- HEADLINES: January soybean futures fail at 50 day moving average; US export sales of corn, wheat, and soybeans unexciting; China buys Gulf US soybeans for February.
- Chicago grain futures are mixed at midday with corn/soyoil/soymeal weaker with soybeans/wheat firmer. Financial markets reflect a “risk on” mentality with the US stock market up 350 points, the 10-year note yield down to 4.65%, and the US dollar sharply lower. The Brazilian Real has rallied to 4.95:1 US$ with Brazilians on a national holiday. A fall in the US dollar could entice new demand in raw material markets, but the drop today does not confirm a lasting trend. A bearish US dollar trend would occur with a close below 105.10 in the spot US dollar index. The US dollar index is trading at 105.95.
- Soybean futures have been the Chicago stalwart with January futures testing the 50-day moving average at $13.31. A settle above this resistance is needed to confirm a shift to a more bullish technical trend. Soymeal futures are down on disappointing US soymeal weekly export sales while funds are piling into new net short positions on soyoil. December soyoil futures fell near $0.49 support.
- Chicago brokers estimate that managed money has bought 3,300 contracts of Chicago wheat and 4,100 contracts of soybeans, while selling 2,400 contracts of corn. In the products, funds have sold 3,100 contracts of soymeal and bought a net 900 contracts of soyoil. Open interest continues to rise in soyoil arguing for a new net short position. Soyoil OI gained 6,668 contracts on Wednesday.
- US weekly grain or soy export sales were non inspiring (except for sorghum with China (again) booking significant US tonnages). For the week ending October 26, the US sold 10.1 million bu of wheat, 29.5 million bu of corn, and 37.1 million bu of soybeans. US sorghum sales were an impressive 14.9 million bu with crop year sales rising to 115.2 million bu (up 102.4 million from last year or 800%).
- US corn sales for the crop year to date are 719 million bu (up 150 million or 26%), while US wheat sales are 417 million bu (down 30 million or 7%), while US soybean sales at 855 million bu are down 329 million or 28%. The US soybean export pace continues to lag, but the US has shipped our more soybeans than last year through October 26. We would not expect that WASDE will adjust their 2023/24 wheat, corn, or soybean export estimates in next week’s report with so much of the crop year ahead and pace analysis suggesting no change.
- There is strong cash talk this morning that China has purchased 6-10 cargoes of US gulf soybeans for February/March. The sale has some traders considering why China would pay the hefty US premium other than US soybeans are often used in their reserve. Moreover, the purchase allows China optionality if Brazil’s soybean harvest is delayed by the acute dryness across Northern Brazil. We look for USDA to confirm new Chinese demand either Friday or Monday.
- Although there continues to be talk that China is asking for US wheat offers, we cannot confirm a sale. The Chinese interest has been discussed in recent days based on Chinese buying group being in Kansas. We believe China has interest in US wheat, but not on a US wheat futures rally.
- US soymeal sales at 86,400 mt were below trade expectations. The US has sold 5.6 million mt in the crop year that started on October 1, which is up 1.7 million or 42% from last year. Demand bull markets need to be fed, and US weekly export sales argues that price is causing hesitation in forward purchases.
- The GFS weather forecast is like the overnight run with below normal rain across Northern Brazil with another round of heavy rain for Southern Brazil of 2.50-5.50” over the next 36 hours. The Southern Brazil rain will produce new flooding. The N Brazilian rain starts to fall late Monday and continues through Wednesday with totals of 0.5-1.50” before another lengthy period of dryness. The Brazilian weather pattern shows no sign of change into mid-November which will again raise crop production worry.
- Brazilian weather is gaining in market importance due to heat/dryness across N Brazil and excessive rain across S Brazil. China has purchased a massive amount of Brazilian corn/US sorghum. Brazilian corn/soybean production estimates are key to longer term Chicago price direction. A 5% yield loss of 2024 Brazilian corn is 6.5 million mt and 8.0 million mt of soybeans which have significant ramifications for US export demand.