- HEADLINES: Weak macros outweigh positive weekly ethanol data.
- Profit taking is theme of the morning in Chicago as macro weakness trumps another round of bullish energy/ethanol data. WTI crude futures are down $2.70-2.80 per barrel, with chart-based resistance at $85 intact for now. RBOB gasoline at midday is down $0.10 per gallon. Weak US GDP data last week and general concern over inflation and the return of elevated Covid cases in China has triggered a ‘get me out’ mentality at midweek. We would also highlight that corn and wheat futures worldwide were heavily oversold as of Monday. Managed funds since mid-Oct have a bought an estimated 65,000 contracts of corn, 35,000 contracts of wheat and 15,000 contracts of beans. New buying will be on pause until NASS’s objective yield data is released next week. FAS again failed to announce any new export sales this morning.
- IHS Markit (formerly Informa) estimates US corn yield at 178.7 bushels/acre, with production pegged at 15,204 million bu. This compares to NASS’s Oct production forecast of 15,019 million bu and if realised will offset projected gains in industrial use. IHS Markit estimates US soy yield at 51.5, with production put at 4,454 million, marginally above USDA’s 4,448 million bu forecast.
- US ethanol production through the week ending Oct 29 totalled 325.5 million gallons, vs. 325.2 million the previous week and a full 30 million above the pace needed to meet the USDA’s ethanol grind forecast. The industry remains at 97% of capacity and still stocks have failed to build. US ethanol stocks last Friday totalled 845 million gallons, vs. 8 million from the prior week but still historically low for late Oct relative to consumption. Our view is that weekly ethanol production continues in a range of 315-325 million gallons well into the winter months. Pace analysis indicates US industrial corn use will exceed USDA’s forecast by 150-200 million bu.
- Cumulative world wheat trade as of early November is calculated at 59.8 million mt, record large and up 3 million mt (6%) from last year. Importantly, combined wheat exports this week are up slightly on the prior week. This is more evidence that suggests high prices are not yet curtailing importer interest.
- However, a correction in world wheat prices is needed. December Paris milling wheat is down €3 per tonne at midday. Global rapeseed prices, too, are correcting from heavily overbought technical levels
- The midday GFS weather forecast is wetter across the Great Lakes and eastern Midwest in the 7-10 period as a deep low-pressure trough sinks into the eastern US late next week. Cumulative rainfall of 1-3” is now offered to E IA, WI, IL, IN and OH Nov 11-13. Active harvest/fieldwork occurs in all areas through early next week but harvest and SRW seeding delays return thereafter.
- Boosts in soil moisture occur in C and N Brazil indefinitely. Heavy rain impacts N Argentina over the next 48 hours. The GFS continues hint at the return of Argentine rainfall Nov 14-16, but whether this is pulled into the nearby period will be monitored closely in the days ahead.
- The lack of sustained active Chinese buying of US soybeans has kept major fundamental resistance intact at $12.50, basis spot, and we have in recent days has highlighted that a few cargoes of Brazilian soybeans have found the world marketplace amid the timely planting of the 2021 crop there. We maintain a long-term bullish US/global grain outlook, but whether USDA begins the process of trimming US corn stocks next week hinges solely upon yield. We would advise waiting post-USDA weakness next week to add to forward wheat/corn supply coverage.