- HEADLINES: Soymeal rally continues with soyoil in retreat on oil share spread unwind; US SRW wheat sales commitments reach 96 million bu or 66% of annual forecast: GFS drier at midday for N Brazil.
- Chicago grain markets are mixed and slightly higher at midday. December corn and December Chicago wheat futures are up 2 cents, while November soybeans are up 1 cent. Chicago price movement has been modest this morning, but there has been market emotion amid the oil share spread unwind and the bears that see Chicago soybeans as overvalued with rain slated to drop early next week across Northern Brazil.
- It is difficult to gauge how much weather premium exists in November soybean values, but our work suggests that it is modest. Traders have never really grabbed hold of the dryness in Northern Brazil as the area is tropical in nature and it is early to be overly concerned. Moreover, US 2023/24 soybean end stocks will be historically tight with farmers tight fisted with the US harvest pushing beyond 75% complete.
- We anticipate a firm Chicago close with a short covering bounce forecast for Friday. Traders do not want to walk into work on Monday with an escalation of the Israeli war and energy prices ripping to the upside. As an increasing amount of US summer row harvest is completed, the seasonal price trend is supportive of Chicago values into mid-November. Strong demand for US soy products makes a break in soybean futures difficult to sustain with crush margins rising.
- Chicago brokers estimate that funds have sold 7,200 contracts of soyoil and 2,200 contacts of soybeans, while buying 4,300 contracts of corn, 4,600 contracts of Chicago wheat, and 4,200 contracts of soymeal.
- There are rumours that China is back asking for offers on US SRW Gulf wheat and even US PNW corn. We have doubts on the Chinese cash corn rumour since Ukraine corn fob offers are so much cheaper. However, it is difficult to line up freight insurance for Ukraine grain export and a buyer may have to go without. The Chinese grain rumours are offering support to Chicago corn/wheat on breaks.
- US weekly export sales for the week ending October 12 were 23.3 million bu of wheat, 34.7 million bu of soybeans, and 50.4 million bu of soybeans. All sales were at the upper end of expectations. For their respective crop years to date, the US has sold 394 million bu of wheat (down 21 million or 5%), 639 million bu of corn (up 94 million or 17%), and 767 million bu of soybeans (down 351 million or 31%). Brazil is back offering 2-3 cargoes of soybeans for export in November that is competitive with US offers that is capping the Chicago rally.
- The Danube River level is in decline on a regional drought which is causing barges/vessels to cut their loads and drafts. Importers are starting to complain on shipping delays and demurrage costs which could further hit the Ukraine farmer. We are told that the Danube River restrictions are raising transit costs with bids to the Ukraine farmer becoming scarce. The Danube River impact needs to be closely followed as it could disrupt Ukraine exports.
- The midday GFS weather forecast is drier across Northern Brazil. A few scattered showers will slide into Mato Grosso and pockets of Goias during October 25-28 before a new dry spell returns. Otherwise, meaningful S American stays relegated to Southern Brazil and Argentina. The Argentine rain will be welcomed but is unwanted across S B Brazil where totals since Oct 1 has eclipse 10.0-16.00”. Our primary concern is across the Northern two thirds of Brazil and the dry soils prevail. And extreme heat is exacerbating issues with temperatures ranging from the mid 90’s to the lower 100’s through the weekend. Cooler readings start on Tuesday.
- Fund demand in soymeal and fund selling in soyoil is the theme of the day. Soymeal prices have leaped upwards on import demand. However, end users are actively booking soyoil needs on today’s break and see value below $0.54 December. US SRW wheat sales account for 66% of the WASDE annual forecast at 96 million bu. The market has accomplished its chore of finding demand. Any additional Chinese demand will be highly bullish. Finally, whether it is the Amazon, Mississippi, or the Danube Rivers, all are historically low a worry for importers. World ocean freight costs are at a one year high. Central US cash basis bids are rising.