- Chicago ag futures are mixed at midday with wheat values lower while corn/ soybeans hold in the green following an early round of fund buying tied to the promise of a Pfizer vaccine that is suggested to be 90% effective against Covid-19.
- That vaccine has sparked strong buying of US equities amid the hope for a return of normal life in 6-9 months that releases pent up economic demand. US livestock futures are sharply higher on the hope for foodservice restocking while Covid-19 hedges such as gold and bitcoin decline. We look for a higher Chicago close amid threatening weather for Argentina and the southern third of Brazil. End users and importers are hoping for a bearish USDA report to buy.
- The Chicago post overnight trade featured active fund buying. However, profit taking ahead of the USDA November crop report pared early gains. The bulls used the vaccine rally to trim back market length with a few traders arguing that some of the USDA bullishness has been factored into price. 75% of the time back to 1999, US soybean end stocks ended up being above the average trade estimate. WASDE tends to be conservative with its export and crush analysis until more is known about the coming S American crop size. Brazil’s CONAB will be out early Tuesday with their 2021 crop forecasts.
- Chicago brokers estimate that funds have bought 3,000 contracts of corn and 5,700 contracts of soybeans, while selling 3,500 contracts of wheat. And funds have bought 1,300 contracts of soy meal and 3,400 contracts of soyoil. Funds were opening buyers but have since become sellers on the midday correction.
- FAS confirmed that 123,000 mt of US soybeans were sold to an unknown buyer for the 2020/21 growing season.
- US weekly export inspections for the week ending November 5 totalled 27.2 million bu of US corn, 91.7 million bu of soybeans, and 11.2 million bu of wheat. US corn and wheat exports were less than expected while soybeans were larger. China took just over 63 million bu of US soybeans, 69% of the US total. China also loaded out 3 boats of US corn which is a trend that continues weekly. China shipments are on track to take 9.5-10.5 million mt of US corn in the 2020/21 crop year.
- Brazilian dryness has placed concern on their ability to ship out February soybean exports in line with existing sales. Most Brazilian farmers do not plant soybeans that mature in 90 days. And soybean farmers in Mato Grosso and Goias have re-seeded several times based on poor germination rates. We have the US shipping 1.7 million mt of US soybeans to China, but if the dry weather trend were to persist for another 10-14 days, that estimate could be too low by 1-2 million. The US 2020/21 balance sheet does not have the room for the US to export additional soybeans with crush rates rising on a near daily basis. The rationing of US demand will be a “fist fight” between exporters and crushers.
- The Russian Economy Minister said that Russia was discussing ways to curb sunflower seed exports. Rumours had Russia increasing the export tax from 6.5% to 30% as of January 1 and/or introducing permits for export. Either is restrictive on Russian sunflower seed exports which is needed to cool rising domestic sunoil/domestic food inflation.
- The midday GFS weather forecast is consistent with limited rain for key crop areas of S Brazil/Argentina through the weekend. An improving rainfall outlook develops early next week for N and C Brazil while Argentina/S Brazil maintain a dry forecast into November 20. The S American forecast is concerning for Argentina/S Brazil crop yield while N Brazilian farmers complain that 2020 is their worst seeding start in a decade.
- End users and importers are hoping for a bearish USDA crop report to buy, just like October, due to ongoing strong US export demand and S American crop woes sparked by weeks of drier than desired weather. The Pfizer Covid-19 vaccine is bullish to US corn/soyoil as Americans may get back to normal driving and crude oil rises sharply on supply. The bearish aspect Covid biofuel demand is in decline. WASDE should not further cut ethanol usage rates.