- HEADLINES: Row crops weaken slightly; Wheat maintains geopolitical premium; Export sales decent but key is timing of harvest in S America.
- Chicago futures are mixed at midday, with wheat adding modest geopolitical risk and corn and soy retreating from early morning highs amid crude’s correction and hope for improved rainfall in Central Brazil. The EU and GFS weather models are very much at odds over Brazilian precipitation beyond Nov 4. The EU model hints at normalisation, while the GFS model (and Canadian) carry dryness into the first week full week of November. Brazilian weather to date has had limited impact on price discovery and yield potential but gains in importance considerably beyond the next 10 days. Row crop balance sheets aren’t yet at a point where supply dislocation can be ignored (like in 2016 and 2017), and so the market’s path diverge massively based on weather performance in S American in late autumn/winter. Dryness in Mato Grosso, as well as excessive rainfall in Rio Grande do Sul will both be focal points. Note that soy seeding typically begins in earnest in RGDS in November.
- Spot WTI crude is down $1.50/barrel at $83.80. Crude has been somewhat volatile between $83-85. $90+ requires confirmed disruption of supply in the Middle East, but we would remind that strength in energy prices to date has been largely a function of expanding US exports and historically tight crude stocks. We see value in spot WTI below $80.
- US export sales in the week ending Oct 12 were decent. Exporters in the period sold a net 53 million bu of corn, vs. 35 million the previous week. Assuming sales erode June onward amid trend yields in S America, Work suggest that weekly demand of 44-46 million bu into late spring validates USDA’s forecast. Exporters sold 51 million bu of soybeans, vs. 50 million the previous week. All wheat sales totalled 13 million bu, vs. 23 million the previous week but 3 million above the pace need to meet USDA’s target. Meal sales were a sizeable 559,400 tons, vs. 479,000 the previous week. Already US meal export commitments account for 40% of USDA’s annual forecast , with 11 months remaining in the marketing year. Argentine crush doesn’t improve until new physical soy supplies are available in Mar/Apr. Demand for US meal continues throughout winter.
- We would also note sorghum sales in the week ending Oct 12 totalled 7.5 million bu, including known Chinese purchases of 2.6 million.
- FAS announced exporters sold 110,000 mt of US soy to China this morning.
- We expect the pace of US export sales to stay reasonable into winter, but an extension of US exporters’ window of opportunity is needed. Key is the timing of 2024’s shift in purchases from the N Hemisphere to S America. This will be entirely a function of the pace of Brazilian soy plantings over the next 2-3 weeks Seeding dates matter this year as it appears Argentine producers will again seed a near-record amount of second crop corn, which isn’t harvested until May.
- The US economy in Q3 grew by a larger than expected 4.9%, which shows resilience, but market sentiment remains hyper focused on elevated interest rates for a prolonged period of time. Equity markets today are focused on future consumer spending. The Dow at midday is down 190 points. Equity markets worldwide have struggled since mid-October. US dollar strength has been a weight on raw materials.
- The GFS weather forecast is consistent with morning output in calling for a stagnant pattern of dryness in N Brazil and excessive rainfall worth 3-8” in RGDS and Parana in S Brazil into Nov 5. Light/scattered rain in C Argentina this weekend chip further away at drought.
- Markets are waiting on their next tradable story, which we would maintain centres on S American weather beginning in November. The choppy nature of the marketplace persists this week and next.