- HEADLINES: Weekly export sales surprise in US holiday week; China buys US wheat/corn; Midday GFS weather forecast like prior runs with the rains backloaded.
- Chicago ag markets are mixed at midday with soybean/soybeans lower while corn/wheat push higher. The corn market finished its December liquidation and has finally awoken to the fact that US corn values are competitive in the world market due to large export purchases over the US Thanksgiving Day holiday. 2023/24 world feedgrain trade is record large helped by China’s massive imports of Brazilian corn in recent months.
- Chicago soymeal values are struggling on slowing US export demand due to historically high prices (new weekly sales of just 64,600 mt) and the competitive nature of Brazilian old crop meal fob offers. Cash soymeal is bid at $18/ton over and offered at $20 over on the Illinois rail. This is underpinning Dec soymeal futures and firming calendar spreads with no soymeal registered against December delivery.
- There are only 62 contracts of soyoil registered for Chicago delivery, but with cash soyoil at 3-3.5 cents over on the Illinois rail, we doubt that deliveries will be large. The December/January soyoil spreads have been wild with values soaring late last week and then collapsing in recent days with December soyoil trading at a discount.
- The USDA reported 134,000 mt of US soybeans that were sold to China which helps in confirming cash connected rumours of demand in recent days. We hear that China has booked another cargo of US soybeans for February this morning along with 2 cargoes of Brazilian soybeans for March.
- The FAS/USDA weekly export sales report showed better than expected totals for US corn, sorghum, wheat, and soybeans. The US sold 75.9 million bu of corn, 69.6 million bu of soybeans, 22.9 million bu of wheat, and 7.3 million bu of sorghum. USDA reported that China booked just under 200,000 mt of US wheat with their crop year commitment rising to 1.0 million mt. China is on pace to secure 1.5-1.8 million mt of US wheat in 2023/24 which would raise US annual export commitments by 25 million bu. The US has sold 466 million bu of wheat (down 28 million or 6%), 963 Mil of corn (up 241 million or 33%), and 1,137 million bu of soybeans (down 225 million or 16%). The US soybean export sales pace was down over 300 million in late October and has gained 100 million bu in the past 30 days. China booked 2 cargoes of US corn last week with 725,000 mt sold to unknown which could be China, it is something that is being discussed.
- The world freight market is on fire with rates soaring in tightening vessel supplies and strong line-ups for a host of commodities. A soaring freight market is often a harbinger of a strong world economy, but a portion of the gain is likely related to the low water levels and high cost in going through the Panama Canal. Some vessels are going south around the horn of S America which is likely taking freight tonnage off the market. A sinking world demand profile does not add up when world trade appears to be so strong. Most freight brokers a forecasting further gain into Q1 2024.
- Chicago brokers estimate that funds have bought 11-12,000 contracts of corn and 6,700 contracts of wheat, while selling 2,200 contracts of soybeans. In the products, funds have sold 5,400 contracts of soymeal and 1,500 contracts of soyoil.
- The midday GFS weather forecast is consistent with prior runs with ongoing dry weather for another 3-4 days. Then totals of 1-2” are forecast across N Brazil next week with drier weather in the 7–12-day period. The extended range model offers near normal rain, but our confidence this far out stays low due to a lack of verification in recent weeks. A trend of above normal temperatures and below normal rainfall persists across N Brazil.
- Unwanted rainfall of 3-5” impacts RGDS and Parana in S Brazil. Argentine weather is favourable with additional rain into Monday. Dry/mild conditions follow into Dec 9 which will aid the spring seeding push.
- The Brazilian weather pattern is like recent runs and abnormal in our view.
- OPEC announced Q1 2024 production cuts that were largely expected, and crude oil futures fell $3.00 on profit taking. Market volatility is ramping up in a host of commodities including energies, ags, and livestock on managed money flows. US weekly grain export sales were surprising over Thanksgiving which underscores that price is buying demand. And N Brazilian December weather is of the utmost importance following the record dry start of the growing season. The grains are forming seasonal lows. The talk that China has secured 3.0 million mt of US sorghum and is again buying corn and wheat must be paid attention to.