- 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.