Author Archives: simon

22 November 2023

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  • HEADLINES: Soybean/corn spread unwinding Chicago holiday feature; OPEC+ delays quarterly meeting on supply cut disputes; GFS weather forecast wetter across southern third of Brazil.
  • Chicago noon ag futures are mixed with the grains higher and soybeans lower. The volume of trade is holiday reduced with the big news being that the OPEC+ quarterly meeting that was planned for the weekend was postponed until November 30 as delegates could not decide on proposed production cuts. Saudi Arabia is said to be dissatisfied with the proposed cuts of other OPEC members. Crude oil is down 19% from its September peak and OPEC+ is looking to raise values through tightening supply.
  • CME crude oil futures fell sharply on the news with December down $3.80/barrel at $74.08 as OPEC+ may not be able to hold onto prior production cuts or make new ones to lift energy valuations. The weakness in crude oil weighed on soyoil due to it being a bioenergy crop, which in turn pressured soybeans. We look for a mixed Chicago close into the US holiday with the market to reopen on Friday morning.
  • USDA/FAS announced the sale of 110,000 mt of US SRW wheat to China, and 128,000 mt of US corn to an unknown destination. Some US exporters argue that the unknown corn sale was to China, but we cannot confirm. China has been a massive importer of Brazilian corn to date. No US soybean sales were announced, but these sales can show up on Friday under the 48-hour business day rule. We understand that China’s Sinograin purchased 4-6 cargoes of US soybeans off the PWN for January shipment yesterday.
  • US exporters report that another 2-4 cargoes of US SRW wheat were sold to China including the sale that was announced this morning. US SRW wheat prices fell back to levels that sparked Chinese demand back in early October.
  • Brazil’s private consultancy Agroconsult estimated the 2023/24 Brazilian soybean crop at 161.7 million mt, which is up 3.7 million from USDA’s 158.0 million mt crop of last year. Agroconsult estimated that Brazilian farmers will seed 2.9% more soybeans than last year. However, soybean yield potential was cut in Mato Grosso due to irregular rainfall and record heat. Brazil’s first corn crop was forecast at 28.7 million mt and the winter corn crop at 100 million mt for a total of 128.7 million. The industry is moving Brazilian corn and soybean production lower, it is just a question of degree.
  • Chicago brokers estimate that managed money has bought 2,700 contracts of wheat and 3,100 contracts of corn while selling 2,100 contracts of soybeans. In the products, funds have sold 2,600 soyoil and bought 1,900 contracts of soymeal.
  • Weekly US ethanol production was 301 million gallons which was down 2% from last year. US ethanol stocks rose by 29 million gallons to 909 million gallons which was down 5% from last year.
  • There is talk that a Cargill soy crush plant in the Upper Midwest was experiencing mechanical difficulties which caused them to repurchase soymeal in the cash market.  This rallied the December/March soymeal spread.
  • The midday GFS weather forecast is similar to the overnight run across Northern Brazil and wetter across Southern Brazil. The prior pattern of a high-pressure ridge across N Brazil and a low-pressure trough across S Brazil will return by the weekend with the mean position of the ridge being further east. Any extreme heat will reside across NE Brazil, and it will push westward with time. Rainfall totals keep increasing across the southern third of Brazil which is worrisome (flooding) amid soils that are already saturated. 12-day rainfall totals equate to 6-9.00” across Parana and Santa Caterina where early December flooding could become widespread. Near normal rainfall drops across Argentina for spring seeding progress.
  • It is a slow pre-holiday trade with traders unwinding long soy/corn spreads. Soyoil is lower on the sharp fall in crude oil while China booked more US SRW wheat. China has now purchased 1.0 million mt of US wheat, with a total of 1.5-1.8 million estimated for the crop year. We would argue that the WASDE 2023/24 US wheat export estimate is 25 million bu too low. The US weekly export sales report will be released on Friday before the Chicago opening with corn/soybean sales building. December Brazilian weather is the key for future Chicago values. This week’s rainfall to date has been disappointing in its coverage. The European model has been far too wet, and the GFS model is favoured going forward. Crop stress is ongoing across N Brazil and further cuts in yield/production are expected.

21 November 2023

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  • HEADLINES: Chicago soyoil breaks out of key chart pattern; China books additional US soybeans: GFS midday weather forecast wetter for Southern Brazil.
  • Chicago grain futures are higher at midday with corn, wheat and soybean gaining on chart-based buying amid economic stability worry across Argentina and falling crop ideas in Brazil. Declining Brazilian corn/soy crop estimates underpins Chicago on breaks. And December soyoil futures have pushed above the neckline of a head-and-shoulders bottom which sets a target of $58.40. The 50-day moving average crosses at $54.49 December soyoil which is the next upside price target. The oil share spread appears to have formed a lasting bottom at 35% with the next upside price target being 39%. Corn appears to be following the soybean rally with wheat following news out of the Black Sea.
  • We look for a mixed Chicago close with an inflow of new fund money noted on the opening. Traders wonder if additional days of inflows are ahead.
  • Chicago brokers estimate that funds have bought 2,000 contracts of wheat, 3,000 contracts of corn and 4,100 contracts of soybeans. In the products, managed money has purchased 3,200 contracts of soyoil and sold 2,500 contracts of soymeal. The soymeal spreads weakened on the rally with traders fearing another week of tepid US soymeal export sales.
  • There are rumours that Ukraine’s Odessa port endured infrastructure damage in a drone/missile attack late day from Russia. The Russians continue to target Ukraine’s grain export ability with European farmers placing blockages on the entry of Ukraine grain into eastern border countries. The struggles of Ukraine grain exports are weighing on the margins of interior Ukraine farmers which will likely cut their use of inputs or planted acres next spring. No Ukraine farmer planned for the war to enter its third year in late February. World wheat prices rallied on the news of a Russian attack, but details are awaited.
  • China’s state buyer Sinograin is rumoured to have purchased 5-8 cargoes of US soybeans off the PNW for Jan/February. A few of the cargoes traded late yesterday, but a daily sales announcement is expected from USDA in the coming days. There is talk that China is also asking for US SRW wheat offers, no sales can be confirmed.
  • Private Brazilian corn/soybean crop estimates are in decline. Brazilian farmers are struggling with drought across the north and flooding across the south. Their cropping options are not what they had hoped for. Mato Grosso/Goias farmers have the option of reseeding soy fields to get a better stand or planting full season cotton. However, if sparsely populated soybean fields are torn up and replanted, the opportunity to plant a second crop of corn is lost. In Southern Brazil, the window is open to seed soybeans into early January, but the harvest is pushed backwards into late April or May. The point is that Brazil will no longer harvest a record large soy crop and winter corn acres could be cut by an amount that drops production by 6-8 million mt.
  • The midday GFS weather forecast is similar to the overnight forecast across Northern Brazil and wetter across Southern Brazil. The prior weather pattern of a high-pressure ridge across N Brazil and a low-pressure trough across S Brazil is returning. This will leave N Brazil wanting more rain while S Brazil struggles to seed spring crops amid flooding rains. The best chance for N Brazilian rain will be from through Saturday before drier/warmer weather returns. Unfortunately, S Brazil just stays wet with the 11–15-day period exceptionally wet with another 3-6.00” of rain. Southern Brazil is becoming as concerning as Northern Brazil amid all the rain and impact on crops from Parana south.
  • 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 US farmers have sold a large percentage of their crop on the rally. We remain bullish of soyoil and soybeans, while the grain markets forge seasonal lows. The US weekly export sales report will be released Friday morning before the Chicago opening which could produce liquidation of long soymeal futures.

20 November 2023

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  • 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.

16 November 2023

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  • HEADLINES: Crude oil prices tank, ag futures follow lower; GFS weather forecast slightly drier in 1–10-day period, wetter in 11–15-day period; US soybean weekly export sales record large at 144 million bu.
  • The sharp fall in US WTI crude oil futures produced selling across the ag sector including soybeans/soymeal where speculators had built up a sizeable, long position following the October Crop report. Soybeans/soymeal had fallen to sharp losses while corn, wheat and soyoil are trying to recover/bounce. Corn futures are back into the green at midday due to the strong potential of Brazilian farmers seeding less corn and the 33% rise in US corn sales to date.
  • WTI crude oil is down $3/barrel to $73.50 December futures on the oil stock build in Cushing, Oklahoma and worry future energy demand from China. The US Biden/Xi summit was reported have gone well for Biden, with some saying that China’s negotiation softness was based on their weak economy. We have no way of knowing if China was trying to calm the political waters due to their weak economy or that they understand the intermingled economic and political ties between both countries heading into a new US presidential election. Yet, the summit is being called successful from the US’s perspective with talk that China has purchased additional US soybeans and is again asking for offers on US SRW wheat. The drop in US/French wheat prices has pulled prices back down to prior Chinese purchase levels back in October.
  • Chicago brokers estimate that managed money has sold a net 3,200 contracts of Chicago wheat, 900 contracts of corn (sold 7,000 early and bought back 6,000 on the rally) and 8,800 contracts of soybeans. Funds have sold 6,600 contracts soymeal and 3,400 contracts of soyoil.
  • USDA/FAS reported massive soybean sales which were largely expected due the daily reporting system announcements (buy the rumour sell the fact). The US sold 144.0 million bu of soybeans (US record sales for any week), 71.2 million bu of corn, and 6.5 million bu of wheat. For their respective crop years to date, the US has sold 1,035 million bu of soybeans (down 282 million or 21%), 831 million bu of corn (up 205 million or 33%), and 437 million bu of wheat (down 33 million or down 7%).  WASDE is forecasting an 8% decline in US wheat exports, so the sales pace justifies their forecast. Corn and soybean sales are also on track to reach the USDA 2023/24 forecasts with the unknown being S American production.
  • FAS/USDA reported that 220,000 mt of US soybeans were sold to an unknown destination in the 2023/24 crop year. The buyer is said to be China which is starting to add to their purchases for late January/February. Brazilian fob offers are hard to find in size until the last half of February.
  • The Argentine presidential election is Sunday with Melei and Massa in a runoff. The polls have the candidates in a dead heat with 10% of the vote undecided. Argentine farmers favour Melei due to his campaign pledge to end taxation of ag exports and the eliminate the Argentine Central Bank. Whether such promises can be kept is unknown, but Melei would cause mass uncertainty in financial volatility should he be elected president this weekend.
  • The midday GFS weather forecast is slightly drier than the overnight run in the 10-day forecast period, but wetter in the 11–15-day timeframe. Another round of heavy rain is forecast for S Brazil into the weekend with some areas enduring 250-300% of normal rain since Sept 1. The midday EU model will be delayed or non-available due to a power outage.
  • The bulls are taking profits on long soybeans/soymeal to enjoy their Thanksgiving Day holiday with needed rain in next week’s N Brazilian forecast. Corn has again bounced off contract lows with wheat values trying to follow. EU wheat production will be down 15-20% next year on diminished seeding due to wet weather. Soyoil will gain on soymeal into yearend on rising domestic demand and falling supplies.

15 November 2023

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  • 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.

14 November 2023

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  • HEADLINES: Chicago turns higher on drier midday GFS forecast for northern Brazil; NOPA out on Wednesday; Mexico secures more US corn.
  • Corn, soybean, and wheat futures are mixed at midday. Any selling has been concentrated in soybeans/soymeal with the grains trading either side of unchanged. Soyoil has been the bullish stalwart of the morning on oil share spreading with December futures rising to their best levels since October 23.
  • However, Chicago trade volume has trended lower from an active opening as traders await news on the Biden/Xi Summit at the APEC meeting, the US House vote on a continuing resolution that includes an extension of the 2018 Farm Bill, and the Weekly FAS US Export Sales report on Thursday that is expected to show that China booked a massive 90-118 million bu of US soybeans last week.
  • A mixed Chicago close is forecast as the market consolidates Monday’s gain. Technically, vegoil values are breaking out to the upside on the charts. Be it palmoil, soyoil or canola, they all appear to be at a bullish technical turning point. Soymeal futures market spreads argue that soybeans are consolidating.
  • FAS announced that Mexico purchased 101,745 mt of US corn. No additional sales of US soybeans were announced sold to China/unknown destinations.
  • Chicago brokers estimate that managed money managers have purchased 1,000 contracts of Chicago wheat, 2,000 contracts of corn, and 3,700 contracts of soyoil. Fund managers have sold 3,200 contracts of soybeans and 4,700 contracts of soymeal.
  • NOPA will report their October member crush and soy product stocks tomorrow. We are looking for a record large crush rate of 188 million bu with soyoil stocks pegged at 1.28 billion pounds. Crush margins have pushed NOPA processors to be running at full capacity. US soyoil yield is best determined with the November report as it reflects the first month of all new crop soybean supply. We doubt that the NOPA data will pressure WASDE to raise their annual crush estimate until there are few additional months of crush. We note that ADM Spiritwood North Dakota plant should become operational before the end of November, adding capacity of an estimated 150,000 bu/day when fully operational. The ADM Spiritwood plant is a joint venture with Marathon.
  • The US inflation rate was 3.2% in October, down from 3.7% in September and 9.1% last year. US gasoline prices were the driver of the lower inflation rate and the rising expectation that the US Central Bank has reached its zenith on its interest rate hikes in its war against inflation. The US dollar has declined to its lowest level since the opening days of September with money managers looking at raw materials as investible for 2024. The US Dow rallied to gains of 460 points while the yield on the US 10-year note has fallen to 4.45%. The Brazilian Real has rallied to 4.85:1 US$.
  • The midday GFS weather forecast is drier than the overnight run for Northern and Eastern Brazil. Exceptional heat and dryness blankets Central and Northern Brazil into Nov 20 with showers returning next week. We estimate 6–10-day rain accumulations across Northern and Central Brazil in a range of 0.4-2.50”. A concerning pattern of dryness resumes in the 11–15-day period as the high-pressure ridge rebuilds aloft. The coming showers will not be enough to arrest crop stress if another period of hot/dry weather returns in the closing days of November and December.
  • Southern Brazil endures additional flooding rain totals of 3-9.00” as a stuck weather pattern holds aloft. The rain adds to crop woes amid saturated soils. More than 30” of rain has fallen across S Brazil since September 1.
  • The drier midday Brazilian forecast has rallied soybeans/ soymeal back in the green. The market is myopic on S American weather due to its importance on future US corn/soy export demand. Cash soymeal and soyoil are trading well above Chicago values which prevents a sizeable decline ahead of first notice day. Corn has the best bullish potential if estimates are correct with a Brazilian total corn production of 123.5 million mt with future declines likely on abandoned acres.

13 November 2023

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  • HEADLINES: Row crops soar on Brazilian heat/dryness; Meal paces rally; Brazilian corn market adding premium.
  • Corn, soybean, and meal futures are sharply higher at midday, with wheat in tow and with soyoil weaker. Meal in recent weeks has been carrying the load in keeping US cash/futures-based soy crush margins elevated, which has worked against strength in oil. Some suggest US soyoil prices are undervalued, but not until there is confirmation of trend soy yields in Argentina will the spread fully re-align itself. Otherwise, today is all about dire weather in Brazil and low odds that the climate pattern changes prior to early/mid-December.
  • Brazilian soy planting is projected to have reached 55-57% complete, vs. 66% a year ago. This year’s discrepancy to last year will widen further as producers across much of the country pause fieldwork. High temperatures in Mato Grosso do Sul, Mato Grosso, Goias and Sao Paulo Tues-Sat will reach 102 degrees or higher. These states account for 50% of total Brazilian soy area/production. Excessive rainfall will continue to batter the southern quarter of Brazil this week. The primary risks, for now, centre on a lack of available of soy supplies in early/mid-February, and guaranteed safrinha corn seeding dates. The US soy export window is being extended, and the yield risk associated with safrinha production next spring/summer is massive.
  • In fact, yield risks today are higher for corn than soybeans in Brazil, but there is no doubt a pattern of regular soaking rain is needed in Central and Northern Brazil no later than Dec 1 to salvage soy potential. Better rain chances do occur in C/N Brazil in the 8–15-day period, but longer-term climate guidance indicates no meaningful change in Brazil’s climate pattern into late year. Brazilian weather stays abnormal. Crop concern is high.
  • We also note that Brazilian corn futures have soared today. January corn in Brazil at midday is up 5.3% at $5.88/bu. Jan Brazilian corn’s premium to Dec Chicago has widened to $1.07/bu, and since late October Brazilian corn’s premium has widened, not contracted, steadily. The global corn market lacks a major supply threat today, but it is clear the Brazilian market is working to funnel winter/spring importer demand to the US.
  • It is just tough to be bearish of row crop markets given the need for record Brazilian soy yields and as S American corn supplies will not be fully replenished until early/mid-summer 2024. Ukrainian corn exporters will be there on rallies, but Ukraine still isn’t a reliable supplier given the escalation in conflict within the Black Sea and as tighter government controls on exports there slow the pace of new shipments.
  • US corn export inspections in the week ending Nov 9 totalled 24.0 million bu, vs. 22.6 million the previous week. Wheat inspections were 7.6 million bu, vs. 4.2 million the previous week. US soybean export inspections totalled 61.2 million bu, vs. 80.2 million the previous week.
  • In their respective crop years to date, the US has inspected for export 243 million bu of corn, 23% above last year, 273 million bu of wheat, down 26%, and 516 million bu of soybeans, down 6% year on year but a sizeable 29% of the USDA’s annual forecast. Following recent Chinese demand and the lack of late Jan/early Feb supply availability in Brazil, the near-term US soy export outlook has brightened.
  • The midday GFS weather forecast is consistent with morning output. Exceptional heat and complete dryness blanket Central and Northern Brazil into Nov 21-22. 5-day precipitation accumulation in RGDS in S Brazil is estimated at 3-8”. Moderate rain expands northward into Mato Grosso do Sul and Mato Grosso Nov 22-25, but concerningly, a pattern of dryness resumes thereafter into Nov 29.
  • There is little/no room for much additional US soy export demand should adverse weather continue in Brazil into December. And in the long run, the size of Brazil’s safrinha corn crop is a big deal for US, world and exporter corn supply and demand. Weather-based volatility lies ahead, but it is imperative that a major/lasting shift occurs in Brazil in the next 2-3 weeks.

8 November 2023

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  • HEADLINES: Wheat soars as rumours that Russia hit a private cargo ship in Odessa oblast port; Soymeal bulls look for big sales tomorrow; Estimates suggest lower Brazilian soy crop at 156 million mt.
  • Soybean/soymeal futures pushed to new rally highs while the grain markets played catch up. The USDA November Crop Report will be released tomorrow. And Brazil’s CONAB will update their 2023/24 corn, soybean, and wheat crop estimates beforehand. We doubt that the USDA data produces statistical fireworks with the trade looking for yield forecasts that are like October. Also, we do not expect that WASDE will make any big downward adjustments on US exports with demand improving and Brazilian weather threatening. Moreover, note that historically, WASDE does not update S American corn/soy crops sizes until December. It is early to adjust Brazilian corn/soy yield estimates downward. However, WASDE should cut Brazilian/Argentine wheat crop estimates due to both drought and flooding. Yet, if there is a bullish balance sheet tomorrow it should be soyoil as carry in stocks are cut by 160 million pounds and WASDE holds the 2023/24 crush pace steady. We see soyoil and oil share as being too cheap relative to demand. But the soyoil chart stays buried in a bearish trend which keeps money managers in a mode of selling rallies.
  • Chicago brokers estimate that funds have bought 8,400 contracts of Chicago wheat, 9,100 contracts of corn, and 6,200 contracts of soybeans. In the products, funds have sold 1,100 contracts of soyoil while buying 4,800 contracts of meal.
  • The USDA confirmed the sale of 565,000 mt of US soybeans to China and unknown destinations in the 2023/24 crop year with 344,500 mt of soybeans received in the reporting period for delivery to unknown destinations. The combined total is 909,000 mt making recent day sales the largest in months. The shipping period is said to be from December through March. We understand that China is still asking for US February/March soybean offers today. Also, USDA reported that Mexico purchased 270,000 mt of corn for delivery in 2023/24.
  • Illinois rail soymeal is bid at $10 over Chicago December futures and offered at $19 over, unchanged. There are rumours that weekly US soymeal sales will again fail to match the expectations of the bulls with Brazilian hi pro meal being far cheaper. US Gulf 46.5% protein meal is offered at $55 over vs Brazilian hi pro (48%) at $23 over, a $32/mt difference. And Argentine soymeal is offered at $46 over, a few dollars cheaper than prior days. With cash meal at $30 over to feeders in Iowa/IL and the Plains, a price near $500 is causing nutritionists to look at using more corn or DDGs/canola or cottonseed hulls due to pricing. Soymeal prices are doing their job of rationing.
  • The other extreme is soyoil in which the cash market is firming today with the Illinois rail trading at $0.05 over Chicago which is up a half to 1 cent from yesterday on improving demand. We hear that biodiesel and renewable diesel producers are active in adding to cash forward coverage on margin. Renewable diesel producers can lock down profitable margins into mid-2024.
  • The Rosario Commodity Exchange lowered their Argentine wheat crop estimate to 13.5 million mt, just 2 million above last year’s crop that was 11.5 million mt. The exchange estimated that corn seeding is 27% and soybean seeding 11% completed, well behind historical averages as producers await additional rain.
  • There are cash exporter rumours that Russia has struck a commercial ship in Yuzhne (Odessa Oblast port). The ship is said to be carrying grain or iron ore according to the rumours. If Russia intentionally struck a private cargo ship it would usher in new layer of worry for marine insurance carriers.
  • The GFS weather forecast is dry with virtually no rain across Northern and Central Brazil into November 20. The lack of rain is startling farmers with seed germination suffering. High temperatures will hold in the 90s/lower 100’s. Such temperatures are some 5-9 degrees above normal which is adding to the soil moisture losses.
  • Estimates are cutting Brazilian soy crop estimate to 156 million mt and corn to 123.5 million mt. Brazilian weather will be alarming in another few weeks if the pattern does not change. It is S American weather that directs Chicago prices. The midday GFS forecast is wetter in the 11–15-day period which is a long way off, but must be closely followed.

7 November 2023

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  • HEADLINES: Soybeans/soymeal surge to new rally high; GFSweather forecast offers no change in Brazilian weather pattern; China books 300-400,000 mt of US soybeans for Dec/January.
  • Soybean and soymeal futures pushed to new rally highs while soyoil falls on oil share spread selling, while the grains are mixed. Chicago corn continues to sag for technical reasons with Friday’s reversal high unable to be exceeded. The Chicago market has all about “fund flow” determinate with soybean/soymeal charts bullish and pushing higher. Corn, soyoil, and wheat charts have not been able to turn around. Grain and soyoil charts are bearish, and until there is a chart-based signal for managed money to exit their growing short position, the trading mentality of fund managers is to sell rallies.
  • The macro financial markets have offered bearish tailwinds with crude oil futures pushing to new lows for the decline at $78.50, and the dollar higher. The interest rate on the 10-year US note has fallen to 4.6% on recessionary worry. The market is see sawing back and forth between a US consumer that is spending and a Chinese consumer that is saving. The DOW is up 90 points at midday and looking to post its 7 consecutive daily higher close.
  • We would maintain a view that Brazilian weather is concerning but could become alarming in another 10-14 days if their weather pattern does not change. The adverse Brazilian weather not only impacts soybean production, but also corn due to latent winter corn seeding dates. Brazilian farmers are in a quandary with the dry forecast leaving them unsure as when they should reseed crops.
  • Chicago brokers estimate that funds have bought 5,900 contracts of soybeans while selling 1,200 contracts of wheat and 4,500 contracts of corn. In the products funds have bought 8,400 soymeal while selling 5,300 contracts of soyoil.
  • The USDA confirmed the sale of 110,000 mt of US soybeans to China in the 2022/23 crop year. Rumours abound that China purchased 300-400,000 mt of US soybeans overnight for December/January.
  • France has planted an estimated 53% of their winter wheat crop with wet soils to keep planting slow until late November. Planted wheat has been suffering from yellowing due to excessive water and a lack of nitrogen. It appears that EU farmers will cut 2-4% of their winter grain seedings due to adverse wet weather.
  • Algeria has started securing wheat for LH December and FH January. Traders are estimating that 150-200,000 mt of wheat has sold at a price of $266/mt basis CIF. Assuming $19-23/mt for freight works back to $243-247/mt basis FOB. The wheat is said to be sourced from Eastern Europe or Russia.
  • The US exported 90.8 million bu of soybeans, 124 million bu of corn, and 68 million bu of wheat during September. US Sept soybean exports were 12 million bu larger, and corn was 21 million bu bigger than 2022. US September wheat exports continue to suffer from Russian wheat export aggression and were 44 million bu less than 2022. September US soymeal exports were record large at 770,067 mt.
  • The GFS weather forecast is dry with virtually no rain across Northern and Central Brazil into November 21. This is as dry as you will ever see Brazil heading into December. The lack of rain is startling farmers with seed germination suffering. Irrigation is unavailable and a deepening drought in the Brazilian Amazon is abnormal.
  • High temperatures will hold in the 90s/lower 100’s daily. Such temperatures are some 5-9 degrees above normal which is adding to the soil moisture losses.
  • Another round of heavy rain occurs across Southern Brazil this weekend and a second system in the last half of next week. 10-day rain totals are estimated in a range of 2-6.50” which adds to renewed flooding. This is a highly unusual Brazilian weather pattern that appears to be static. Closely monitor the daily forecasts.
  • Brazilian weather is not alarming today, but it will be in another few weeks if the pattern does not change. The impact on S American soy/grain production would then be massive as double cropping opportunities pass. This is no place for new sales amid such threatening Brazilian weather. And the early harvest of Brazilian soybeans has been pushed backwards to February. Both Brazilian yield and planted area is being impacted and must be adjusted downwards.