- HEADLINES: Chicago down following crude oil ahead of US Central Bank meet; Southern Brazilian flooding worsening; GFS midday weather forecast offers a drier Southern Brazil in November.
- Chicago futures are lower at midday. Corn and soybean futures are slightly lower with US hard wheat futures mixed. Other than the soy product trends on the oil share spread unwind, Chicago has had difficulty sustaining a break or a rally since late summer. The choppy/sideways Chicago price trend should persist.
- The bulls claim that the US harvest is nearly completed, and that higher prices are needed to pull supply from the farmer. The bears cite diminished US export demand and future record S American crop potential. Both sides are right (as of today), which is leading to sideways trade. In fact, Friday’s big winner is today’s big loser, soymeal. US soymeal export sales as of mid-October are the second largest on record. However, tomorrow the EIA will provide US biodiesel production including renewable diesel demand for various fats and vegoils. There are budding demand bull stories for both soy products.
- Chicago brokers estimate that managed money has sold 3,300 contracts of wheat, 4,500 contracts of corn, and 3,900 contracts of soybeans. In the products, funds have sold 4,600 contracts of soymeal and bought 1,900 contracts of soyoil. Managed money and index funds are on the sell side of Chicago. This needs to change for a longer-term bottom to form and a sustained rally.
- FAS/USDA indicated that for the week ending Oct 26, the US shipped out 20.9 million bu of corn, 69.5 million bu of soybeans, and 7.0 million bu of wheat. The wheat and corn exports were below trade expectations while soybeans were in line.
- For their respective crop years to date, the US has exported 194.7 million bu of corn (up 28.8 million or 17%), 365.6 million bu of soybeans (down 10.6 million or 3%), and 261.4 million bu of wheat (down 93 million or 26%). The US looks to export a near equal number of soybeans in the first 2 months of the crop year vs last year (400 million bu) which makes any annual projection of US soybean exports of 1,650 million bu or less statistically difficult.
- Rainfall across Southern Brazil keep adding up and is historically unprecedented. Key areas of SW Parana have now received 33-40” of rain with widespread areas receiving 27-36.00” of rain in the past 2 months. And the forecast calls for another 1.50-5.50” of rain before the end of the week.
- Flooding is widespread according to reports and farmers are facing yellowing corn and the need to replant soybeans. Northern Brazil has received all the weather attention due to an unusual drought, but it is the southern third of Brazil where months of heavy rain is taking a real toll on Brazilian summer row crop yield and production.
- Chinese pork values are down 7% in a week, one of the largest ever moves as farmers liquidate herds following an autumn festival holiday that failed to produce improved demand. China’s hog oversupply has been evident for a year and farmers are just giving up. ASF is not the culprit according to Asian sources. ASF has been in the background of Chinese agriculture for years and new hog hotels have been able to build supply and manage the disease. ASF hot spots often develop, but the big fall in price is due to herd liquidation/margins.
- The GFS weather forecast has trended drier across Northern Brazil with another round of heavy rain for Southern Brazil of 1.50-5.50” before a welcomed drying trend. The drier weather across Southern Brazil is welcomed amid weeks of above normal totals. Near to below normal rain will drop across Northern Brazil with increased totals forecast to start next weekend. The extended range forecast has been inconsistent for Northern Brazilian rainfall and the intensity of a high-pressure Ridge aloft. Our bet is for continued below normal N Brazilian rainfall into mid-November.
- We look for the US soybean harvest to reach 85-87% with corn to reach 72-75%. The US harvest is in its final stages this week. Chicago soymeal futures will stay extremely volatile with little hope of expanded Argentine offers into May of 2024. We stay bullish of US soy products with the grains to chop in a broad sideways range. US crude oil being down $3/barrel has added to the bearish mentality.