- Soy futures rose 6-8 cents to end the week, led by a strong rally in December soyoil ahead of next week’s expiration. Spot soybean oil stopped just short of $0.40/lb and traded the highest price since July 2014.
- FAS made a rare soybean meal export sales announcement of 130,000 mt of soybeans to the Philippines. Thursday’s Export Sales report showed that cumulative meal exports are now above last year and the highest since 2013/14 at 2.4 million mt. Outstanding sales of 3.5 million mt are down slightly from last year, but the lowest since the 2012 drought. World end users have light coverage.
- However, the USDA raised its annual soymeal export forecast by 500,000 tons to 14 million mt or nearly unchanged from last year’s record export pace.
- The rapidly expanding soybean meal export program highlights the looming battle that will take place between US exporters and the US processors for the 2020/21 crop. We remain bullish as current prices are not rationing the tight US soybean stocks. We see 2020/21 US soybean end stocks at just 30-65 million bu demanding acute rationing via higher prices.
- March Chicago corn rallied 2.5 cents as wheat futures break through chart-based resistance. Corn’s own fundamental input remains bullish. Near complete dryness will persist across Argentina through the end of December. Brazil’s interior market has rallied slightly following CONAB’s 2.3 million mt cut to first crop production. Rising global wheat prices will ensure record global corn feed consumption.
- The Buenos Aires Grain Exchange on Thursday pegged early planted corn’s crop rating at just 24%. This compares to 35% last week and 45% on the same week in 2019. We nte that if the two-week weather forecast verifies, Dec 2020 will be noticeably drier than Dec 2017, the last year of major crop loss. An immediate pattern change is needed to prevent a further 7-8 million mt reduction in Argentine corn supply.
- Managed fund net length on Tuesday was 270,000 contracts, near unchanged from the prior week. Speculative buying resumes next week if weekend Argentine forecasts go unchanged.
- March Chicago wheat rallied 20 cents amid reports that the Russian government is indeed considering placing a sizeable levy on wheat exports to quell food inflation. The issue for markets worldwide is that with respect to a tax, rather than a new quota, the government has the ability to implement one immediately and even retroactively. Any tax will slow both farmer and exporter sales. Interior Russian flour prices this week are unchanged and still record high. Fresh policy news may be published over the weekend.
- We estimate Jul-Dec Russian wheat exports at 25.2 million mt. This implies that the USDA’s global trade matrix features Jan-Jun Russian shipments of 14.8 million mt, the second largest on record. We have no way of knowing just much of this will be left in Russia via policy. Yet, amid record global wheat consumption, some measure of demand will be shifted elsewhere, potentially including to the US.
- The wheat outlook has turned more bullish as Russia aims to cap exports for the first time in years. Not until large N Hemisphere winter wheat crops are confirmed will the market relax.
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