- The morning has been mixed in Chicago, with corn, wheat and soybean markets trading narrowly around unchanged. FAS this morning announced another 128,000 of US beans sold to unknown destinations. Otherwise, there is little new for either the bulls or the bears to sink their teeth into. EU grain futures have followed Chicago to modest losses.
- This week’s EIA report featured US ethanol production still well below year-ago levels, but also a further tightening US ethanol supply and demand. Ethanol production through the week ending Oct 18 totalled 293 million gallons. This is up 6 million on the prior week but down 3% from the same week in 2018. Weekly ethanol stocks last Friday fell 30 million gallons to 897 million, down 11% from mid-October a year ago. Exports continue to lag, but there is a growing need for enlarged US ethanol production. Margins are profitable.
- EIA also pegged US crude stocks last week (less reserves) at 433 million barrels, down 1.7 Mil from the prior week. A modest build in stocks was expected, and spot WTI crude is up $0.70/barrel at midday. Spot WTI is now $4/barrel off seasonal lows scored in early September.
- The Brazilian Real continues its recovery from lows scored last week. Long-awaited pension reform has cleared Brazil’s Senate on Tuesday and now only awaits signature by President Bolsonaro in November. This bill looks to reduce Brazilian public spending by some $200 billion over the next decade, and is viewed as a crucial step in stabilising Brazilian finances. The Real looks set to continue to strengthen in the weeks ahead.
- Markets will be paying close attention to this weekend’s Presidential election in Argentina. Argentina’s Peso has inched to a 7-week low at 58.9 to 1 $US. Argentina inflation will persist for some time, but key nearby is whether grain/soy export taxes are raised in late 2019/early 2020. Polls continue to suggest Kirchner-based Alberto Fernandez will take power, and a boost in export duties is a real possibility. The additional cost to export will raise Argentine fob prices as well as work to lower farmgate prices. Argentine exporters have enjoyed reduced export taxes since 2015.
- The midday S American forecast is unchanged from prior runs. Needed rain will impact S Cordoba and Buenos Aires into the weekend. Brazilian rainfall will favour Mato Grosso, Parana and RGDS in the South.
- The transition to Brazil’s wet season remains, but totals of 1.0-1.5″ will favour 60-65% of Brazil’s Soy Belt in the next 5 days.
- The midday GFS weather forecast is slightly wetter in southern IL and IN early next week but is otherwise unchanged. A cold/dry pattern will be intact throughout the next 10 days across Plains and Western Corn Belt. This will allow harvesting to accelerate, with soils firming due to cold temperatures there. Moderate rains impact the E Corn Belt Sun-Tues. No additional precipitation is forecast Oct 30-Nov 8. 16 to 30-day guidance maintains a drier than normal trend into late November. A warming of temperatures is also due beyond November 2.
- Research maintains that direction will stay lacking into November amid a rising world wheat market, pitiful US corn export demand and uncertainty over near-term Chinese buying. S American drought is unlikely into late year.