- HEADLINES: Chicago steady/higher at midday; Crude and soyoil reverse morning losses; GFS and EU weather models stay at odds over Brazilian rainfall.
- Chicago ag markets are steady to higher, with KC wheat pacing the recovery on continued short covering. Soyoil has followed crude in reversing early weakness, despite a further build in US crude stocks. Renewable diesel production, stocks, and implied disappearance for the month of September will be published Thursday. And S America’s corn market continues its task of funnelling demand away from Brazil and to other origins, with US fob corn the world’s most reliable supply.
- Brazilian corn futures are up another 2-6 cents following Tuesday’s surge, March corn in Brazil sits at $6.30/bu, and we note the Brazilian market has been a leader of world values since late summer 2020. Spot corn in Brazil was the first to embark on a lasting rally in August 2020 and was the first to collapse in spring 2023. Brazilian corn’s premium to Chicago has widened to $1.60/bu, basis March. Key is whether Brazilian market strength stays in place despite a deflated US market. Work suggests US corn export potential is rising.
- EIA ethanol data leans a bit bearish. US gasoline use in the week ending Nov 24 totalled 8.21 million barrels per day vs. 8.48 million the prior week and down 1% from the same week in 2022. Commercial US crude stocks last Friday totalled 449.7 million barrels, vs. 448.1 million the previous week and up 7% from last year. Even the US’s strategic crude reserve was up 400,000 barrels week on week.
- Ethanol production was 297 million barrels, down 3 million from the previous week and a 7-week low. Notice that a pretty clear seasonal jump occurs just after Thanksgiving, but weekly ethanol grind since mid-Nov has been rather dull marketwise. Margins remain highly profitable, but the market is balanced today.
- March Paris milling at midday is up €3.25/mt as the Baltic/German cash markets fell to reach parity with Russian fob offers. EU and Russian cash wheat markets were at level money in August, only for Russian values to drop quickly. We maintain that stable/higher Russian offers in the next few weeks confirms a bottom in wheat. The US and EU do need improved export demand. Key is how importers respond to weather/logistical challenges in the Black Sea and reduced high quality milling wheat availability in Australia.
- The midday GFS weather forecast is consistent with morning output in allowing better rain chances to expand into Central Brazil beginning Dec 4-5. Totals of 1-2” are forecast to blanket much of the driest regions of Mato Grosso and Goias, though totals above 2” will be highly scattered/regional in nature. A moderation of temperatures in Brazil occurs this weekend. Yet more unwanted rainfall of 3-5” impacts RGDS and Parana in S Brazil. Argentine weather stays favourable, with soaking rainfall due in the next 48 hours. Dry/mild conditions follow into Dec 9.
- We would note the GFS forecast remains much drier than its EU counterpart in C and N Brazil next week and implies only modest soil moisture boosts across the northern third of Brazil’s soy belt. Rain gauges matter most Dec 4-6.
- The short side of global corn and wheat markets has become overly crowded, at a time of rising Russian wheat and Brazilian corn prices and as S American corn production is highly uncertain. Soybeans and oil have the best fundamental story amid strong crush margins and expanding biofuel production. Potential Brazilian soy yield loss adds to upside potential in Dec-Jan.