- Ag markets have done little since the end of the overnight session, with beans up slightly on Chinese trade optimism and with grains steady to slightly weaker on a lack of demand and improving S American weather forecasts . Soy oil has led the complex rally at midday following new seasonal highs posted in Malaysian palm oil futures. EU rapeseed oil has followed in recent days, and so global vegetable oil markets are rising as Malaysian palm oil stocks are steadily reduced.
- There is an otherwise lack of fresh news. No new sales were announced by FAS this morning. Markets simply await NASS yield data and clarity as to whether China will accept the US’s invitation to finalise Phase One of partial agreement in Iowa at some point this month.
- US export inspections through the week ending Oct 31 included 11 million bu of corn, vs. 15 million the previous week; 11 million bu of wheat, vs. 21 million the previous week; and 54 million bu of soybeans, vs. 58 million the prior week. Soybean shipments were in line with expectations, while grain shipments were a bit weaker.
- For their respective crop years to date, the US has shipped just 148 million bu of corn, down 62% from last year; 402 million bu of wheat, up 21%; and 351 million bu of soybeans, up 11% from this week a year ago. We expect the USDA to leave annual wheat and bean export forecasts unchanged in Friday’s WASDE, but with corn shipments to date accounting for just 8% of the USDA’s current forecast, the lowest on record, a 100-150 million bu reduction in 2019/20 corn exports is probable.
- We also note that with ethanol production still well behind last year, the USDA is likely to lower total US corn consumption 125-175 million bu. This will act to offset completely any 1.5-2.1 bushels/acre reduction in yield. US corn disappearance remains concerning.
- Paris grain futures have followed the US to modest losses, with spot corn there fall ing €6.75/mt ($0.19/bu) ahead of November’s expiration. Deferred EU corn futures are down slightly. Leaking EU wheat and corn markets suggest that the rally in Russian fob wheat prices was overdone. The corn market is prepped for enlarged Black Sea corn exports beginning in late 2019.
- Yet, macro financial markets are undoubtedly positive. Spot WTI crude has rallied $1/barrel to a new 6-week high. The Dow is set to post a new all -time record high near 27,500 as US/China tensions erode. The next few weeks will be marked by a battle between oversupplied grain markets against improving general raw material outlooks.
- The midday S American weather forecast maintains a pattern of normal/above normal across Central Brazil and Northern Argentina into the latter part of November. Most important is that meaningful high-pressure ridging does not return to Brazil during the period. Seasonal rainfall will be allowed to move northward in the next 72 hours. Vegetation health improvement lies ahead.
- Ag markets have traded in rather narrow ranges. This narrow, choppy trading likely continues into Friday. Key will be the performance of interior US basis levels as harvest accelerates amid Central US dryness.