- HEADLINES: Chicago mixed at midday with soybeans gaining on the grains; Soymeal pushes to new rally high; GFS drier for Northern Brazil into November 4.
- Chicago grains are lower and soybean/soymeal firmer at midday. The volume of trade was active following the opening but has since slowed. Corn and wheat markets continue to trade in broad ranges while soybeans find support at $12.70-12.80 relative to November soybean futures. Soymeal is gaining on soyoil with the oil share spread falling to 37.7%. The oil share spread unwind has been sizeable which has contributed to the Chicago soymeal rally.
- We note a weakening trend of cash soymeal in Latin American which is producing the bear spreading of the Dec/March soymeal futures. Yet, domestic soyoil basis is starting to firm as end users reach seek forward coverage. A year ago on this same date, December 2022 soyoil futures closed at $71.87/pound with renewable diesel demand half of what it is today.
- And soyoil stocks as measured by NOPA/Census were far larger. NOPA as of October 1, 2023, reported member soyoil stocks at a 9-year low. Crude oil and heating oil prices were similarly priced which leaves one wondering on the downside price potential of soyoil. Argentina is exporting far less soymeal, but they are also exporting 2.2 million mt less soyoil. If there is a bearish point to soyoil it is that other vegoils can replace the lost Argentine exports. Yet, a 20 cent drop relative to last year on more bullish fundamentals appears that there is upside in Chicago soyoil futures when seasonal lows are confirmed.
- Chicago brokers estimate that funds have sold 5,100 contracts of wheat and 4,200 contracts of corn, while buying 1,600 contracts of soybeans. Funds are net sellers of 2,000 contracts of soymeal and 4,100 contracts of soyoil.
- In the first trade mission in years, China, and the Iowa Soybean Association along with US Soybean Export Council signed frame contracts for an unspecified tonnage of US soybeans. The press release claims that China booked billions of dollars of US soy, but neither the contract timing nor performance of the purchases were specified. Such frame contracts are largely ceremonial, but the legal departments of several US exporters will report the China sale to FAS/USDA which could produce a sizeable daily export sale over the next 48 hours.
- WTI Crude oil futures have not been able to sustain an early day rally with values down $2/barrel at midday at $83.50 basis December. Energy futures are retreating to prices that equate to October 9, the Monday following the start of the Hamas war against Israel. There were rockets launched at Iraq’s Ain al-Asad air base which is housing the US military. The geopolitics of crude oil will continue to produce sizeable market volatility in energy. But the war must spread beyond Gaza for spot WTI crude to push above $90/barrel.
- The midday GFS weather forecast is drier across Northern Brazil and Argentina with heavy rain forecast for S Brazil/Paraguay. The pattern remains stuck. Scattered showers are forecast for Mato Grosso/Goias from Wednesday into the weekend before dry weather returns. Rain totals are estimated in a range of 0.25-1.50”, about half normal totals. Southern Brazil is forecast to see 2-7.00” of rain which rekindles flooding worry. And Argentina has a chance of rain mid next week with totals of 0.15-1.00”
- Extreme heat across Northern Brazil exacerbates soil moisture loss with highs ranging from the mid 90’s to the lower 100’s. Southern Brazil and Argentina are forecast to see seasonal 70’s and 80’s for daily highs.
- It is too early for Northern Brazilian weather concern, but the existing dry pattern needs to change by November 10 for soybean seedlings to recover. Some climate experts see a N Brazilian summer drought in November/December and January. Soymeal is scoring new rally highs with key resistance at $432.60 basis December. Corn and wheat look to trade in a broad range until the US corn harvest is 80% completed.