- Chicago ag futures are strong but have fallen from morning highs. However, sustained weakness in the US$ has allowed new speculative money to find raw material markets, while rising US export demand and adverse global weather patterns lend fundamental support.
- Soy oil has led the rally this morning as exporters sold 33,000 mt to India. Indian demand for US soy oil is rare and hasn’t happened in bulk since 2012/13, when India secured 113,000 mt. This is important as it indicates a change in global vegetable oil trade flows. A close above $9.35 this week foreshadows a more dynamic bull market in Chicago soy oil.
- US export sales through the week ending Oct 29 included a massive 103 million bu of corn, 56 million bu of soybeans and 22 million bu of wheat.
- Year-to-date US corn export commitments now sit at 1,307 million bu, up 179% from last year and a near-record large 56% of the USDA’s forecast. Soybean export commitments are a record large 1,782 million bu, up 132% from last year and already 81% of the USDA’s forecast, also record large.
- Bean sales moving forward need to average just 11 million bu/week to meet the USDA’s forecast, which is clearly too low. We have raised projected 2020/21 US soy exports to 2,325 million bu, 125 million above USDA. This leaves zero room for yield loss.
- Year-to-date wheat commitments total 616 million bu, up 12% from last year. This is more aligned with the USDA’s 975 million bu forecast, but sales have been slightly better than expected all season despite lofty Gulf prices.
- We also mention that China last week secured another 13 million bu of US sorghum. 2020/21 sorghum export commitments are now 143 million bu, a sizeable 55% of the USDA’s forecast with 43 weeks left in the marketing year. The USDA’s 2020/21 US sorghum export is 20-30 million bu too low. This indicates that domestic rationing is needed. This is being reflected in the interior cash market, with sorghum basis reaching $1.15/bu over Chicago corn futures in parts of the Central Plains. Sorghum prices are working to assure acreage expansion. This will complicate the seedings matrix across the Southern and Central US Plains.
- The US forecast has pushed rainfall early next week even farther east. Precipitation totals in excess of 1″ are now expected to be isolated to IA, IL and WI. A few light showers are possible across the far Eastern Plains, but drought will be ongoing across a bulk of the HRW Belt. Severe/extreme drought is firmly in place across CO, NM, Western KS and Western NE.
- The midday GFS weather forecast is wetter in parts of Central Argentina but is otherwise consistent with prior output. Normal rainfall will develop in Central Brazil beginning next week but areas of the far North and South will be left dry. Much of Argentina’s crop belt, too, will see well below normal rainfall into the second half of November. Decent totals will favour the far Western Argentine crop belt Nov 13-15 but dryness returns thereafter. Irregular precipitation in S America is a concern.
- Markets continue to digest the decline in US end stocks. Longer term, greater than expected US yield cuts or continued drought in Argentina triggers the need to ration soybean supplies, while even corn needs to keep 2021 seeding intentions above 90 million acres. The USDA will release its 10-year baseline projections on Friday afternoon.