- Fresh rally highs in corn/soymeal/soybeans have underpinned Chicago this morning. An early break uncovered fresh fund buying as speculative longs continue to pile into new length. Soy crush spreads are blowing out to the upside as world soybean end stocks tighten and cash product basis bids rise. Brazil is virtually out of soybeans while Argentine farmers are tight fisted with stored supply as labour strikes loom over their industry. The US 2020/21 soybean carryout is in retreat and the US cannot meet combined domestic/world demand in the months ahead. Tightening stores of US soyoil and soymeal are the result and the market is trying to find a price that produces substitution. In the case of soyoil, the price of canola, sunoil and palmoil are also sky high on tight stocks which argues for a rationing rally. A close above $0.35 basis December soyoil issues a more dramatic rationing rally signal.
- Chicago brokers estimate that funds have bought 11,900 contracts of corn, 2,700 contracts of Chicago wheat, and 7,500 contracts of soybeans. In soy products, funds have bought 7,400 contracts of soymeal and 3,800 contracts of soyoil. The early soymeal rally felt like an exhaustion top on the upside.
- FAS reported the sale of 152,404 mt of US soybeans sold to Mexico and 132,000 mt to an unknown buyer (rumoured to be an EU crusher), along with 130,000 MTs of US white wheat to South Korea.
- The USDA weekly export sales report for the week ending October 15 reflected sales of; 13.5 million bu of US wheat, 72.1 million bu of corn, and 81.8 million bu of soybeans. Corn/soybean sales were larger than expected. The US also sold 321,900 mt of soymeal and 37,000 mt of soyoil. The US has now sold 1,666 million bu of US soybeans, just 10 million less than all the soybeans that were exported in 2019/20. The US soybean export sales pace argues for a 2020/21 export total of 2,325 million bu. Chinese purchases have slowed this week, but other buyers like Mexico and the US are stepping forward.
- On a known basis, China has now secured 25 million mt of US soybeans with 60% of the (10.9 million mt or 6.5 million mt) unknown destination category likely destined for China. This takes estimated 2020/21 China purchases of US soybeans to 31.5 million mt, well on their way to 35-37 million mt for the 2020/21 crop year. Amid the purchases already on the book, a 2020/21 crop year total of 38 million mt is realistic, especially if S America has any new future adverse weather.
- China has booked a known 10.5 million mt of US corn on a known basis with another 1.5 million estimated to be in the unknown category for a grand total of 12.0 million mt. We estimate China corn 2020/21 corn imports from the US at 14-14.5 million mt. So far, the USDA is correct in staying with a 2,325 million bu US 2020/21 corn export estimate.
- Chicago spot soybeans have strong chart-based resistance at $10.80-11.00 with December soymeal showing resistance at $390-400/ton. November soybean futures scored a new rally high to $10.8525 as buy stops were triggered. China showed as a buyer of 11,000 mt of US soyoil, but we doubt that China secured 20,000 mt of meal. The meal sale will be switched or corrected with US cash meal weakening at midday.
- A daily chance of rain exists across Brazil into November 5. Showers start on Friday and continue for the next 2 weeks. 10-day rainfall totals are estimated in a range of 1.50-4.00″ with the heaviest totals falling across Minas Gerais and throughout Argentina. Temperatures cool to the 80’s to 90′s.
- At one point, the nearby crush spread gained an astounding 20 cents/bu as soymeal/soyoil posted hefty gains. The soymeal market is technically overbought as the cash market weakens. A correction is expected Friday on profit taking ahead of the weekly CoT report. However, SW Russian wheat weather remains arid (at least up until October 30 when some rains show on midday run) which will underpin Dec Chicago wheat below $4.16. March corn is fundamentally overvalued above $4.20 without large new US sales to China. Cash corn and soybean movement increased on the morning rally which could spark profit taking in bull spreads.