4 November 2021

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  • HEADLINES: Chicago slides sharply on China demand concern for US soybeans; Corn/wheat follow on fund selling.
  • An early Chicago rally failed with corn, soybean and wheat futures sliding lower into the midday hour. Soybeans have been the downside price leader on slowing Chinese demand as the wait times to pass through the Panama Canal rise with Brazil offering new crop cargoes for sale for late December. Heading into the USDA November Crop report, traders are understanding that the window of export opportunity is closing on the US Gulf with any additional demand to be sourced off the PNW (to China).
  • The US export sales pace in corn, soybeans and in wheat is under last year, but domestic margins for US soybean crush and ethanol production continue to rise, and are record large for ethanol. This is producing fancy cash basis bids for spot corn/soybeans. The market rallied on the strong domestic margins but slid recently on unexciting US export demand. It is a battle between the strong domestic market and weakening demand for US soybeans from China.
  • Chicago brokers estimate that funds have sold 9,000 contracts of soybeans, 7,600 contracts of corn, and 1,500 contracts of wheat. In soy products, funds have sold 4,900 contracts of soyoil and 4,700 contracts of soymeal. The fund selling has been aggressive in the soy complex from the opening bell.
  • US weekly export sales for the week ending October 28 were; 14.7 million bu of wheat, 48.2 million bu of corn, and 68.5 million bu of soybeans. The soybean and corn sales were larger than expected. For their respective crop years to date, the US has sold 478 million bu of wheat (down 138 million or 22%), 1,221 million bu of corn (down 86 million or 6.5%), and 1,187 million bu of US soybeans (down 591 million or 33%). The US soybean sales pace argues for a US soybean export estimate of 1,900 million bu or less compared to the USDA forecast of 2,090 million bu.
  • The Panama Canal is the next supply chain snarl with traffic causing backlogs of 14-16 days that are expected to lengthen to 19-23 days by early December. The canal backlogs are raising the cost of exporting US product to SE Asia. The additional ocean freight cost is adding up. China is comfortable with its US soybean supply afloat, and they are turning their any new purchases to the PNW. Note that Brazil is offering their new crop soybeans for late December out of the Northern ARC (northern export terminals) export terminals which will cost about $0.20/bu less on a CIF basis to China. Therefore, Chicago is concerned about declining US soybean exports in early 2022 and the slow pace of sales to date. January soybean futures have fallen to initial support at $12.10-12.20 with the next level being the October lows at $11.96.
  • The midday GFS weather forecast is like the overnight run with widely scattered showers that will develop across the E Midwest during November 12-14. Cumulative rainfall of 0.5-1.50” is offered for IL, IN and OH.  Dry and warming weather follows in the 11–15-day period.
  • Boosts in soil moisture occur in C and N Brazil indefinitely. Needed rain impacts Argentina this weekend. The GFS forecast continues to 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.
  • Commodity values are falling across the spectrum as risk off is the mentality as world energy prices decline. We suspect that the break might be temporary, and that inflationary buying will return following the USDA November Crop Report. Key support rests below $5.50 in December corn and $12.10 in January soybeans. Wheat remains a bull market with KC wheat having support below $7.80. A trading bottom should occur early next week. The US farmers will be virtually finished their corn/soybean harvest and seasonally, it is historically the wrong time of the year to be overly bearish. Lastly, S American weather can’t get much better.

 

  • For what it is worth, a recently released EU publication was accompanied by the following note:

Soaring fertiliser prices, in part driven by a strong run-up in natural-gas prices, are poised to add more uncertainty to global food markets well into the 2022/23 season. With international prices of most food crops (with the exception of rice) already at multi-year highs and their exportable supplies barely adequate to meet demand, any weather or input induced shortfall in 2022 could have worrying implications for global food security. To reverse the alarming rise in hunger in a pandemic-ridden world calls for concrete actions to guarantee supplies and access to food, particularly for the most vulnerable. 

  • To us at least, this is a very telling statement!