- HEADLINES: Morning rally fades on lack of news; Rapeseed markets soar; Argentine dryness to persist.
- Price action in Chicago and elsewhere has been mixed this morning, with oilseeds gaining on grains. We understand that Chinese buying/pricing exists under the Chicago soybean market and despite varying opinions on final 2021/22 US soybeans exports, there is no doubt that China remains the big short in the marketplace currently. The pace of Brazilian soy seeding will be rapid in the weeks ahead, and new crop soybean exports will reach the world marketplace by the second half of February. But there exists a wide open for excellent US soy sales and shipments in the meantime.
- Outside markets lack a clear trend at midday. Paris milling wheat and corn futures look to settle near unchanged. It is EU and Canadian rapeseed markets have been this morning’s bullish leader, with spot rapeseed in Europe reaching new rally highs of €689 ($801) per tonne. This compares to Nov Chicago soybeans at $451 per ton. The trade is now wondering whether rapeseed prices must nearly double soybeans in order to adequately shift demand. Recall the world’s rapeseed supply issue is not solvable this year, and elevated substitution from rapeseed oil to soybean or other vegoil is a requirement.
- Iraq’s ag ministry has suggested 2022/23 wheat seedings there would be cut in half due to water shortages. Any drop in Iraqi wheat production would boost the need for imports immediately as end stocks there have dwindled to near zero. Cutting Iraqi planted wheat area in half would mandate imports of 4.5-4.7 million tonnes, vs. a projected 2.6 million in 2021/22. This would also be a new record large import total.
- Relatedly, Kazakhstan’s Minister of Ag pegged total grain exports in 2021/22 at just 6.0-6.5 million tonnes, vs. USDA’s projected 8.1 million. There is a clear wheat supply/demand issue in the Mid-East and Kazakhstan, and the USDA in subsequent releases will continue to boost total world wheat trade.
- It is tough to find other significant input. EIA’s weekly report on Wednesday is expected to show another week of sizeable US ethanol production, while crude and motor gasoline stocks stay well below recent years. We have previously highlighted that ethanol production is incredibly profitable amid current corn prices. We note that the incentive to boost blend rates has also been elevated, with RBOB gasoline’s premium to the ethanol ($0.28 per gallon) the highest since March.
- S America’s weather pattern appears to be developing a classic La Niña signature as dryness spreads northward into Rio Grande do Sul in far Southern Brazil. The midday GFS forecast has extended near complete dryness in Argentina and Southern Brazil into Nov 3. Rain will be needed soon thereafter.
- The midday GFS weather forecast has reduced rainfall totals projected in IA next week but maintains a pattern of widespread soaking rainfall across a bulk of the Midwest next Mon-Wed. Rainfall totals in excess of 1” will favour MO, IL, WI, MI and portions of IN. We note that the EU model has a much drier bias next week, and so the EU’s afternoon solution will be monitored closely. This is not an overly threating pattern but will add to harvest challenges east of the Mississippi River. Already corn and soy yields in the second half of harvest are expected to drop meaningfully in pockets of the eastern Midwest due to recent wet conditions.
- The S American forecast is unchanged at midday. Rapid soil moisture lies ahead across Argentina’s primary ag belt.
- Harvest lows have been scored in our opinion, but the rate/intensity of this season’s recovery requires steady confirmation of sizeable demand. We maintain a strategy of using breaks to add to Q1 2022 supply coverage. Continued dryness in Argentina will be a big deal for corn and soymeal markets.