- There is more than one way to eliminate a commodity surplus. The US cranberry industry, hit by Chinese tariffs that has benefited the Canadian cranberry industry, has agreed to destroy a quarter of its 2018 production. It is reported that 240 million lbs will be destroyed. For some reason that angers us even more over the stupidity of this trade war. It is said that some were piling soybeans on the ground in ND because they cannot move the harvest due to the trade war. We don’t know many who have piled soybeans outside and not later regretted it, but maybe they have it hedged. The cost doubtless flows back to the farmer. There is plenty of storage space due to the short corn crop. Elevators are not getting full and little/no corn will be stored outside. We heard told of an elevator in MN that had built outside bunkers that will now remain empty. We wonder if the USDA has been tracking a phantom corn crop in S MN/N IA that is not there, and think that the November corn yield could be a bullish surprise on Thursday. Back in 1993, when farmers knew they had a had a bad crop due to wet conditions it took until the November report that year before the USDA found out and reported how bad it was. Knowing that NE and others did produce record crops the USDA has them at records in too many places where the harvest was disappointing. Potentially in our opinion, the USDA IA corn yield is bushels too high. This is not 1993 but a reflection of it.
- The US and China may or may not be serious about putting an end to their trade war but China appears to be preparing for the long haul if an agreement escapes them. Informa says that Chinese pig producers are reducing soymeal in feed rations from 20% to 10-12%. These may not be the most efficient feed rations but will utilise what feedstuffs they have and can acquire outside the US. China boosted their feed grain production producing surpluses and they will re-balance domestic production toward more protein. They will also diversify their plant protein imports increasing imports of rapeseed, sunflower meal, palm cake and even peas while buying 80% of the Brazilian soybean crop. They are not going to settle on a trade agreement with the US because of any dependence on US soybeans. We believe that China has determined that it will make it to the next Brazilian soybean harvest without buying from the US and the early planting in Brazil will help them achieve that.
- Liquidation is the word of the morning as Chicago traders trim recent net long positions ahead of the November USDA crop report. Traders note that NASS has surprised the trade with larger than expected US corn and soybean yields in recent monthly reports. The average US November corn yield estimate is 180.0 bushels/acre with the soybean yield at 52.8 bushels/acre. This would be down 0.7 BPA from October on corn and down just 0.1 BPA in soybeans. Bullish traders argue that record or near record amounts of October rainfall and several strong wind storms caused an even larger US corn and soybean yield drop.
- Chicago brokers report that funds have sold 2,000 contracts of wheat, 3,400 contracts of corn, and 3,000 contracts of soybeans. In soy products, funds have sold 3,700 contracts of soymeal while buying 1,900 contracts of soyoil. It does not take much volume to push Chicago prices around.
- Colin Peterson (D-MN) will be taking over the House Ag Committee following the Democrats win of the House in the US Mid Term Election. Questions abound on the 2018 US Farm Bill and if Colin will ask for a rewrite. We expect that work eligibility rules for the SNAP program will be modified and that Peterson could push to lift the cap on the US CRP program. Right now, the 33-year-old CRP program is capped at 24 million acres. Rep Peterson has argued to lift the CRP cap and allow additional acres to return to the program to benefit wildlife and farm income. Yet, the US Congressional legislative divide will likely cause the current Farm Bill to be extended for another year.
- Russia has been exporting wheat like it will reach 50 million mt annually. Russia wheat exports look to reach 27 million mt by the end of the year. If the Russian Ag ministry limits wheat exports to 33-34 million mt, this would leave just 5.5-6.5 million to export from January through June. It is becoming obvious that the Russian Government will have to place some sort of restriction on trade to leave enough flour/wheat for their own population. How and when such restrictions are announced is being debated, but an announcement could come before year end. World wheat trade is equal to last year with millers having limited forward coverage. October 2018 world wheat trade was record large.
- The midday central US GFS weather forecast is slightly drier at midday with limited precipitation for the Plains and much of the Midwest into Nov 16. Any meaningful rain will drop across the SE and Eastern US. Several bouts of cold air will cycle southward with one bout on the weekend and another during the middle of next week. Arctic air builds across Canada and will likely cycle southward in the 14-20-day period. This is a cold and mostly dry weather pattern for the Central US heading into late November. The midday S American forecast features near to above normal rainfall for much of Brazil with frequent and heavy rains to start across Argentina this weekend. Favourable conditions will prevail with the only concern being for ripening winter wheat across Argentina.
- The USDA Nov report awaits traders on Thursday. US weekly export sales data will be overlooked as traders focus on US corn/ soybean yields instead. Traders expect that WASDE will cut its US soybean export estimate due to the tepid US sales pace. The big question is US corn yield and whether NASS cut it 1-3 bushels/acre. World wheat prices will likely hold firm on falling supply.