- US cash ethanol prices have fallen to multi-month lows, which has weighed on production margins but also looks to find better consumption interest. Brazilian cash ethanol prices, meanwhile, continue to rally, and even amid Brazil’s 20% tariff on imports from the US, Gulf ethanol pencils into Brazil. Higher ethanol disappearance is expected into late year.
- Most soybean futures were up 1-2 cents after trading in a relatively narrow 6-8 cent range today. The December soymeal contract, however, slipped by just over $1 while soyoil continued its rally and added 0.4 cent to close at 34.56 cents (up nearly 8% since the beginning of the month). 97% of the soybean crop was dropping leaves as of Oct 22 while 70% of the crop had been harvested. Harvest progress was above the high end of the range of expectations, up 21 points for the week, but still lagging behind the 5 year average of 73%. China will release final details for September imports tomorrow but the total should be unchanged from the 8.11 million mt “preliminary” estimate released earlier this month. Based on exporter shipments to China in September, we expect China’s October imports to fall to 6.11 million mt. However, ship lineups so far this month suggest that November imports will jump to 9.3 million mt. We look for a broad ranging trade to unfold.
- Corn futures rallied 6-7 cents, which relative to recent months is quite a bit, and which we attribute mostly to fund short covering. Somewhat quietly managed funds have a established a sizeable net short, which as of Sunday evening is estimated to have reached 185,000 contracts, a record for the middle part of October. Producers are harvesting, and not generally interested in adding to new sales at current prices, and so the path of least resistance today was higher. Other news is lacking. S American basis levels are stagnant and still some 5-20 cents below Gulf quotes. US harvest progress through Sunday reached 38% complete, vs. 59% on average. Interior basis levels are mostly stable, and in the C Midwest have rallied noticeably from early October’s lows. There’s still no compelling evidence to support a major lasting move in either direction. The bulk of harvest still lies ahead, but ethanol production should be maintained at lofty levels, and US Gulf ethanol is now priced at a 35% discount to Brazilian origin, and the recent break in ethanol prices should find some incremental demand moving forward.
- Wheat futures led the way in ag markets amid short covering, and an otherwise lack of selling. Managed funds’ net short in Chicago has been growing slowly but steadily, but we also mention funds net long in Kansas has now been liquidated entirely. As of last Tuesday funds were net short 5,000 contracts in Kansas (which was slightly larger as of this morning), and so were net short Kansas for the first time since April. Russian interior wheat prices are stable in both Roubles and US$, and with replacment in Southern Russia calculated at $160-162/mt, we maintain that downside risk in world cash markets is limited. Russian fob offers are unchanged at $193/mt. German wheat rests at $196. Comparable Gulf HRW is offered at $197/mt, and so a host of origins are competiting for new business over the next 2-3 months. Winter wheat as of Sunday was 75% planted and 52% emerged, and the season’s first crop rating is due next Monday.