- HEADLINES: EPA corn ethanol mandates supportive; Limited progress scored between Biden/Putin on troop build-up; US stock market soars on Omicron threat.
- Chicago ag markets continue to chop, with grains steady/higher and old crop soy futures down 10-14 cents at midday. Soybeans are sagging as rumours out of the Biden Administration suggesting that long awaited biofuel mandates will be released later today. The rumours have new mandates not making the US biofuel industry happy. Potential bad biodiesel mandate news along with Brazil being cheaper from February forward has caused the soy complex pressure.
- Corn/wheat futures were initially tugged lower and have recovered. A bilateral discussion between US President Biden and Russian President Putin yielded limited progress with Russia blaming their troop build on Ukraine, they are the one building troop numbers along a mutual border. The Biden/Putin talks failed to lower political tensions with key US intelligence sources suggesting that Russia could invade Ukraine in late December or early January. Chicago bears would not want to be short of grain should any fighting develop. Russia and the Ukraine are in the world’s top 3 grain exporters. We doubt that US/NATO member economic sanctions will change Russia’s aggression. Note that US President Obama placed sanctions on Russia on their taking of Crimea in 2015.
- The Crimea sanctions pushed Russia to increase its own livestock industry and import less of EU/US meat and dairy goods. Russian raw materials stretch over 11 time zones, and even ending Russia’s ability to wire money abroad is not expected to have much economic bite. Embargoing Russian energy or grain would just add to world inflationary pressures. This leaves the west weak on having an economic stick to fight Russian aggression.
- October Trade data showed that China imported record monetary values of US ag products at $5.23 billion with US ag exports also record large for any month at $17.6 billion. This reflects the need for feed/food within China. US ag exports are strong and this along with heady ethanol/soy crush demand will underpin Chicago. Following the injury inflicted by Hurricane Ida in early September, US ag exports have been strongly recovering. The October data will cause WASDE to be timid with further cuts in US 2021/22 soybean/wheat export estimates on Thursday.
- US stock markets are soaring as the Omicron variant is not as dangerous to human health as Delta. It is “risk-on” in the financial markets, a trend that will not go unnoticed by grain traders following the USDA December Crop report. The US/world economic outlook is brightening in that Covid will likely be a waning influence in 2022. This raises confidence that record large US grain demand will persist and that spot Chicago soybean futures will hold key support at $11.75-12.00 during the coming Brazilian harvest.
- The EPA set ethanol mandates at 12.6 billiuon gallons for 2020, 13.8 billion for 2021 and 15 billion for 2022. The 2022 mandate is supportive with the EPA suggesting that it will reject a significant number of small refinery waivers. No news was offered on biodiesel/advanced biofuel mandates which will be out later this afternoon. Unless you trade RINs, few really care about 2020 or 2021 ethanol/biodiesel mandates as usage is already determined. The 2022 ethanol mandate of 15 billion gallons amounts to nearly 5,300 million bu of US corn grind. We expect that it will reach 5,400 for 2022 on strong profit margins.
- The midday GFS weather forecast is slightly drier than the overnight run for Argentina/S Brazil with heat noted late next week. The forecast remains concerning amid the fast decline in soil moisture levels.
- Expected bearishness over the biodiesel mandate has pressured Chicago soybeans/soyoil at midday. Just getting past the rumours that extend back for years will aid soyoil. Corn/wheat will closely follow S Brazilian/Argentine weather next week. The forecast is concerning into yearend. Our view is bullish of grain on breaks. March soybeans should find support below $12.40 on strong US crush margins and strong cash basis bids.