- Tuesday was another dull day of trade in Chicago soy markets, with January holding in just a 5 cent range through the day, and ending only marginally lower. Soymeal was $1-2 weaker as soyoil bounced back on a recovery in palm oil stabilised. The palm oil market had been trending lower through November and fell sharply on Monday as India announced plans to double the palm oil import tax. At Tuesday’s low, December and January palm oil were down nearly 10% from the late October high. India is the world’s largest palm oil importer, with the latest USDA estimates showing India to import 9.5 million mt or 14% of total world production. October imports reported on Monday were slightly better than a year ago near 750,000 mt. Early estimates are for imports to fall 10-15% under last year over the next several months. The break in palm oil this week has pushed the spot soy/palm oils spread near multi year highs with US soyoil near a 6¢/lb spot premium. The US soyoil premium is based on biodiesel demand which is outstanding. US soybean weekly export sales data will be released on Friday. Chinese demand is only so-so, and US 2017/18 soybean export estimates are at least 100 million bu too large. January soybeans should trade a $9.50-10.0 range.
- Corn futures found support on the third (and perhaps last) day of fund short covering. Another week of strong ethanol production is expected in Wednesday’s EIA report and liquidation of December futures will continue ahead of 1st notice. Whilst US ethanol prices are in retreat, Brazilian origin ethanol continues its rally. This week Brazilian ethanol is quoted at $2.11/gal, a 9-month high and also a 43% premium to US Gulf ethanol, which more than offsets Brazil’s newly established tariff on imports from the US. A counter-seasonal decline in US ethanol stocks is possible in the weeks ahead. However, it should be noted that the EU and GFS weather models include enough rainfall in Argentina for early crop establishment, and precipitation and temperatures are not overly important until early/mid-December. Also, competition for world market share will be ongoing unless drought strikes Brazil again in in the April to June period. Corn values look to be range bound into 2018.
- The highlight of the wheat market day was of course widespread media coverage of Russia confirming that a radioactive leak originated there in late September. The trade is scrambling to know what this means for supply and demand, particularly with many well versed on catastrophes at Chernobyl and Fukushima. However, cash markets only barely moved, and in the meantime the goal for all major exporters is to find market share. The key is that this does not seem to be a power plant melt down! Any future impact will likely be modest. Russian fob offers are higher this afternoon, but only by $.50/mt. Paris milling wheat rebounded from 3-month lows, and overall the world cash wheat market has been inching lower, with exporters in France, Germany, Russia and the Baltics offering wheat at $190-194/mt. Notice that comparable Gulf HRW is not priced competitively. Dryness in the US Plains, Spain, France and North Africa will of course be watched, but we see nothing that will alter the long-established sideways trend in the near term.