- Chicago ag futures are mixed but well above session lows at midday. Fund liquidation dominated early amid another round of weakness in global energy markets, but strong US and global grain fundamentals have offered support. US corn is the world’s cheapest feedgrain. US soybeans are virtually the only supply available to world importers through mid-Feb. And even wheat export demand has held steady despite large premiums to EU and Black Sea origin. Spot WTI crude is down $1.40 at $36 but the Dow has rallied to modest gains.
- US export sales through the week ending Oct 22 featured 88 million bu of corn, vs. 72 million the prior week and well above expectations; 60 million bu of soybeans, vs. 82 million the prior week; and 27 million bu of wheat, vs. 14 million the previous week.
- The week’s wheat business was heavily weighted toward white wheat, with China buying one cargo and S Korea buying three. We would mention that US white wheat export commitments currently sit at 141 million bu, a hefty 76% of the USDA’s forecast. Asian demand for US white wheat has been robust. For their respective crop years to date, the US has sold 1,204 million bu of corn, up 168% from last year, 1,726 million bu of soybeans, up 145% from last year and 594 million bu of wheat, up 11%.
- Excellent US corn and soy export demand is known, but it is expected to continue well into late 2020 even assuming normal S American weather. US soy export commitments now account for a record 79% of the USDA’s forecast. As such, a final export number of 2,275 million bu is most probable. This will pull down ending stocks by 75 million bu assuming NASS’s yield is unchanged. New Chinese demand for US soy has been slower in recent days but there is still little/no room for S American yield loss. Acute focus will be placed on Argentine soil moisture as La Niña strengthens.
- Even US corn export will be forced upward if sales of 60+ million bu continue into late November. US exporters were announced to have sold 56 million bu of corn to Mexico this morning. 35 million bu will be delivered in the 20/21 crop year. Exporters also sold 5.5 million bu of corn to unknown destinations and the corn market has quickly turned into one being driven by demand.
- The midday Black Sea forecast is slightly drier in Southern Russia. The US forecast features dryness and warming temperatures into the middle of November. Row crop harvesting will be complete in the next 10-12 days.
- The midday GFS weather forecast is consistent with its morning output and is viewed as mixed. Heavy rainfall will be ongoing across Central and Northern Brazil indefinitely. Lesser showers will allow Brazilian soy planting to accelerate across major producing states Parana and Mato Grosso do Sul. Zero precipitation is forecast in Argentina into Nov 10. Argentine crop areas benefited from soaking rain last week but it is important that regular rain return no later than late November. A rapidly strengthening La Niña is a concern.
- World cash grain and soy markets will be the principle drivers of Chicago futures into late year. We doubt cash markets can sustain any lasting downtrend amid grain supply tightness across the EU, Black Sea and Brazil. Breaks will be absorbed quickly.