- Chicago recovers; Ethanol production growth continues; Equity, energy markets sag on rising bond yields.
- Chicago ag markets are higher at midday as corn trades through initial resistance, wheat attempts to test its 20-day moving average and as nearby US export demand remains intact. Exporters this morning sold another 389,000 mt of soybeans to China and unknown destinations and another 100,000 mt of corn to unknown. This brings total US corn sales on a known basis since Oct 10 to 131 million bu, and 219 million since Oct 4, and corn/soy export sales this and next Thursday will be large. Today it is meal that is boosting futures-based soy crush margins. Long term risks are bearish without threatening S American weather in Dec-Jan, but the uncertainty surrounding the US Presidential election and the US’s competitive position in row crop markets for autumn/early winter delivery have triggered support on corrections.
- Cumulative Sep 1-Oct 18 ethanol production is calculated at 2.15 billion gallons, up 3% from 2023. USDA in its Oct WASDE forecast ethanol’s corn demand draw in 2024/25 to decline slightly.
- Ethanol stocks last Friday were 934 million gallons, down slightly week-on-week as stable domestic use and improved exports offset production gains. Residual ethanol disappearance, the best proxy for exports, since January is up 11% on last year. The Brazilian fob ethanol market remains at/above US Gulf values, which is unusual for October. Ethanol production margins are decent. A seasonal peak in corn grind isn’t anticipated in mid-December.
- Macro input leans a bit negative. Spot WTI crude is down $1.10/barrel at $70.60. US crude stocks continue to build seasonally, with stocks on Oct 18 up 1% on last year at 426 million barrels. Treasury yields continue to climb, as does the US dollar, and the Dow at midday is down 390 points, as the bond market becomes more pessimistic with respect to additional rate cuts through the balance of 2024. Importantly, the Brazilian Real today has scored a newer two-month low, and this along with Chicago soy’s recovery aids future Brazilian producer profitability.
- US ethanol production, too, continues to expand year-on-year. Production in the week ending Oct 18 totalled 318 million gallons, vs. 306 million the previous week, up 4% on last year and the second largest on record for this particular week.
- The midday GFS weather forecast is unchanged from its morning release, with a nice mix of rain/sun projected over the next 10 days in both Brazil and Argentina. Heavy showers linger in Argentina for another 24 hours. Heavy totals of 1.0-2.5” are offered to the drier areas of Buenos Aires. Rain in N Brazil stays light/scattered in nature through Friday, after which better organised events occur on a near-daily basis. We maintain that subsoil moisture reserves will be established S America-wide in the next 2-3 weeks. Near-term threats are absent.
- Harvest pressure begins to fade seasonally. Offsetting near ideal S American weather in the short run is the US’s monopoly on Nov-Dec soy trade, while the soy-corn ratio is projected to narrow further amid sizeable US corn disappearance, in both the industrial and export markets.