Author Archives: simon

11 December 2023

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  • HEADLINES: Soybeans rally to exceed last week’s high; China has halted request for US SRW on price; GFS midday weather forecast drier for N and E Brazil next 10 days.
  • Chicago futures are sizably mixed at midday with Chicago wheat futures sharply lower, soybean futures sharply higher and corn caught in between. March corn futures fell to test key support at $4.75-4.60 while January soybeans held key support at $13.00 and January soymeal against $400.00. We note that January soyoil futures are holding support at $0.50 with a key NOPA crush report due out on Friday. The NOPA report could reflect a US soyoil end stock total of 950 million pounds of soyoil or less due to fresh renewable diesel demand. We maintain that Northern and Eastern Brazilian soybeans are enduring drought stress and the need for a soaking rain is growing in importance. Chicago soybeans are adding weather premium amid the potential for falling yields should the current below normal rainfall and above normal temperature pattern persist into January. Brazilian crops need to see a weather pattern change for the bears to feel comfortable enough to sell a sharp Chicago break.
  • Chicago brokers estimate that funds have sold 6,800 contracts of Chicago wheat and 6,900 contracts of corn, while buying 8,500 contracts of soybeans. Managed money has bought 4,200 contracts of soymeal and 2,100 contracts of soyoil. Chicago has now pushed above last week’s high in January soybeans which triggered another round of fund buying.
  • USDA reported the sale of 132,000 mt of US soybeans to an unknown buyer for delivery in the 2023/24 crop year. We understand that China has also bought another 2-4 cargoes of US soybeans for February/March. We see world ocean freight rates pushing even higher as vessel tonnage is tied up going around the horn of S America vs the Panama Canal. There are alternatives to the canal, it is just that there is cost to switching to the PNW or a longer duration voyage. China is still asking for offers on US corn but have halted their inquiries for US wheat.
  • US export inspections for the week ending December 7 were 28.0 million bu of corn, 36.1 million bu of soybeans, and 10.3 million bu of wheat. For their respective crop years to date, the US has exported 361.4 million bu of corn (up 80 million or 22%), 725 million bu of soybeans (down 140 million or 16%), and 316 million bu of wheat (down 93 million or 23%). The trade will be closely following the shipping schedule of US SRW wheat sales to China.
  • The GFS midday weather forecast is slightly drier in the week 1 forecast for Northern and Central Brazil with widespread 90’s and lower 100’s. The GFS forecast keeps backloading the forecast with rain, which is in low confidence due to recent forecast failures. For the next week, we look for Northern and Central Brazil to receive 0.2-1.25” of rainfall with coverage at no better than 45-50%. This leaves widespread N Brazilian areas in need of rain. S Brazil and Argentina will enjoy near to above normal rainfall and near normal temperatures with highs in the 80’s to lower 90’s. There is no indication of adverse weather for Argentine crops, which favours yield potential. It is N and E Brazil where an abundant rainfall profile is in immediate need.
  • Holiday thinning volume exacerbates Chicago price moves into the end of the year. NOPA will release its November soy crush report on Friday which will be one of the most important reports of the year due to the determination of the 2023/24 soyoil yield (new crop) with member end stocks to drop below 950 million pounds. And US renewable diesel demand is again ramping up. Finally, Brazilian corn values are rising which underpins March Chicago corn below $4.80. March Chicago wheat has support at $5.90-6.00 due to recent Chinese offtake.  Thursday’s USDA Weekly Export Sales Report to show massive new US SRW wheat sales to China.

8 December 2023

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  • HEADLINES: USDA December report non inspiring with limited statistical change; GFS midday weather forecast like the overnight run, wetter in 11-15 day; China secures US SRW wheat and soybeans.
  • Chicago futures weakened following the USDA December crop report as WASDE raised last year’s Brazilian soybean crop by 2 million mt to a record 160 million, while cutting this year’s soybean crop by 2 million mt to 161.0 million. The net stocks result was negligible with 2023/24 World December soybean end stocks at 114.5 million mt, the same as November. WASDE held their 2023/24 Brazilian corn crop estimate at 129.0 million mt, while raising US wheat exports by 25 million bu due to recent Chinese demand for SRW wheat. The WASDE December report is neutral with large US corn stocks (2 billion bu) being an overhang on price. We doubt that corn, soybeans, or wheat can sustain a lasting bearish trend until more is known about 2024 S American crop sizes. December is a key growing month for Northern Brazil, but Southern Brazil is still seeding spring crops. Thus, look for choppiness to persist with breaks supported by commercial demand due to expanding US export interest in the grains.
  • WASDE trimmed its estimate of US 2023/24 corn stocks to 2,131 million bu, down 25 million bu due to a hike of a like amount of demand in US corn exports. WASDE forecast 2023/24 US corn exports at 2,100 million bu, up a sizeable 439 million bu from last year. Note that this expanded US corn exports assumes a 129.0 million mt Brazilian total corn crop. CONAB and private analysts all indicate 2023/24 Brazilian corn production at 118.5-123.0 million mt, well below WASDE which has the potential to raise US export demand even more. 2022/23 Brazilian corn exports were raised to a record 57.0 million mt to reflect China’s massive buying. WASDE left 2023/24 Chinese corn imports unchanged at 123.0 million mt. Amid the limited change in US 2023/24 corn end stocks, the WASDE report is neutral corn.
  • US 2023/24 soybean end stocks (and the entire 2023/24 US balance sheet) were left unchanged at 245 million bu. No adjustments to US crush or export demand were noted and WASDE left its forecast of US soyoil for biofuels unchanged also at 12,800 million pounds. We would argue that US soyoil use for biofuel will be adjusted upwards by 2 billion pounds in the months ahead due to surging renewable diesel production and a plateauing of used cooking oil imports.
  • China 2023/24 soybean imports were raised 2.0 million mt to a record large 102.0 million while there were no changes to 2024 Argentine soy crop at 48.0 million mt. The US and world soybean crop data argues for a broad trading range of $13-14.00. Soyoil will gain on meal as US cash soymeal premiums deflate in 2024.
  • USDA December wheat data lacked surprises. Global end stocks were reduced slightly as higher projected world trade (+2 million mt) more than offset larger production (+1 million mt). Canadian and Australian crop sizes were increased to account for recently published government data. Canadian and Aussie exports were increased. Brazilian wheat production was trimmed 1 million mt following excessive flooding during September/October/November.
  • US wheat exports were lifted 25 million bu, all SRW, following recent Chinese demand. US end stocks were reduced by a like amount. Work suggests USDA is still 10-20 million bu too low with its annual US export target, China secured another 4 million bu of US SRW overnight, and the US SRW balance sheet is tightening rapidly. WASDE projects SRW exports to exceed HRW for the first time on record. 2023/24 US SRW stocks are pegged at 118 million bu, with stocks/use calculated at 27%, vs. 37% in November and vs. 26% in 2022/23. If SRW acreage is lost, 2024/25 US SRW stocks drop to or below 85 million bu. Chicago wheat futures have corrected at midday as the market reconciles overbought technical conditions, but the ingredients for additional speculative short covering stays in place.
  • The USDA’s Dec WASDE, as always, lacks market-changing input. Key moving forward is whether a pattern shift in Central and Northern Brazil is finally allowed to occur beyond Dec 20. Thereafter, the Northern Brazilian crop will begin to shed yield rapidly if regular soaking rain fails to develop. US corn remains cheap in the world marketplace as feed grain, with March Brazilian corn today rising to $6.45/bu. Chicago wheat values are tied to additional Chinese demand and tightening SRW wheat stocks. Wheat values have scored a major multiyear bottom.
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6 December 2023

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  • HEADLINES: Wheat rallies further on yet more Chinese demand; Plunge in crude weighs on row crops.
  • Chicago futures are mixed again, with row crops weaker and global wheat values steady/higher on additional Chinese demand for US origin. We also note that China this week has begun shipping previously purchased Russian cargoes. And bitterly cold temperatures and active snow in Southern and Central Russia will challenge logistics at ports and in the interior of Russia into mid/late December. Finally, the Aussie market has been stable despite ABARES raising its Australian production estimate on Monday. Wheat short covering continues.
  • US exporters sold another 372,000 mt of SRW to China this morning.
  • This brings Chinese purchases of US SRW this week to 37 million bu and brings total US SRW export commitments to 144.8 million bu, which matches the USDA’s annual forecast. Even assuming SRW sales between mid-Dec and late May average only 1 million bu/week, final US SRW exports are likely to reach 170 million bu. US SRW stocks, which were excessively large in summer/early autumn following record yield, will be cleared by spring. We expect the USDA to lift its all-wheat export forecast on Friday by 25-35 million bu.
  • Exporters also sold 136,000 mt of soybeans to China for old crop delivery.
  • Yet, the primary driver of corn, soy and soy product markets today is a further collapse in crude oil. Spot WTI is down $3.00/barrel at $69.30, a new 5-month low. Energy markets remain hyper-focused on Monday’s downgrade to Chinese debt and general pessimism surrounding global economic growth in 2024. Cash ethanol prices have followed crude lower, with the spot Midwest swap market dropping to $1.75/gal, vs. $2.20+ in Sep-Oct.
  • Weekly EIA data, however, is not overly bearish. US ethanol production in the week ending Dec 3 totalled 316 million gallons, up 19 million gallons on the prior week and unchanged from early Dec a year ago. Ethanol stocks totalled 901 million gallons, down 8% year on year. US commercial crude stocks last Friday were 445 million barrels, down 4.7 million from the previous week, and replenishing the US’s strategic reserve (which is still a very weak 352 million barrels) will be challenging.
  • The midday GFS weather forecast is consistent with its forecast into Dec 15-16. Better rain chances evolve across Central Brazil and Argentina in the 6–10-day period. Accumulation in the driest areas of Mato Grosso and Goias is pegged in a range of 0.75-2.00”, while multiple days of needed drier weather occur in far Southern Brazil. Soaking rainfall is forecast to blanket the core of Argentina’s Ag Belt next Thurs-Sat. However, heat/dryness persist in C/N Brazil into the weekend, and the GFS model is much drier in C/N Brazil the 11–15-day period as expansive high pressure ridging returns. Model forecasts, and the market, are struggling with forward S American outlook. Rain is needed immediately in N Brazil.
  • Wheat is nearing overbought levels technically and a pause in the recent recovery is likely, while March Chicago corn failed to break through its 50-day moving average. Chicago soy and soyoil are nearing oversold levels, and many have been unimpressed with Brazilian soy crop health to date.

5 December 2023

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  • HEADLINES: China buys more US SRW wheat; Rumours of Brazilian corn switching to the US: Midday GFS weather forecast drier N Brazil.
  • Chicago futures are mixed at midday with soybeans lower, while the grains have rallied. The volume of Chicago trade is down from yesterday with fund managers busy covering massive corn/wheat shorts while peeling back length in soybeans and soymeal. Soyoil is back testing key support at $0.50 basis January futures.
  • China purchased an additional 200,000 mt SRW wheat overnight which pushed March Chicago wheat close to $6.40 resistance. China has now purchased 1.6 million mt of US wheat and talk is that their total purchase on this round may reach 1.75 million. The Chinese demand should prod the USDA to raise their 2023/24 wheat export estimate on Friday. We maintain that China will take 2.0 million mt of US wheat in the 2023/24 crop year, but the French wheat market has not followed Chicago to the upside, and the future opportunity for China is to secure French SRW.
  • Corn has rallied on rumours that China is washing out 6-10 Brazilian corn cargoes with the hope that the corn will be switched to the US on the profitable economics. The Brazilian corn market has rallied sharply as its exportable supply is within 1-2 million mt of being sold out for the season. China has purchased 1.0 million mt of US corn in the 2023/24 crop year. The rapid sale of the record large 2023 Brazilian corn crop increases the odds for US corn sales to China (and other importers). Crop year to date world corn trade is record large, it is just that Brazil has been filling the business. US corn export sales are forecast to be noticeably stronger in the weeks ahead on its newfound competitive economic position. Brazilian corn export sale commitments have reached 51.0 million mt or just 1 million of the crop year forecast.
  • Chicago brokers estimate that managed money has bought 7,400 contracts of Chicago wheat, 8,400 contracts of corn, while selling 6,400 contracts of soybeans. In the soy products, funds have sold 5,100 contracts of soyoil while buying 2,400 contracts of soymeal.
  • China’s Caixin Services index (PMI) rose to 51.5 in November, a hint that China’s economic outlook may be brightening. China’s manufacturing index fell to 49.4 in November, which was down 0.1% from October. Copper and other industrial metal prices were rising on the hope of renewed demand. Commodity markets cannot sustain rallies without growing Chinese demand. China is forecast to import record tonnages of soybeans and feedgrains in the 2023/24 crop year on its government reserve restocking.
  • China is rumoured to have booked 3-4 cargoes of US soybeans for January/February this morning. The purchase is said to be out the PNW. China continues to use weakening Chicago prices to book forward coverage into March.
  • The midday GFS weather forecast is drier than the overnight for Northern Brazil and wetter for Southern Brazil.  Limited rain is forecast for Northern Brazil over the next 5 days with isolated accumulations of 0.25-1.50”. The forecast models call for an increase in Northern Brazilian rainfall in the week 2 forecast with totals of 1.50-4.00”.
  • Southern Brazil will endure soaking rainfall later today which continues into Saturday. 10-day rain totals are estimated in a range of 3.00-6.50” which is up 1-1.50” from the overnight forecast. New rounds of flooding are possible. The extended range forecast offers additional heavy rain for S Brazil.
  • Soybeans are extracting weather premium on the prospect of rain for Northern Brazil in the extended range. Yet, Brazilian crop estimates are in decline with the winter corn in the biggest supply risk due to falling seeded acres. Both US corn and wheat have brightening export demand outlooks, while the soy complex struggles under the weight of another big Brazilian soy crop. We note that soyoil is back to its November lows on fund selling, but as new renewable diesel plants open, a cash led soyoil rally will unfold in 2024. End users should use the soyoil break for new purchases.

4 December 2023

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  • HEADLINES: Soybeans shed risk premium on projected Brazilian rainfall in mid-Dec; Wheat rallies on confirmation of Chinese demand.
  • Chicago ag markets are mixed at midday with Jan beans lower and falling below its 200-day moving average while wheat surges on confirmation of sizeable demand from China for US SRW. Corn is stuck in between but is adding modest premium following the spot market in Brazil reaching $6.00/bu. Long soy-short grain spreads are being unwound as physical corn exports begin their seasonal increase and as extended range forecasts in Brazil offer some measure of climate normality. Whether extended range forecasts pull elevated rainfall totals into 5 and 7-day forecasts is important.
  • FAS announced that US exporters this morning sold 267,044 mt of corn to Mexico and 440,000 mt of SRW to China. Mexico’s demand for US corn remains record large, and this morning’s SRW sale to China puts total 2023/24 US SRW export commitments at 124 million bu. This accounts for 85% of the USDA’s forecast with nearly half the crop year remaining. Conservatively, final US SRW exports are likely to exceed USDA’s forecast by 10-15 million bu, which trims end stocks a similar amount.
  • The US SRW balance sheet tightens meaningfully again in 2023/24 if acreage is reduced and yield drops from last year’s all-time record 77.6 bushels/acre.
  • US export inspections in the week ending Nov 30 included 46 million bu of corn, vs. 16 million the previous week, 41 million bu of soybeans, vs. 58 million the prior week and 11 million bu of wheat, vs. 10 million the previous week. Corn shipments were above all trade expectations and featured 11 million bu to China, the largest in six months. Cumulative corn inspections at 332 million bu are up 27% year on year.
  • The pace of physical soy shipments has slowed seasonally, and a bit earlier than normal. Outstanding sales are large (511 million bu), but that Brazilian bean exports have been extended into late autumn is noteworthy. We view Brazilian crop risks today as more centred on harvest dates, which have been pushed into second half of Feb/early March, but there is little doubt Brazilian exporters will be active in the global market come spring.
  • French wheat seeding is just 82% complete, 74% a week ago and vs. 95% on average. Snow blankets much of central Europe, and additional unwanted rain is forecast across northern France over the next 10 days. The planting season has all but ended, and regional winter wheat acreage loss will be 10-20% year on year in parts of France and Germany. Weather adversity remains a theme in the world of agriculture.
  • ABARES overnight pegged Australian wheat production at 25.5 million mt, vs. USDA’s 24.5. Australian barley production is forecast at 10.8 million mt, vs. USDA’s 9.7. Stats Can raised its Canadian wheat production forecast to 32 million mt, vs. USDA’s 31 and lifted canola production to 18.3 million mt, vs. USDA’s 17.8. Wheat and rapeseed/canola markets have shrugged off relatively dull government forecasts, but USDA in Friday’s December WASDE will likely loosen its world wheat, barley and canola balance sheets.
  • The midday GFS weather forecast is similar to the morning run in projected widespread heavy rainfall across Central Brazil Dec 11-18, but keeps net boosts in soil moisture regional/scattered this week. It is clear near-term Brazilian forecasts have trended drier, while longer term outlooks have trended wetter. Near-normal rain is projected in Argentina.
  • Soybeans are extracting risk premium following mediocre export shipment data and favourable 8–15-day outlooks in Brazil. Grains are adding premium amid logistics issues in the Black Sea, Chinese demand for wheat and as, unlike beans, S Hemisphere corn supplies won’t be replenished until summer. It is critical that above-normal rainfall occurs in Central and Northern Brazil in Dec and Jan.

30 November 2023

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  • HEADLINES: Weekly export sales surprise in US holiday week; China buys US wheat/corn; Midday GFS weather forecast like prior runs with the rains backloaded.
  • Chicago ag markets are mixed at midday with soybean/soybeans lower while corn/wheat push higher. The corn market finished its December liquidation and has finally awoken to the fact that US corn values are competitive in the world market due to large export purchases over the US Thanksgiving Day holiday. 2023/24 world feedgrain trade is record large helped by China’s massive imports of Brazilian corn in recent months.
  • Chicago soymeal values are struggling on slowing US export demand due to historically high prices (new weekly sales of just 64,600 mt) and the competitive nature of Brazilian old crop meal fob offers. Cash soymeal is bid at $18/ton over and offered at $20 over on the Illinois rail. This is underpinning Dec soymeal futures and firming calendar spreads with no soymeal registered against December delivery.
  • There are only 62 contracts of soyoil registered for Chicago delivery, but with cash soyoil at 3-3.5 cents over on the Illinois rail, we doubt that deliveries will be large. The December/January soyoil spreads have been wild with values soaring late last week and then collapsing in recent days with December soyoil trading at a discount.
  • The USDA reported 134,000 mt of US soybeans that were sold to China which helps in confirming cash connected rumours of demand in recent days. We hear that China has booked another cargo of US soybeans for February this morning along with 2 cargoes of Brazilian soybeans for March.
  • The FAS/USDA weekly export sales report showed better than expected totals for US corn, sorghum, wheat, and soybeans. The US sold 75.9 million bu of corn, 69.6 million bu of soybeans, 22.9 million bu of wheat, and 7.3 million bu of sorghum. USDA reported that China booked just under 200,000 mt of US wheat with their crop year commitment rising to 1.0 million mt. China is on pace to secure 1.5-1.8 million mt of US wheat in 2023/24 which would raise US annual export commitments by 25 million bu. The US has sold 466 million bu of wheat (down 28 million or 6%), 963 Mil of corn (up 241 million or 33%), and 1,137 million bu of soybeans (down 225 million or 16%). The US soybean export sales pace was down over 300 million in late October and has gained 100 million bu in the past 30 days. China booked 2 cargoes of US corn last week with 725,000 mt sold to unknown which could be China, it is something that is being discussed.
  • The world freight market is on fire with rates soaring in tightening vessel supplies and strong line-ups for a host of commodities. A soaring freight market is often a harbinger of a strong world economy, but a portion of the gain is likely related to the low water levels and high cost in going through the Panama Canal. Some vessels are going south around the horn of S America which is likely taking freight tonnage off the market. A sinking world demand profile does not add up when world trade appears to be so strong. Most freight brokers a forecasting further gain into Q1 2024.
  • Chicago brokers estimate that funds have bought 11-12,000 contracts of corn and 6,700 contracts of wheat, while selling 2,200 contracts of soybeans. In the products, funds have sold 5,400 contracts of soymeal and 1,500 contracts of soyoil.
  • The midday GFS weather forecast is consistent with prior runs with ongoing dry weather for another 3-4 days. Then totals of 1-2” are forecast across N Brazil next week with drier weather in the 7–12-day period. The extended range model offers near normal rain, but our confidence this far out stays low due to a lack of verification in recent weeks. A trend of above normal temperatures and below normal rainfall persists across N Brazil.
  • Unwanted rainfall of 3-5” impacts RGDS and Parana in S Brazil. Argentine weather is favourable with additional rain into Monday. Dry/mild conditions follow into Dec 9 which will aid the spring seeding push.
  • The Brazilian weather pattern is like recent runs and abnormal in our view.
  • OPEC announced Q1 2024 production cuts that were largely expected, and crude oil futures fell $3.00 on profit taking. Market volatility is ramping up in a host of commodities including energies, ags, and livestock on managed money flows. US weekly grain export sales were surprising over Thanksgiving which underscores that price is buying demand. And N Brazilian December weather is of the utmost importance following the record dry start of the growing season. The grains are forming seasonal lows. The talk that China has secured 3.0 million mt of US sorghum and is again buying corn and wheat must be paid attention to.

29 November 2023

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  • 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.

28 November 2023

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  • HEADLINES: Chicago soy, wheat recover; Corn preps for Dec delivery period.
  • Corn futures continue to lag, but Chicago soybean/wheat futures are higher at midday. Soybeans/soyoil continue to pace the rally on concerning Brazilian weather and declining crop prospects. Brazilian ag consultant MB Agro estimated the Brazilian soybean crop at 155 million mt, down 10 million from an early forecast due to the drought across Northern Brazil. The firm also cut Brazil’s 2024 soybean export forecast to 96 million mt from just over 100 million previously. Many traders argue that Argentina will make up for any Brazilian soy crop losses in 2024 and in crush and soy product exports that will be the case. However, it is Brazilian crop size and exports that directly impacts US soybean exports, which has a more direct impact on Chicago soybean futures than crush margins or soy product pricing.
  • Liquidation is ongoing in December grain contracts in Chicago as traders get positions down before first notice day. There are over 2,950 grain certificates registered and 4 contracts of corn that could be delivered as of this morning. It is expected that corn registrations could increase before Thursday.
  • We note that the market needs to get beyond first notice day before any sustained recovery can occur.
  • The USDA announced the sale of 123,300 mt of US soybeans to an unknown destination which helps confirm that China booked 3-5 soybeans yesterday. We believe that China is asking for February US soybean offers this morning, but no new purchases can be confirmed.
  • Chicago brokers report that managed money has sold 2,500 contracts of wheat and 4,600 contracts of corn, while buying 2,900 contracts of soybeans. In the products, funds have bought 1,500 contracts of soymeal and 2,100 contracts of soyoil.
  • CONAB late Monday pegged Brazilian soy planting at 75% complete, vs. 86% a year ago in late November. The drought across Northern Brazil is worsening with 13.8% of the crop flowering, and 3.1% of the crop in the pod formation stage. Understandably, the 2023/24 Northern Brazilian soy crop is now being pushed by abnormal warmth. Producers in the south are still trying to seed with additional rain further slowing the process. Another 1.00” of rain fell across Passo Fundo in Rio Grande do Sul today which pushed the total since September 1 near 60.0”. RGDS soy planting is only 37% complete, vs. 65% a year ago. We also note Brazil’s first (summer) corn crop is only 55% seeded, vs. 69% last year. Major delays persist in Bahia and Goias.
  • The midday GFS weather forecast is like the overnight forecast across Northern Brazil with limited rainfall for at least the next 5 days. The model offers a better chance of rain on Monday with increased afternoon thunderstorms. Rain accumulations increase to 0.25-1.50 from Monday through Wednesday of next week. High temperatures range from the upper 80’s to the lower 100’s which is 4-9 degrees warmer than seasonal averages.
  • Southern Brazilian weather stays wet with rains of 2.5-6.00” that fall every 2-3 days. The overall S American pattern stays the same. Better Brazilian rain needs to be pulled forward in the forecast as forward model guidance in Northern Brazil has been too wet thus far in the growing season.
  • Record domestic US soybean demand, expanding renewable diesel production and Argentina’s absence from the global meal market until spring 2024 lean supportive of global oilseed markets. Possible Brazilian soy crop loss adds to upside potential in Q1 2024. Corn and wheat lack a compelling story today, but strength in the Russian wheat market is important. US corn is the world’s cheapest, whilst profitable domestic ethanol production margins remain intact.

27 November 2023

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  • HEADLINES: Chicago corn and wheat push to new lows on fund selling prior to first notice day against December futures; China buys 3-5 cargoes of US soybeans for February.
  • Chicago futures are weaker at midday with corn/wheat futures pushing to new contract lows. Fresh news is lacking for the drop, but the breaking of contract lows in the grains ahead of first notice day triggered resting sell stops. Wheat and corn futures sit at multiyear lows. The US wheat drop followed the fall in Paris wheat futures last week. The last time that Chicago wheat was this low was August of 2020 during the height of the pandemic.
  • Traders are discussing large deliveries against December Chicago wheat and corn, which has pushed out calendar spreads and pressured flat prices. Traders remember the large Chicago wheat deliveries that circulated during the September delivery period.
  • Soybeans/soymeal futures are lower on the prospect of improving Northern Brazilian weather amid the prospect of better rains after December 4. Light showers have been occurring, but the crop conditions are in decline across Northern Brazil as measured by the NVDI indexes. Soyoil is rallying on cash strength and the ongoing search for new renewable diesel feedstock as new plants prepare to come into operation in early 2024.
  • There were no new daily sales announcements, but China is said to have purchased another 3-5 cargoes of US soybeans on the morning break off the Gulf/PNW.
  • The USDA reported that in the week ending November 23, the US exported 16.0 million bu of corn, 53.0 million bu of soybeans, and 10.2 million bu of wheat. The wheat and corn inspections were below trade expectations while soybeans were in line. In their respective crop years to date, the US has exported 286.1 million bu of corn (up 57 million or 20%), 614.3 million bu of soybeans (down 78 million or 11%), and 298.5 million bu of wheat (down 90 million or 23%). US wheat exports are struggling even though the sales pace has improved.
  • Chicago brokers report that managed money has sold 8,500 contracts of wheat, 8,200 contracts of corn, and 2,300 contracts of soybeans. In the products, funds are flat in soymeal and have bought 2,300 contracts of oil.
  • Newswires are confirming cash talk that China delayed a few cargoes of French wheat from December into March. The reason for the delays is not known, but the Chinese wheat import program slowdown has raised European eyebrows that China may wish to delay other shipments. China has a massive corn import program underway from Brazil which along with an active late season soybean program may be delaying wheat imports. China has pledged to secure 9.2 million mt of wheat annually as they became WTO members back in 2001. The US challenged and won a WTO case against China and won, and since China has become the world’s largest wheat importer of over 10 million mt.
  • The midday GFS weather forecast is drier across Northern Brazil with limited rainfall for at least the next 6 days. There will be spotty afternoon thunder storms, but organized and meaningful rain will be lacking. High temperatures range from the upper 80’s to the lower 100’s which is 4-9 degrees warmer than seasonal averages.
  • Better rain is forecast to fall after December 4 across N Brazil, but heavier totals are pushed back into the final 2 days of the 10-day forecast. N Brazilian soybeans require improved rainfall totals as the bloom period starts.
  • Southern Brazilian weather stays wet with rains of 2.5-6.00” that fall every 2-3 days. The overall S American pattern stays the same, better Brazilian rain needs to be pulled forward in the forecast.
  • The CFTC CoT report will be released this afternoon as the funds pile into a larger net short grain position on the new contract lows in corn/wheat. The break to new lows has the fund algos sell, it is almost that simple. Farmer selling from the US, Brazil or Argentina is non-existent. First notice day against December futures looms which is forcing additional liquidation. US and world soy stocks are tightening, corn will follow but the bottoming process takes time.