- HEADLINES: NOPA soyoil stocks fall to 1,099 million pounds, lowest since December 2014; EIA weekly ethanol grind rises 4%; GFS weather forecast like overnight run for S America.
- As expected, it has been a mixed Chicago trading session with debate ongoing as future S American weather and the crop damage that has occurred, the weekend Argentine Presidential election and coming US export demand. US Gulf corn is competitive in the world market (as recent US daily sales have shown), while Russian wheat offers are only mildly higher. Soybeans are a supply driven bull while the grain markets are gauging/encouraging world trade. The spot Chicago soybean/corn ratio has pushed out to 2.93:1 with the new crop ratio at 2.5:1. The widening soy vs corn ratio is trying to incentivise US farmers to seed an additional 2-4 million acre of soybeans next year. The need for additional US soybean acres is tied to expanding renewable energy production, but it is the size of 2024 Brazilian soybean harvest that determines if price has rationed enough demand. We see a mixed Chicago close with soybean short covering noted late session amid the expectation of large US weekly export sales tied to China of over 100 million bu.
- The USDA announced the sale of 124,000 mt of US corn to Japan in the 2023/24 crop year. FAS originally announced the US corn sale was to Mexico.
- Chicago brokers estimate that managed money has sold 4,200 contracts of Chicago wheat, 6,300 contracts of corn and 2,200 contracts of soybeans. Funds are mixed in the products selling 3,800 soymeal and buying 1,200 contracts of oil.
- The new ADM Spiritwood ND Ethanol plant is expected to become operational by early December with a daily crush capacity of 150,000 bu and all the oil production being taken by Marathon Oil Company. The meal production will be sold into the domestic US market which will add to US supplies. The crusher was expected to come online in early autumn, but delays in finishing the construction of the plant pushed back its start until late November/December. Some of the cash squeeze in the US soymeal market was Spiritwood buying back in sales that were made previously. Crushers are not very kind to each other when they realise that the opposition is on the other side of a transaction.
- EIA reported that the weekly US corn grind produced 208 million gallons of ethanol, up 4% from last year and up 2 million gallons from last week. The EIA released 2 weeks of US ethanol data this week due to computer maintenance last week. US weekly ethanol production is record large to date, which hints that USDA/WASDE is still 25 million bu too low in its annual corn grind forecast.
- NOPA reported an October soybean crush rate of 189.8 million bu, a record with soyoil stocks falling to 1,099 billion pounds. US soyoil stocks are at their lowest level since December 2014 and are likely to drop again in November.
- The GFS midday weather forecast is like the overnight run. Heat/dryness blankets Central and Northern Brazil into Nov 20 with showers returning late Sunday/Monday. We estimate 6–10-day rain accumulations in a range of 0.4-2.50” across N and C Brazil. A concerning pattern of dryness resumes in the 11–15-day period as the high-pressure ridge rebuilds aloft. Southern Brazil endures additional flooding rain of 3-9.00”. More than 30” of rain has fallen across S Brazil since September 1.
- The grains have struggled on rallies while the only supply bull market is soybeans due to adverse Brazilian weather. The Argentine election on the weekend and next week’s shortened US holiday trade has sparked risk aversion and profit taking in soybeans/soymeal. Soymeal spreads have been a harbinger of soybean price activity and the weakness in the Dec/March meal spread is noteworthy. We maintain a bullish view on soyoil, but we would not chase rallies in soybeans/soymeal. Grains hold the range.