- HEADLINES: KC wheat rallies on fund short covering with traders pointing to China: Corn drops on chart-based selling ; GFS midday weather forecast offers more rain for S Brazil starting tonight.
- It has been another mixed morning in Chicago. Wheat/soybeans are higher with corn weaker in a continued choppy trade. Private crop yield/production estimates are due from StoneX and S&P Global/Markit in the next few days with the USDA November Crop Report due out on November 9, next Thursday. The November WASDE may be the last USDA Crop report if the US Congress is unable to agree on 2024 Budget pact. The December USDA report does not update US corn/soy yields, but it does seasonally start to peg Brazilian crop sizes depending on prevailing weather trends. Traders will look to Brazil’s CONAB for monthly Brazilian crop assessments if the US government is closed due to political budget differences. We would assume that a 3–4-week closure of the US government would push the January Crop Report backwards into February.
- Chicago brokers estimate that managed money has bought 1,900 contracts of Chicago wheat and 5,300 contracts of soybeans, while selling 5,700 contracts of corn. In the products, funds flat in soyoil and sold 1,900 contracts of soymeal.
- Russian war planes dropped explosives into Black Sea shipping lanes according to Ukraine, but no explosions are damage were incurred. Ukraine indicated that Russia is regularly dropping sea mines or other explosives into their nascent shipping channel. However, cargo traffic continues. The corridor was shut for 3 days last week on the promise that Russia would act with warplanes, but this week’s bombardment does not appear to be slowing down transits. Yet, traders will monitor the situation closely.
- Brokerage firm StoneX slashed their Brazilian corn production estimate to 128 million mt vs a prior forecast at 139.2 million due to drought across N Brazil and flooding across SE Brazil. The reseeding of soybeans will cut the window to seed winter corn in late February and March. However, StoneX held their 2024 Brazilian soybean crop forecast at 164.1 million mt.
- We would currently agree with a 127-128 million mt total Brazilian corn crop but argue that adverse weather will tug the Brazilian soybean crop to 158 million mt or less by mid-November without a change in the overall pattern. An even deeper cut in the Brazilian soybean crop could follow if the pattern is unchanged on December 1.
- The US ethanol industry produced 309 million gallons of ethanol last week, up 3 million gallons on the week prior and the largest weekly production total of this crop year. US ethanol stocks declined 16 million gallons to 883 million gallons. US gasoline consumption was 8.7 million barrels/day, equal to 2022.
- There have been rumours that China may have purchased US HRW wheat with a delegation from COFCO in Kansas today. However, we cannot confirm a cash purchase at this time. KC wheat has found a bid on rumours of Chinese demand.
- Talk is also noted that a 50,000 mt sale of US soymeal was switched back to S America on price late Tuesday. An intercompany exporter switch is possible if the soymeal was sold optional origin. Here too, no confirmation is offered.
- The GFS weather forecast is like the overnight run with below normal rainfall across Northern Brazil with another round of heavy rain for Southern Brazil of 2.50-6.50” in the next 48 hours. The heavy rain across Southern Brazil will produce additional flooding with some areas of RGDS enduring nearly 40” of rain since September 1. The unwanted rain extends north into Santa Caterina and S Parana. The rain starts to fall across N Brazil late Monday and it will continue through Wednesday before another lengthy period dryness unfolds. The below normal rainfall and above normal temperature trend is worrisome across N Brazil.
- Brazilian weather will be gaining in importance due to an abnormal weather pattern of hot/dry across N Brazil and excessive rain across S Brazil. Paraguay is also included in the inundating rain. The line of too little and too much rain is readily defined. Otherwise, world soybean exports from the 3 primary shippers is estimated to be record large through November. NASS will be out with its October 1 crush report after the close that will define 2022/23 US soyoil end stocks. Our worry over S American weather is growing and all should pay close attention.