close with soybean short covering noted late session amid the expectation of large US weekly export sales tied to China of over 100 million bu.
  • The USDA announced the sale of 124,000 mt of US corn to Japan in the 2023/24 crop year. FAS originally announced the US corn sale was to Mexico.
  • Chicago brokers estimate that managed money has sold 4,200 contracts of Chicago wheat, 6,300 contracts of corn and 2,200 contracts of soybeans. Funds are mixed in the products selling 3,800 soymeal and buying 1,200 contracts of oil.
  • The new ADM Spiritwood ND Ethanol plant is expected to become operational by early December with a daily crush capacity of 150,000 bu and all the oil production being taken by Marathon Oil Company. The meal production will be sold into the domestic US market which will add to US supplies. The crusher was expected to come online in early autumn, but delays in finishing the construction of the plant pushed back its start until late November/December. Some of the cash squeeze in the US soymeal market was Spiritwood buying back in sales that were made previously. Crushers are not very kind to each other when they realise that the opposition is on the other side of a transaction.
  • EIA reported that the weekly US corn grind produced 208 million gallons of ethanol, up 4% from last year and up 2 million gallons from last week. The EIA released 2 weeks of US ethanol data this week due to computer maintenance last week. US weekly ethanol production is record large to date, which hints that USDA/WASDE is still 25 million bu too low in its annual corn grind forecast.
  • NOPA reported an October soybean crush rate of 189.8 million bu, a record with soyoil stocks falling to 1,099 billion pounds. US soyoil stocks are at their lowest level since December 2014 and are likely to drop again in November.
  • The GFS midday weather forecast is like the overnight run. Heat/dryness blankets Central and Northern Brazil into Nov 20 with showers returning late Sunday/Monday. We estimate 6–10-day rain accumulations in a range of 0.4-2.50” across N and C Brazil. A concerning pattern of dryness resumes in the 11–15-day period as the high-pressure ridge rebuilds aloft. Southern Brazil endures additional flooding rain of 3-9.00”. More than 30” of rain has fallen across S Brazil since September 1.
  • The grains have struggled on rallies while the only supply bull market is soybeans due to adverse Brazilian weather. The Argentine election on the weekend and next week’s shortened US holiday trade has sparked risk aversion and profit taking in soybeans/soymeal. Soymeal spreads have been a harbinger of soybean price activity and the weakness in the Dec/March meal spread is noteworthy. We maintain a bullish view on soyoil, but we would not chase rallies in soybeans/soymeal. Grains hold the range.