• HEADLINES: Row crops recover; Dow surges 700 points.

• Chicago ag markets have recovered from morning lows amid surging equity markets and as corn and soy can’t quite shake firm and rising interior basis levels. That basis has been so strong during the throes of harvest is noteworthy and hints at some measure of ongoing supply/demand imbalance. Soy crush margins remain incredibly profitable. Cash ethanol production margins this week are up slightly amid strength in ethanol prices. Export demand is critical in the long run but until final yields and Sep-Nov residual disappearance is known, the market will have difficulty in understanding just how tight near-term supply and demand is. The Dow at midday is up 700 points and sits at the highest level since late August.

• The next major move will be a function of S American soil moisture in late Nov/early Dec, and even this is uncertain given the return of La Niña-based dryness in Argentina and a projected 10-day dry spell in Central Brazil beyond early next week. Climate outlooks maintain favourable weather in Brazil throughout the autumn and winter months, but the S American growing season in 2022/23 is the most important in years.

• Rigidly neutral trade has not been limited to US markets, but a lack of conviction is clearly present elsewhere. Brazilian corn futures and basis levels have failed to rally, despite Black Sea export corridor concerns, but Brazilian corn is near a record price for late Oct. Record Brazilian export demand provides support on breaks there. Corn and soy have found equilibrium values. Wheat will be subject to disruptions in Black Sea shipments Nov onward, though we reiterate that the pace of Russian wheat exports has risen since early October. Russian wheat will be cheap indefinitely.

• We estimate that managed funds today are long a net 250,000 contracts corn, unchanged from last week, 70,000 contracts of beans, up slightly, and short a fairly sizable 26,000 contracts of wheat in Chicago. Wheat’s short is subject to covering.

• We are uncertain regarding the evolution of Black Sea trade if the corridor is eliminated or adjusted, but it is a headline risk that dominates wheat price discovery in the short run.

• The S American GFS weather forecast is again unchanged in S America into the middle part of November. Soaking rainfall of 1-4” impacts Paraguay and Parana and Sao Paulo in southern Brazil on the weekend. Regional showers of 1-2” are forecast in Mato Grosso do Sul and Mato Grosso early next week. All but RGDS in far southern Brazil will be well watered on Nov 1. A lengthy drier pattern follows, with little/no rainfall offered to any crop region in S America Nov 1-10. Brazilian soy seeding will race ahead. The return of regular showers will be needed soon thereafter.

• Markets cannot break until favourable S American weather in Dec is confirmed. Rallies struggle on sluggish global trade. Our long-term concern is that global weather patterns improve as La Niña and the US loses additional market share to S America in crop year 2023/24.

To download our weekly update as a PDF file please click on the link below: