- HEADLINES: Mexico buys more US corn; Timing of Milei policy enactments unknown, farmers halt cash sales; GFS midday weather forecast drier N Brazil and wetter S Brazil.
- Chicago is mixed with intraday surges of volume at midday. The grain watercooler talk is centred around the election of Argentine President Milei, and his next actions, and Brazilian weather and crop sizes. Chicago volume is thin, and traders have to be careful with large orders as they will move the market in pre-holiday US trade. There are limited resting orders, and it does not take much to push the market in either direction.
- We have previously suggested that we were expecting trading lows to be set early this week. It appears that soybeans/soy product markets bottomed in the overnight trade when selling pressure swelled on the Milei Argentine presidential win. Melei will not be installed as president until December 10, but already the industry is trying to decide what will be his first order of business (how disruptive it will be to Argentine exporters or producers). We note that Milei needs the support of the Argentine Congress to pass new legislation, and he has no coalition. This makes ending taxes or going to US dollar economy and getting rid of the Argentine Central Bank extremely difficult in his early days. However, Milei has a political tailwind from the election that he must use effectively. Argentine politics will be impossible to understand, as if that was anything new!
- Chicago brokers estimate that managed money has sold a net 2,000 contracts of Chicago wheat and 3,100 contracts of corn, while buying 3,700 contracts of soybeans. Funds have bought a net 1,200 contracts of soymeal and 3,200 contracts of soyoil. Fund managers have been net buyers across the soy complex. However, it is the large net long soymeal long (131,000 contracts) vs the net soyoil short (6,000 contracts) that should support long oil share spreading.
- FAS/USDA reported that another 104,000 mt of US corn was sold to Mexico. Already Mexico has taken a record tonnage of US corn and looks to remain an active buyer on breaks. The weekly USDA export sales report will be released on Friday due to the US Thanksgiving Day holiday on Thursday.
- US weekly export inspections for the week ending November 16 were 59.1 million bu of soybeans, 21.8 million bu of corn, and 13.1 million bu of wheat. For their respective crop years, the US has shipped 584 million bu of soybeans (down 53 million or 8%), 268 million bu of corn (up 51 million or 24%), and 287 million bu of wheat (down 91 million or 32%). Based on the weekly export and shipping pace, we see no reason to alter WASDE annual export forecasts. Last week’s big rise in US soybean sales helped to shore up the US early 2024 export pace.
- Argentine farmers are celebrating the Milei win and will not make any new cash sales until more is known on his presidential platform for the Argentine grain industry. The soy/dollar program expired late last week and is not expected to return. And the falling Blue Peso rate will ignite new rounds of inflation. It is a holiday across Argentina, but the Peso will drop even more until there is clarity on Milei’s initial policy steps. Argentina politics will provide greater volatility for Chicago on policy unknowns.
- The midday GFS weather forecast is drier across Northern Brazil and wetter across Southern Brazil with the precipitation changes occurring in the week 2 forecast. The prior weather pattern of a high-pressure ridge across N Brazil and a low-pressure trough across S Brazil will be returning next week. This will leave N Brazil wanting more rain while S Brazil struggles to seed spring crops. The best chance for N Brazilian rain will be through Friday, before drier/warmer weather returns across N Brazil. Unfortunately, S Brazil just stays wet.
- Funds are sizeable shorts in corn/wheat but there are no other notable sellers. Farmers in the US, Brazil and Argentina will not sell corn/wheat in a down market. And soybeans are enjoying demand on Argentine political uncertainty and an expanding US export window during February. The US dollar is in a bear market that should pull new investment into commodities by yearend. We see the grain markets as bottoming. A close above $0.53 January soyoil futures confirms a seasonal bottom and acceleration of the rally.