- HEADLINES: Energy markets fade on warm US winter forecast; Ags follow; corn, soy export demand improves.
- US and global ag markets have extended Wednesday night’s correction amid weakness in energy markets. NOAA’s updated Nov-Jan climate outlook this morning featured continued above-normal temperatures across the Southern US and East Coast, and odds are decent that this relative warmth will impact a majority of the US population. A warm winter will buffer against seasonal declines in natural gas stocks, and energy prices took this as a sign that worst case scenarios will be avoided. Confidence in 90-day forecasts is low, but given recent/upcoming warmth, NOAA’s seasonal temperature forecast is logical. WTI crude at midday is down $2.10 per barrel, with spot Chicago soyoil down $.021 per pound.
- US exports sales through the week ending Oct 14 are viewed as market positive. Exporters through the period sold 50 million bu of corn, vs. 41 million the previous week and the largest since March. China last week purchased 5 million bu of US sorghum, which reflects the first meaningful Chinese purchase of sorghum since early September. Exporters also sold 130,000 mt of corn to Mexico this morning.
- Soybean sales totalled 106 million bu, vs. 42 million the previous week, and the largest since Sep 2020. China secured 69 million bu on a known basis, and it remains that FAS’s daily reporting system is not catching the full extent of Chinese interest. Soymeal sales were an impressive 240,400 tons, including a rare sale to Denmark. US soymeal supplies will stay abundant, but the market is clearly cheap enough to funnel importers to the US. Soymeal export demand will be the dominant feature of soybean price determination in 2021/22, which makes Argentine weather and soy yields there so important this winter.
- For their respective marketing years to date, the US has sold 1,138 million bu of corn, up 2% from last year and an all-time record for mid-October, 1,075 million bu of soybeans, down 35% from last year, and 453 million bu of wheat, down 20% from last year.
- The lagging pace of soybean commitments, amid timely seeding in Brazil, raises the burden of the pace of weekly soy sales between now and December. Chinese demand is said to exist just below the market, and the issue in the near-term is whether importers opt to chase values higher amid solid crush margins. New sales announcements will be watched for on Friday following today’s break. We also wonder if Egypt opts to return to the wheat marketplace after cancelling its most recent wheat tender on Oct 12. Egypt’s GASC is only fully covered into late November.
- The midday GFS weather forecast is drier in the Upper Midwest but unchanged elsewhere. Harvest-delaying precipitation will be confined to the eastern Midwest, but totals in portions of IL, IN and OH of 3-4” next week will further weigh on yield potential there, while progress is unlikely to resume until Nov 3-4. Fortunately, relative warmth and dryness resumes beyond next week and November precipitation guidance features below normal amounts in all but far Northern Plains.
- In S America, the GFS forecast has followed the EU in adding light/moderate rain to western Argentine crop areas. A bulk of Argentina’s primary Ag Belt will see 10-day rainfall of just 0.25-0.75”. Favourable conditions persist in Brazil into early Nov.
- Seasonal lows have been scored in our opinion, but the whipsawing of this week indicates that lasting bull runs require the feeling of tightness in cash markets. Our bet remains that positive seasonal trends hold into winter. Soybeans stay the laggard, while US demand potential is massive. Overall, we believe it is still the wrong time of year to make sales.