- Chicago futures are mixed at midday in diminished volume as traders/fund managers await US election results and their impact on the macro financial markets. Crude oil futures have recovered from sharp overnight losses as values score seasonal lows on diminished US production. However, amid the large fund ag length, it is taking Chicago somewhat longer to bottom with cash grain markets being the final arbiter. It is cash grain basis heading into first notice day that will provide bullish heart beyond the middle of November.
- US corn futures are sagging on the worry over new US regional lock downs to flatten the health care curve as US Covid-19 cases surge. Although a national US lockdown is unlikely, US ethanol demand could sag as Americans drive fewer miles amid the need to lower infection rates. The 30-day lockdown in the UK has spooked corn bulls into new worry regarding future US ethanol demand amid state by state stay at home orders. US wheat futures are higher as nearly 1.0 million mt of new world wheat demand is working with Turkey’s TMO returning with a tender for 500,000 mt. Syria and North African wheat demand are also working which will be focused on EU/Russia. This new world wheat demand and Brussels lowering their 2020 corn crop estimate (60 million mt vs USDA’s 66 million) has us wondering how the EU will be able to cope with tightening feed supplies. The EU cannot import large tonnages of US corn (besides some small tonnages into Spain) due to unapproved GMO traits, and with the Ukraine nearly sold out of exportable corn supply and a new S American harvest months away, the function of the EU wheat/corn market is to price itself above the world milling/feed markets to preserve domestic feed stores. We worry that with the EU exporting wheat/corn that its feed shortfall is becoming all but unsolvable.
- US export inspections for the week ending October 29 were; 28.4 million bu of US corn, 76.5 million bu of soybeans, and 10.5 million bu of US wheat. Soybean, corn and wheat export estimates were slightly less than expected. We note that last week’s US soybean export inspections were revised up to 103.6 million bu, a gain of nearly 6 million. China accounted for 44.5 million bu or 58% of the week’s total shipments. China also accounted for 50% of the US corn exports on the week or 14 million bu. China continues to actively ship out both US soybeans/corn.
- FAS reported the sale of 204,000 mt of US corn to an unknown buyer. US corn sales have been featured daily since Ukraine fob offers shot up last week. Chicago brokers estimate that funds have sold 5,300 contracts of corn and 3,200 contracts of soybeans, while buying 2,800 contracts of wheat. In the products, funds sold 1,200 contract of soyoil while being flat in soymeal.
- The midday forecast is like the overnight run with limited rainfall for Argentina and S Brazil over the next 10-12 days. Daily rain chances will be ongoing across N Brazil. Showers will allow Brazilian soy planting to accelerate across major producing states Parana and Mato Grosso do Sul. A rapidly strengthening La Niña is a concern as dryness features across Argentina and S Brazil into early 2021. Temperatures across S Brazil/Argentina are cool this week, but warm in the 10-14 day period to the 80′s and 90′s. Drying soils are a worry into mid-November.
- The premiums of November-January and November-March soybean futures bought enough cash soybeans in a nearby position that produces the need for an East Coast processor or exporter to mop up deliverable receipts. Once those receipts are taken, the outlook brightens considerably for US soybeans. And there may be regional Covid lock downs. but US corn is in strong demand from importers. With rising Russian wheat and flour prices, it is difficult to be bearish amid concerning dryness across a good portion of Argentina and at least half of Brazil.