Monthly Archives: November 2023

14 November 2023

Posted on November 14, 2023 by simon

• HEADLINES: Chicago turns higher on drier midday GFS forecast for northern Brazil; NOPA out on Wednesday; Mexico secures more US corn.

• Corn, soybean, and wheat futures are mixed at midday. Any selling has been concentrated in soybeans/soymeal with the grains trading either side of unchanged. Soyoil has been the bullish stalwart of the morning on oil share spreading with December futures rising to their best levels since October 23.

• However, Chicago trade volume has trended lower from an active opening as traders await news on the Biden/Xi Summit at the APEC meeting, the US House vote on a continuing resolution that includes an extension of the 2018 Farm Bill, and the Weekly FAS US Export Sales report on Thursday that is expected to show that China booked a massive 90-118 million bu of US soybeans last week.

• A mixed Chicago close is forecast as the market consolidates Monday’s gain. Technically, vegoil values are breaking out to the upside on the charts. Be it palmoil, soyoil or canola, they all appear to be at a bullish technical turning point. Soymeal futures market spreads argue that soybeans are consolidating.

• FAS announced that Mexico purchased 101,745 mt of US corn. No additional sales of US soybeans were announced sold to China/unknown destinations.

• Chicago brokers estimate that managed money managers have purchased 1,000 contracts of Chicago wheat, 2,000 contracts of corn, and 3,700 contracts of soyoil. Fund managers have sold 3,200 contracts of soybeans and 4,700 contracts of soymeal.

• NOPA will report their October member crush and soy product stocks tomorrow. We are looking for a record large crush rate of 188 million bu with soyoil stocks pegged at 1.28 billion pounds. Crush margins have pushed NOPA processors to be running at full capacity. US soyoil yield is best determined with the November report as it reflects the first month of all new crop soybean supply. We doubt that the NOPA data will pressure WASDE to raise their annual crush estimate until there are few additional months of crush. We note that ADM Spiritwood North Dakota plant should become operational before the end of November, adding capacity of an estimated 150,000 bu/day when fully operational. The ADM Spiritwood plant is a joint venture with Marathon.

• The US inflation rate was 3.2% in October, down from 3.7% in September and 9.1% last year. US gasoline prices were the driver of the lower inflation rate and the rising expectation that the US Central Bank has reached its zenith on its interest rate hikes in its war against inflation. The US dollar has declined to its lowest level since the opening days of September with money managers looking at raw materials as investible for 2024. The US Dow rallied to gains of 460 points while the yield on the US 10-year note has fallen to 4.45%. The Brazilian Real has rallied to 4.85:1 US$.

• The midday GFS weather forecast is drier than the overnight run for Northern and Eastern Brazil. Exceptional heat and dryness blankets Central and Northern Brazil into Nov 20 with showers returning next week. We estimate 6–10-day rain accumulations across Northern and Central Brazil in a range of 0.4-2.50”. A concerning pattern of dryness resumes in the 11–15-day period as the high-pressure ridge rebuilds aloft. The coming showers will not be enough to arrest crop stress if another period of hot/dry weather returns in the closing days of November and December.

• Southern Brazil endures additional flooding rain totals of 3-9.00” as a stuck weather pattern holds aloft. The rain adds to crop woes amid saturated soils. More than 30” of rain has fallen across S Brazil since September 1.

• The drier midday Brazilian forecast has rallied soybeans/ soymeal back in the green. The market is myopic on S American weather due to its importance on future US corn/soy export demand. Cash soymeal and soyoil are trading well above Chicago values which prevents a sizeable decline ahead of first notice day. Corn has the best bullish potential if estimates are correct with a Brazilian total corn production of 123.5 million mt with future declines likely on abandoned acres.

13 November 2023

Posted on November 13, 2023 by simon

• HEADLINES: Row crops soar on Brazilian heat/dryness; Meal paces rally; Brazilian corn market adding premium.

• Corn, soybean, and meal futures are sharply higher at midday, with wheat in tow and with soyoil weaker. Meal in recent weeks has been carrying the load in keeping US cash/futures-based soy crush margins elevated, which has worked against strength in oil. Some suggest US soyoil prices are undervalued, but not until there is confirmation of trend soy yields in Argentina will the spread fully re-align itself. Otherwise, today is all about dire weather in Brazil and low odds that the climate pattern changes prior to early/mid-December.

• Brazilian soy planting is projected to have reached 55-57% complete, vs. 66% a year ago. This year’s discrepancy to last year will widen further as producers across much of the country pause fieldwork. High temperatures in Mato Grosso do Sul, Mato Grosso, Goias and Sao Paulo Tues-Sat will reach 102 degrees or higher. These states account for 50% of total Brazilian soy area/production. Excessive rainfall will continue to batter the southern quarter of Brazil this week. The primary risks, for now, centre on a lack of available of soy supplies in early/mid-February, and guaranteed safrinha corn seeding dates. The US soy export window is being extended, and the yield risk associated with safrinha production next spring/summer is massive.

• In fact, yield risks today are higher for corn than soybeans in Brazil, but there is no doubt a pattern of regular soaking rain is needed in Central and Northern Brazil no later than Dec 1 to salvage soy potential. Better rain chances do occur in C/N Brazil in the 8–15-day period, but longer-term climate guidance indicates no meaningful change in Brazil’s climate pattern into late year. Brazilian weather stays abnormal. Crop concern is high.

• We also note that Brazilian corn futures have soared today. January corn in Brazil at midday is up 5.3% at $5.88/bu. Jan Brazilian corn’s premium to Dec Chicago has widened to $1.07/bu, and since late October Brazilian corn’s premium has widened, not contracted, steadily. The global corn market lacks a major supply threat today, but it is clear the Brazilian market is working to funnel winter/spring importer demand to the US.

• It is just tough to be bearish of row crop markets given the need for record Brazilian soy yields and as S American corn supplies will not be fully replenished until early/mid-summer 2024. Ukrainian corn exporters will be there on rallies, but Ukraine still isn’t a reliable supplier given the escalation in conflict within the Black Sea and as tighter government controls on exports there slow the pace of new shipments.

• US corn export inspections in the week ending Nov 9 totalled 24.0 million bu, vs. 22.6 million the previous week. Wheat inspections were 7.6 million bu, vs. 4.2 million the previous week. US soybean export inspections totalled 61.2 million bu, vs. 80.2 million the previous week.

• In their respective crop years to date, the US has inspected for export 243 million bu of corn, 23% above last year, 273 million bu of wheat, down 26%, and 516 million bu of soybeans, down 6% year on year but a sizeable 29% of the USDA’s annual forecast. Following recent Chinese demand and the lack of late Jan/early Feb supply availability in Brazil, the near-term US soy export outlook has brightened.

• The midday GFS weather forecast is consistent with morning output. Exceptional heat and complete dryness blanket Central and Northern Brazil into Nov 21-22. 5-day precipitation accumulation in RGDS in S Brazil is estimated at 3-8”. Moderate rain expands northward into Mato Grosso do Sul and Mato Grosso Nov 22-25, but concerningly, a pattern of dryness resumes thereafter into Nov 29.

• There is little/no room for much additional US soy export demand should adverse weather continue in Brazil into December. And in the long run, the size of Brazil’s safrinha corn crop is a big deal for US, world and exporter corn supply and demand. Weather-based volatility lies ahead, but it is imperative that a major/lasting shift occurs in Brazil in the next 2-3 weeks.

8 November 2023

Posted on November 8, 2023 by simon

• HEADLINES: Wheat soars as rumours that Russia hit a private cargo ship in Odessa oblast port; Soymeal bulls look for big sales tomorrow; Estimates suggest lower Brazilian soy crop at 156 million mt.

• Soybean/soymeal futures pushed to new rally highs while the grain markets played catch up. The USDA November Crop Report will be released tomorrow. And Brazil’s CONAB will update their 2023/24 corn, soybean, and wheat crop estimates beforehand. We doubt that the USDA data produces statistical fireworks with the trade looking for yield forecasts that are like October. Also, we do not expect that WASDE will make any big downward adjustments on US exports with demand improving and Brazilian weather threatening. Moreover, note that historically, WASDE does not update S American corn/soy crops sizes until December. It is early to adjust Brazilian corn/soy yield estimates downward. However, WASDE should cut Brazilian/Argentine wheat crop estimates due to both drought and flooding. Yet, if there is a bullish balance sheet tomorrow it should be soyoil as carry in stocks are cut by 160 million pounds and WASDE holds the 2023/24 crush pace steady. We see soyoil and oil share as being too cheap relative to demand. But the soyoil chart stays buried in a bearish trend which keeps money managers in a mode of selling rallies.

• Chicago brokers estimate that funds have bought 8,400 contracts of Chicago wheat, 9,100 contracts of corn, and 6,200 contracts of soybeans. In the products, funds have sold 1,100 contracts of soyoil while buying 4,800 contracts of meal.

• The USDA confirmed the sale of 565,000 mt of US soybeans to China and unknown destinations in the 2023/24 crop year with 344,500 mt of soybeans received in the reporting period for delivery to unknown destinations. The combined total is 909,000 mt making recent day sales the largest in months. The shipping period is said to be from December through March. We understand that China is still asking for US February/March soybean offers today. Also, USDA reported that Mexico purchased 270,000 mt of corn for delivery in 2023/24.

• Illinois rail soymeal is bid at $10 over Chicago December futures and offered at $19 over, unchanged. There are rumours that weekly US soymeal sales will again fail to match the expectations of the bulls with Brazilian hi pro meal being far cheaper. US Gulf 46.5% protein meal is offered at $55 over vs Brazilian hi pro (48%) at $23 over, a $32/mt difference. And Argentine soymeal is offered at $46 over, a few dollars cheaper than prior days. With cash meal at $30 over to feeders in Iowa/IL and the Plains, a price near $500 is causing nutritionists to look at using more corn or DDGs/canola or cottonseed hulls due to pricing. Soymeal prices are doing their job of rationing.

• The other extreme is soyoil in which the cash market is firming today with the Illinois rail trading at $0.05 over Chicago which is up a half to 1 cent from yesterday on improving demand. We hear that biodiesel and renewable diesel producers are active in adding to cash forward coverage on margin. Renewable diesel producers can lock down profitable margins into mid-2024.

• The Rosario Commodity Exchange lowered their Argentine wheat crop estimate to 13.5 million mt, just 2 million above last year’s crop that was 11.5 million mt. The exchange estimated that corn seeding is 27% and soybean seeding 11% completed, well behind historical averages as producers await additional rain.

• There are cash exporter rumours that Russia has struck a commercial ship in Yuzhne (Odessa Oblast port). The ship is said to be carrying grain or iron ore according to the rumours. If Russia intentionally struck a private cargo ship it would usher in new layer of worry for marine insurance carriers.

• The GFS weather forecast is dry with virtually no rain across Northern and Central Brazil into November 20. The lack of rain is startling farmers with seed germination suffering. High temperatures will hold in the 90s/lower 100’s. Such temperatures are some 5-9 degrees above normal which is adding to the soil moisture losses.

• Estimates are cutting Brazilian soy crop estimate to 156 million mt and corn to 123.5 million mt. Brazilian weather will be alarming in another few weeks if the pattern does not change. It is S American weather that directs Chicago prices. The midday GFS forecast is wetter in the 11–15-day period which is a long way off, but must be closely followed.

7 November 2023

Posted on November 7, 2023 by simon

• HEADLINES: Soybeans/soymeal surge to new rally high; GFSweather forecast offers no change in Brazilian weather pattern; China books 300-400,000 mt of US soybeans for Dec/January.

• Soybean and soymeal futures pushed to new rally highs while soyoil falls on oil share spread selling, while the grains are mixed. Chicago corn continues to sag for technical reasons with Friday’s reversal high unable to be exceeded. The Chicago market has all about “fund flow” determinate with soybean/soymeal charts bullish and pushing higher. Corn, soyoil, and wheat charts have not been able to turn around. Grain and soyoil charts are bearish, and until there is a chart-based signal for managed money to exit their growing short position, the trading mentality of fund managers is to sell rallies.

• The macro financial markets have offered bearish tailwinds with crude oil futures pushing to new lows for the decline at $78.50, and the dollar higher. The interest rate on the 10-year US note has fallen to 4.6% on recessionary worry. The market is see sawing back and forth between a US consumer that is spending and a Chinese consumer that is saving. The DOW is up 90 points at midday and looking to post its 7 consecutive daily higher close.

• We would maintain a view that Brazilian weather is concerning but could become alarming in another 10-14 days if their weather pattern does not change. The adverse Brazilian weather not only impacts soybean production, but also corn due to latent winter corn seeding dates. Brazilian farmers are in a quandary with the dry forecast leaving them unsure as when they should reseed crops.

• Chicago brokers estimate that funds have bought 5,900 contracts of soybeans while selling 1,200 contracts of wheat and 4,500 contracts of corn. In the products funds have bought 8,400 soymeal while selling 5,300 contracts of soyoil.

• The USDA confirmed the sale of 110,000 mt of US soybeans to China in the 2022/23 crop year. Rumours abound that China purchased 300-400,000 mt of US soybeans overnight for December/January.

• France has planted an estimated 53% of their winter wheat crop with wet soils to keep planting slow until late November. Planted wheat has been suffering from yellowing due to excessive water and a lack of nitrogen. It appears that EU farmers will cut 2-4% of their winter grain seedings due to adverse wet weather.

• Algeria has started securing wheat for LH December and FH January. Traders are estimating that 150-200,000 mt of wheat has sold at a price of $266/mt basis CIF. Assuming $19-23/mt for freight works back to $243-247/mt basis FOB. The wheat is said to be sourced from Eastern Europe or Russia.

• The US exported 90.8 million bu of soybeans, 124 million bu of corn, and 68 million bu of wheat during September. US Sept soybean exports were 12 million bu larger, and corn was 21 million bu bigger than 2022. US September wheat exports continue to suffer from Russian wheat export aggression and were 44 million bu less than 2022. September US soymeal exports were record large at 770,067 mt.

• The GFS weather forecast is dry with virtually no rain across Northern and Central Brazil into November 21. This is as dry as you will ever see Brazil heading into December. The lack of rain is startling farmers with seed germination suffering. Irrigation is unavailable and a deepening drought in the Brazilian Amazon is abnormal.

• High temperatures will hold in the 90s/lower 100’s daily. Such temperatures are some 5-9 degrees above normal which is adding to the soil moisture losses.

• Another round of heavy rain occurs across Southern Brazil this weekend and a second system in the last half of next week. 10-day rain totals are estimated in a range of 2-6.50” which adds to renewed flooding. This is a highly unusual Brazilian weather pattern that appears to be static. Closely monitor the daily forecasts.

• Brazilian weather is not alarming today, but it will be in another few weeks if the pattern does not change. The impact on S American soy/grain production would then be massive as double cropping opportunities pass. This is no place for new sales amid such threatening Brazilian weather. And the early harvest of Brazilian soybeans has been pushed backwards to February. Both Brazilian yield and planted area is being impacted and must be adjusted downwards.

6 November 2023

Posted on November 6, 2023 by simon

• HEADLINES: Soyoil surges on oil share buying and building California demand; Saudi buys 700,000 mt of Black Sea wheat; Private Brazilian soy crop estimates.

• It is green across the Chicago grain complex with soybeans being the upside leader. January soybeans have rallied to their best price since September 15 and are up $1.00/bu from an October 12 low. Corn/wheat futures have traded both sides of unchanged, but until December corn is able to exceed Friday’s high at $4.8125, the market appears unwilling to push for fund short covering.

• Wheat has been a “me too” market with a weekend sale of 700,000 mt of Russian/Ukrainian wheat offering early support. More and more, world wheat buyers are completing private trade deals that make wheat pricing opaque. There were two Saudi buyers that approached Black Sea sellers on the weekend to complete the purchase.

• Soyoil has rallied to sharp gains on the rise in energy values and oil share spreading as traders focus on the California mandate that private/state trucking fleets fully shift over to renewable diesel on January 1.

• California uses 99% of the US’s renewable diesel production which along with a Marathon plant is expanding production by 66% due to new soyoil refining capacity and the Redeo California Phillips 66 Plant coming online in early 2024, there is a landscape of rapidly expanding US biodiesel production. A higher Chicago close is forecast as the market adds weather premium for Brazilian adversity.

• Chicago brokers estimate that funds have bought 5,700 contracts of soybeans, 3,200 contracts of corn, and 2,200 contracts of wheat. In soy products, funds have bought 5,800 contracts of soyoil and sold 2,100 contracts of soymeal. The soyoil market will confirm a trading bottom with a close above Friday’s high at $0.5132 basis December futures.

• The USDA confirmed the sale of 126,000 mt of US soybeans to China in the 2022/23 crop year. The sale helped to confirm that China booked upwards of 400-500,000 mt of US soybeans late last week for February/March shipment.

• We cut our 2023/24 Brazilian soy crop estimate to 157-158 million mt due to the ongoing drought across the northern two thirds of Brazil and the acute flooding to the south. We had started out the crop year forecasting a Brazilian soy crop at a record large 161-162 million mt. We now estimate that 20% of Mato Grosso farmers will have to replant soybeans due to poor germination. Northern Brazilian farmers are closely following daily weather forecasts trying to find a day of rain. The forecasts are arid and if replanting cannot occur by the middle of November, they may be forced to switch to full season cotton or corn. Northern Brazilian farmers claim that they have never endured such early season dryness. The weather impact on Brazilian corn/soy production will be rising after November 15.

• US weekly export inspections for the week ending November 2 were 21.0 million bu of corn, 76.6 million bu of soybeans, and just 2.6 million bu of wheat. For their respective crop years to date, the US has sold 216 million bu of corn (up 41 million from last year) 448 million bu of soybeans (down 23 million), and 264.3 million bu of wheat (down 97 million). Other than China’s purchase of US SRW wheat, the US wheat export inspection total will be struggling.

• The S American GFS weather forecast is dry with below normal rain across Northern Brazil into November 20 with another two episodes of heavy rain for Southern Brazil that starts on the weekend. Heat will be centred on Northern Brazil with highs in the 90’s/100’s. Southern Brazil will be more seasonal with 70’s/80’s. The Brazilian weather pattern shows no sign of change which raises the worry for Brazilian crop yields/production.

• Brazilian weather is gaining in market importance due ongoing heat/dryness across Norther Brazil. Saudi bought 700,000 mt of Black Sea wheat with Algeria/Jordon seeking Dec/January supply. The USDA November report will cause a pause in the premium add for Brazilian weather, but if the pattern holds into mid-November, the big fund short position in corn is at risk. Climate scientist fears a stuck Brazilian weather pattern into November. It is a supply driven bull market. We look for 91-94% of the US soybean crop and 84-85%of the corn harvest to be completed.

3 November 2023

Posted on November 4, 2023 by simon

• HEADLINES: Soybeans rally on building S American weather concerns: Dec Chicago corn scores short term reversal; US dollar plunge adds to winter export potential: Wheat extends recovery; US dollar index key to direction.

• Chicago soybean futures gained 21-24 cents on Friday, leaving January soybeans up 32 cents for the week and above all major moving averages confirming a bullish trend.

• However, soyoil fell to a 6-month low under pressure from rising soymeal and oil share spreading. US soyoil offers have been unchanged for months at 6 cents over Chicago, while S American offers have rallied sharply to 7-8 cents under. The spread to the US Gulf has narrowed to 14-15 cents, or the tightest since June. With US vegoil consumption to exceed production by a record amount, the US market will be mindful of S American prices to ensure that the US does not become export competitive.

• Chicago soybeans are focused on Brazilian weather. In the north, planting has been slowed due to extreme dryness, while historic rains have fallen across Southern Brazil.

• Chicago has had a record large Brazilian crop dialled in, but weather is a concern, and Chicago is adding premium. A test of $14-14.25 January is now expected with even higher prices possible depending on Brazilian weather and crop production potential. Soy is a supply driven bull market with Nov/December weather being key.

• Chicago corn futures ended sharply higher amid soaring soybeans/meal price and as the US dollar index scored a key downward reversal. Index funds on Tuesday were net long only 237,000 contracts, vs. 344,000 in June, and key into late year is whether additional US dollar weakness attract institutional money into the ag space. Fundamentally, Dec corn below $4.70 is undervalued. A range of $4.70-5.10 is probable until more is known about S American crop potential.

• Midwest cash ethanol prices this week fell $0.05-0.30/gallon. However, margins are still profitable amid strength in the cash DDG market and as spot cash corn in IA/IL sits at $4.60-4.7/bu. US Gulf corn is the cheapest reliable origin into February. There is no need for the market to decline to encourage increased consumption, which is important.

• Brazilian weather is most important in the long run. Soybean seeding in Mato Grosso is now 83% complete, vs. 93% last year. However, soy replanting will be widespread and there are extensive reports of producers in Brazil planning to abandon safrinha production amid reduced margins and weather uncertainty.

• End users are recommended to secure cover on corrections lower. Positive seasonal trends stay in place through winter. March Chicago upside is pegged at $5.15 in the near term at $5.30-5.40 by Jan/Feb.

• Global wheat markets ended higher again amid moderate short covering. Concerning Brazilian weather is a threat to food markets as a whole, and unwanted rain in the south of Brazil will further harm wheat quality. Yet, most important was Friday’s reversal in the dollar. Currency movement early next week must be followed closely. Index funds hold the smallest net long position since records began in 2009. US dollar index weakness changes this trend as a new year begins. Managed funds on Tuesday were short 102,000 contracts in Chicago vs. 92,000 the previous week.

• Other news is lacking. Markets worldwide lack fresh input. Yet it is known that the drawdown in physical supplies lean supportive global cash markets into spring when new crop N Hemisphere yield potential can be better assessed. Chicago will continue to gain on KC. Quietly, lengthy dryness has returned to a vast swath of the US HRW Belt. French planting progress warrants close watching over the next 2-3 weeks.

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

Weekend summary 3 November 2023

2 November 2023

Posted on November 2, 2023 by simon

• HEADLINES: January soybean futures fail at 50 day moving average; US export sales of corn, wheat, and soybeans unexciting; China buys Gulf US soybeans for February.

• Chicago grain futures are mixed at midday with corn/soyoil/soymeal weaker with soybeans/wheat firmer. Financial markets reflect a “risk on” mentality with the US stock market up 350 points, the 10-year note yield down to 4.65%, and the US dollar sharply lower. The Brazilian Real has rallied to 4.95:1 US$ with Brazilians on a national holiday. A fall in the US dollar could entice new demand in raw material markets, but the drop today does not confirm a lasting trend. A bearish US dollar trend would occur with a close below 105.10 in the spot US dollar index. The US dollar index is trading at 105.95.

• Soybean futures have been the Chicago stalwart with January futures testing the 50-day moving average at $13.31. A settle above this resistance is needed to confirm a shift to a more bullish technical trend. Soymeal futures are down on disappointing US soymeal weekly export sales while funds are piling into new net short positions on soyoil. December soyoil futures fell near $0.49 support.

• Chicago brokers estimate that managed money has bought 3,300 contracts of Chicago wheat and 4,100 contracts of soybeans, while selling 2,400 contracts of corn. In the products, funds have sold 3,100 contracts of soymeal and bought a net 900 contracts of soyoil. Open interest continues to rise in soyoil arguing for a new net short position. Soyoil OI gained 6,668 contracts on Wednesday.

• US weekly grain or soy export sales were non inspiring (except for sorghum with China (again) booking significant US tonnages). For the week ending October 26, the US sold 10.1 million bu of wheat, 29.5 million bu of corn, and 37.1 million bu of soybeans. US sorghum sales were an impressive 14.9 million bu with crop year sales rising to 115.2 million bu (up 102.4 million from last year or 800%).

• US corn sales for the crop year to date are 719 million bu (up 150 million or 26%), while US wheat sales are 417 million bu (down 30 million or 7%), while US soybean sales at 855 million bu are down 329 million or 28%. The US soybean export pace continues to lag, but the US has shipped our more soybeans than last year through October 26. We would not expect that WASDE will adjust their 2023/24 wheat, corn, or soybean export estimates in next week’s report with so much of the crop year ahead and pace analysis suggesting no change.

• There is strong cash talk this morning that China has purchased 6-10 cargoes of US gulf soybeans for February/March. The sale has some traders considering why China would pay the hefty US premium other than US soybeans are often used in their reserve. Moreover, the purchase allows China optionality if Brazil’s soybean harvest is delayed by the acute dryness across Northern Brazil. We look for USDA to confirm new Chinese demand either Friday or Monday.

• Although there continues to be talk that China is asking for US wheat offers, we cannot confirm a sale. The Chinese interest has been discussed in recent days based on Chinese buying group being in Kansas. We believe China has interest in US wheat, but not on a US wheat futures rally.

• US soymeal sales at 86,400 mt were below trade expectations. The US has sold 5.6 million mt in the crop year that started on October 1, which is up 1.7 million or 42% from last year. Demand bull markets need to be fed, and US weekly export sales argues that price is causing hesitation in forward purchases.

• The GFS weather forecast is like the overnight run with below normal rain across Northern Brazil with another round of heavy rain for Southern Brazil of 2.50-5.50” over the next 36 hours. The Southern Brazil rain will produce new flooding. The N Brazilian rain starts to fall late Monday and continues through Wednesday with totals of 0.5-1.50” before another lengthy period of dryness. The Brazilian weather pattern shows no sign of change into mid-November which will again raise crop production worry.

• Brazilian weather is gaining in market importance due to heat/dryness across N Brazil and excessive rain across S Brazil. China has purchased a massive amount of Brazilian corn/US sorghum. Brazilian corn/soybean production estimates are key to longer term Chicago price direction. A 5% yield loss of 2024 Brazilian corn is 6.5 million mt and 8.0 million mt of soybeans which have significant ramifications for US export demand.

1 November 2023

Posted on November 1, 2023 by simon

• HEADLINES: KC wheat rallies on fund short covering with traders pointing to China: Corn drops on chart-based selling ; GFS midday weather forecast offers more rain for S Brazil starting tonight.

• It has been another mixed morning in Chicago. Wheat/soybeans are higher with corn weaker in a continued choppy trade. Private crop yield/production estimates are due from StoneX and S&P Global/Markit in the next few days with the USDA November Crop Report due out on November 9, next Thursday.   The November WASDE may be the last USDA Crop report if the US Congress is unable to agree on 2024 Budget pact. The December USDA report does not update US corn/soy yields, but it does seasonally start to peg Brazilian crop sizes depending on prevailing weather trends. Traders will look to Brazil’s CONAB for monthly Brazilian crop assessments if the US government is closed due to political budget differences. We would assume that a 3–4-week closure of the US government would push the January Crop Report backwards into February.

• Chicago brokers estimate that managed money has bought 1,900 contracts of Chicago wheat and 5,300 contracts of soybeans, while selling 5,700 contracts of corn. In the products, funds flat in soyoil and sold 1,900 contracts of soymeal.

• Russian war planes dropped explosives into Black Sea shipping lanes according to Ukraine, but no explosions are damage were incurred. Ukraine indicated that Russia is regularly dropping sea mines or other explosives into their nascent shipping channel. However, cargo traffic continues. The corridor was shut for 3 days last week on the promise that Russia would act with warplanes, but this week’s bombardment does not appear to be slowing down transits. Yet, traders will monitor the situation closely.

• Brokerage firm StoneX slashed their Brazilian corn production estimate to 128 million mt vs a prior forecast at 139.2 million due to drought across N Brazil and flooding across SE Brazil. The reseeding of soybeans will cut the window to seed winter corn in late February and March. However, StoneX held their 2024 Brazilian soybean crop forecast at 164.1 million mt.

• We would currently agree with a 127-128 million mt total Brazilian corn crop but argue that adverse weather will tug the Brazilian soybean crop to 158 million mt or less by mid-November without a change in the overall pattern. An even deeper cut in the Brazilian soybean crop could follow if the pattern is unchanged on December 1.

• The US ethanol industry produced 309 million gallons of ethanol last week, up 3 million gallons on the week prior and the largest weekly production total of this crop year. US ethanol stocks declined 16 million gallons to 883 million gallons. US gasoline consumption was 8.7 million barrels/day, equal to 2022.

• There have been rumours that China may have purchased US HRW wheat with a delegation from COFCO in Kansas today. However, we cannot confirm a cash purchase at this time. KC wheat has found a bid on rumours of Chinese demand.

• Talk is also noted that a 50,000 mt sale of US soymeal was switched back to S America on price late Tuesday. An intercompany exporter switch is possible if the soymeal was sold optional origin. Here too, no confirmation is offered.

• The GFS weather forecast is like the overnight run with below normal rainfall across Northern Brazil with another round of heavy rain for Southern Brazil of 2.50-6.50” in the next 48 hours. The heavy rain across Southern Brazil will produce additional flooding with some areas of RGDS enduring nearly 40” of rain since September 1. The unwanted rain extends north into Santa Caterina and S Parana. The rain starts to fall across N Brazil late Monday and it will continue through Wednesday before another lengthy period dryness unfolds. The below normal rainfall and above normal temperature trend is worrisome across N Brazil.

• Brazilian weather will be gaining in importance due to an abnormal weather pattern of hot/dry across N Brazil and excessive rain across S Brazil. Paraguay is also included in the inundating rain. The line of too little and too much rain is readily defined. Otherwise, world soybean exports from the 3 primary shippers is estimated to be record large through November. NASS will be out with its October 1 crush report after the close that will define 2022/23 US soyoil end stocks. Our worry over S American weather is growing and all should pay close attention.