- China’s swine fever outbreak has passed another milestone with the first cases detected in the southwest of the country and a fresh outbreak in the southeast, the government has said on Monday. According to two statements published by the Chinese ministry of agriculture, swine fever incidents have been reported in the city of Taizhou in the Zhejiang province in the southeast region and another in Zhaotong, Yunnan province, for the first time in the southwest region. The two incidents mark the thirty-fourth and thirty-fifth cities in China to report swine fever this year, with the outbreak first detected in August. The city of Taizhou reported 56 pigs had been found dead in a farm of 2,280 pigs, while in Zhaotong, 545 pigs out of 1,157 pigs across two farms died as a result of the fever. Despite China’s National Grain and Oil Information Centre’s (CNGOIC) claim that swine fever will have only limited effect on soybean meal demand in China, made back in early September, outbreaks have escalated in recent weeks. The market is closely watching the development of this disease in China as the pig industry accounted for more than 40% of China’s total soymeal consumption last year.
- US ag markets are unchanged at midday, and so markets have held up well despite another rather negative macro day. Crude extended its overnight losses, with spot WTI down $3.20/barrel at new lows for the move. The Dow is down 350 points on a series of weak quarterly earnings. World equity markets are following. Questions about world economic growth persist.
- We have also heard that the Russian government will meet with grain exporters on Friday. This meet was originally scheduled for last week. Quite what will be discussed and agreed remains to be seen, watch this space! Why the meeting was rescheduled is uncertain and we have no way of knowing what will come of the meeting. A ban/cap on exports is highly unlikely, but we have highlighted that interior Russian wheat prices have hit two-year highs. Wheat stocks in Russia on Nov 1 are expected to be at a two-year low, with stocks/use tight. Recall that in 2014 the government added a tax on wheat exports, which was announced months in advance. It is the price of Russian interior prices, and pushback from domestic industries, that will potentially trigger government intervention.
- Wednesday’s EIA report should include another boost in US crude stocks. Ethanol production margins remain depressed, and so grind last week is likely to be flat. We would mention that Brazilian cash ethanol prices are up yet again, with a much better pace of US ethanol exports due in late 2018/early 2019.
- The European weather forecast is drier in key parts of France and Germany. Precipitation this week will instead favour the Alps, far Western Ukraine and Central Russia. Some areas will benefit but a large portion of the EU/Black Sea wheat belt will be left dry. Wheat and soy futures have recovered at major chart-based support, with Dec corn again above its 20-day moving average. As expected, neither the bulls nor bears have had much leverage this week.
- The midday central US GFS weather forecast is little changed and still wet in the extended period. Excessive rainfall is not indicated, but 2-3 light/moderate rain events are forecast Oct 31-Nov 6. Accumulations in the 7-12 day period are put at 0.50-1.50”. The heaviest amounts will fall across IA, M N and WI. There is no sign of any shift to bitter cold or meaningful snow over the next two weeks. In the near term, it remains that near zero precipitation is expected across the heart of the corn/soy Belt into early next week.
- The fundamental outlook remains supportive of corn, bullish wheat and bearish beans on rallies. The outlook for S American weather into early 2019 is normal/favourable.