• HEADLINES: Market trades both sides on EPA announcement concern over 2020-2021-2022 biofuel mandates; US export sales ok.

• Investment flows have been the theme of the past several days of Chicago trading. Some argue that the inflow is due to early Index Fund rebalancing or the pre-roll as some call it. Others suggest it is new funds coming into the space due to inflation. All we know is that open interest is rising from a 4 year low across Chicago which suggests that it likely is new investment. In year-end reports to fund shareholders, managers will want to see some exposure that helps counter budding inflationary pressures. Bitcoin is not approved by many investment committees, but commodity futures fit the bill. We look for additional fund flows into the ag commodity space into yearend. It is the degree that determines Chicago price action on a day-to-day basis.

• And it is always difficult to figure out the index fund rebalance since reports of how much new capital comes or leaves the space is lacking. This makes estimating the rebalance an educated guess, and in past years the rebalance has shown that the impact on price is always less than originally feared. The biggest re-balance in Chicago is soymeal. But following the big up day yesterday, soymeal open interest declined which argued for short covering. Our bet is that much of the meal rally is due to massive shorts that were covered. Soymeal was the short used against long beans, corn, and wheat.

• Chicago brokers estimate that funds have bought 3,500 contracts of wheat, 6,500 contracts of corn, and 4,500 contracts of soybeans. In soy products, funds have bought 1,900 contracts of soymeal while selling 2,100 contracts of soyoil.

• The soyoil/soymeal spread should be getting close to a bottom. Soyoil will again start to the bullish leader of soy products following the EPA mandate announcements that has produced headline risk. US soybean crush operations have ramped up which is producing additional soymeal/soyoil. The meal production will more than offset the extra demand produced by spot shortages of lysine. The additional soyoil production is being exported overseas to make sure that strong crush margins can persist into early 2022.

• US Export Sales for the week ending November 11 were: 14.7 million bu of wheat, 35.6 million bu of corn, and 50.8 million bu of soybeans. For their respective crop years to date, the US has sold 503 million bu of wheat (down 130 million or 20%), 1,298 million bu of corn (down 90 million or 6%), and soybeans 1,271 million bu (down 608 million or down 32%). The US soybean sales pace is not gaining, and USDA remains far too high with their annual soybean export estimate. We would note that Canada imported a record amount of US corn this week at 12.3 million bu with total purchases rising to 60.8 million bu. We look for Canada to import 6.0 million mt of US corn due to its dire drought and the lack of feedgrains. The competition for supply continues to ramp up for corn/soy in the Dakotas, Nebraska, and Minnesota. Premium basis bids are expected to persist well into early 2022.

• Industry sources report that EPA is expected to announce 2020-2021 and 2022 biofuel mandates before the weekend. No exact timing of the announcement is being offered. The mandate announcements have been anticipated for weeks. The key will be the 2022 mandate since the blending for 2020 and 2021 is nearly completed. By 2007 Energy Bill Law, the Biden Administration must announce the annual mandates by the end of November. There is headline risk when the EPA makes the announcement.

• The midday GFS weather forecast is like the overnight run with below normal rainfall for Argentina and the far southern areas of Brazil over the next 10 days. Moderate to heavy rains will persist across N Brazil with totals of 3-6.00” into Nov 28. The best chance of rain is for Santa Fe during the middle of next week.

• Fund flows cause rallies, but when the buying ceases, prices correct. Cash soybean/corn movement has picked up on the rally with farmers willing to reward the market. However, if a drought were to develop across Argentina/S Brazil, much higher Chicago values would be justified.

• HEADLINES: Investment flows boost Chicago to sharp morning gains; US farmers boost cash sales; Egypt’s GASC buys just 60,000 Romanian wheat.

• Grain markets are sharply higher at midday with the soy complex being the upside leader. Managed money inflows on inflation positioning and reports of concerning weather forecasts for S America has the complex pushing to sharp daily gains. March soybean futures were able to push back above $13.00, the highest price since the bearish September 30 NASS Stocks report. Corn and wheat have followed with both attempting to test last week’s high. March corn scored a short term high at $5.93 while March KC wheat topped out at $8.44 last week. The volume of trade has been active with moderate producer cash selling noted on the sharp advance. The daily highs are likely in place, but aggressive selling will depend on speculative profit taking going home.

• Chicago brokers estimate that funds have bought 12,900 contracts of corn, 16,700 contracts of soybeans, and 6,900 contracts of wheat. In soy products, funds have bought 3,500 contracts of soyoil and 2,400 contracts of soymeal. The fund buying of soymeal has not been very large on the morning rally. This was less than expected volume with December soymeal almost filling an upside chart gap, which has produced some profit taking. The morning spike rally in meal likely forged a top in March soybean futures above $13.00.

• FAS reported the sale of 30,000 mt of soyoil to India and 132,000 mt of US soybeans to China in the 2021/22 crop year. A year ago, India made a purchase of 80,000 mt of US soyoil at about the same time due to the US competitive soyoil price position relative to palmoil. The US soyoil sales pace has been slow due to elevated cash Gulf offers, but with world sun/canola oil prices rallying sharply, US soyoil is again competitive. The FAS/USDA will be releasing their weekly export sales report on Thursday.

• EIA reported that the US weekly ethanol grind to produce ethanol rose to 312 million bu, up 7 million from the week prior. The US needs to average 296 million bu of corn grind per week to reach the WASDE annual usage forecast at 5,250 million bu. Research maintains a US 2021/22 US corn grind of 5,400 million bu or 150 million more (than WASDE). The weekly pace in the crop year to date is on target to reach our elevated US corn grind.

• Weekly US ethanol stocks fell by 9 million gallons to 843 million due to strong blender demand. US gasoline stocks are at their lowest levels on years amid active consumer demand and elevated miles driven.

• Egypt’s GASC secured 60,000 mt of Romanian wheat in the overnight tender. Turkey is tendering for 385,000 mt of wheat, which will likely be mostly Russian as exporters have been moving this wheat into position to lock down the Russian floating export tax. A sizeable Turkish purchase is expected. We expect that Russia sold nearly all the 800,000 mt of Algerian wheat purchased in a tender that closed on Tuesday. Reports that Russia sold just 250,000 mt are too low we believe.

• The midday GFS weather forecast is like the overnight run with limited rainfall for Argentina and the far southern areas of Brazil over the next 10 days. Moderate to heavy rains will persist across N Brazil with totals of 3-6.00” into Nov 27. A break in the wet Northern Brazilian weather is desired with sunshine for soy crop reproduction.

• New investment flows into Chicago has produced a one-way bullish price move this morning. However, the low volume rally in soymeal with values nearly filling an open chart gap suggests that a correction could befall the market heading into the weekend. It is premature to be overly bullish on S American weather for another few weeks.

• HEADLINES: NOPA crush exceeds expectations; Funds add to Chicago wheat length.

• Chicago ag futures have again traded both sides of unchanged in weak volume, with soybeans, meal and Chicago wheat the bullish leaders at midday. The pace of physical US soybean exports remains impressive while funds continue to build net length in the US wheat market. CFTC data will be released this afternoon following last week’s Veteran’s Day holiday in the US. We estimate that managed funds last Tuesday were net short a modest 2,000 contracts of Chicago wheat, but since last Tuesday fund have bought some 35-37,000 contracts.

• Algeria has postponed a wheat purchase planned for today to Tuesday. Paris milling wheat futures have reacted negatively to the allowing of minor bug damage, which favours Russian exporters, while Algeria has also boosted its minimum test weight requirement to 77kg, which bodes poorly for French exports following this season’s quality loss there. Wheat prices worldwide are not slowing importer demand, but the EU missing out on this week’s Algerian business is viewed as negative to wheat consumption there in the near-term. Aussie wheat futures are also down slightly amid coming dryness there.

• FAS’s daily reporting system featured 264,000 mt of soybeans sold to unknown destinations and 198,200 mt of US corn sold to Mexico. 50,000 mt of Mexico’s purchase this morning is for 2022/23 delivery. Other tender/demand news is absent, and overall, it has been a rather uneventful/quiet start to the week.

• US weekly export inspections through the week ending Nov 11 featured 76 million bu of soybeans, with the previous week’s total revised upward 9.7 million bu to 106.9 million, the largest weekly FGIS number since Nov 2016. Corn shipments totalled 34 million bu, vs. 26 million the prior week. US wheat shipments totalled 14 million bu, vs. 9 million the previous week. For their respective crop years to date, US exporters have shipped 1,223 million bu of soybeans, 33% below last year 1,263 million bu of corn, down 6%, and 488 million bu wheat, down 22%. Pace analysis argues against any significant changes to US exports in the USDA’s Dec WASDE, but weekly soy sales/shipments must stay elevated to avoid a downward revision thereafter.

• NOPA-member soybean crush in October totalled 184 million bu vs. trade expectations of 182 million. Crush in October was down 1.3 million bu from last year but is the second highest for the month on record. The recent short-covering rally in soymeal has lifted the spot futures-based crush margin to an incredible $2.10/bu, vs. $1.15 a year ago in mid-Nov. Actual margins in the cash market are even better amid positive meal and oil basis. Monthly crush is expected to stay above 180 million bu well into mid/late spring. Oct 21 soyoil stocks were 1.83 billion lbs, vs. 1.49 billion a year ago, which leans bearish Chicago oil.

• US soyoil disappearance has been intact at high prices, but until the US’s renewable diesel program ramps up in mid/late 2022, boosts in crush rate will keep the US soyoil market adequately supplied.

• The midday S American weather forecast is wetter in southern Brazil in the 11-15 day period, with needed accumulation of 1-3” offered to Parana and RGDS. Confidence so far out is low, but whether rain expands into the drier areas of southern Brazil by late November will be monitored closely. The forecast is otherwise consistent with the overnight run. Daily showers persist across Central and Northern Brazil. Dry/mild conditions will be established throughout the next 10 days across Buenos Aires and Cordoba Argentina, which will allow soy seeding there to accelerate.

• Chicago markets have digested record low exporter wheat stocks/use and the tightening of US corn supply and demand relative to expectations early Nov. A choppier marketplace is anticipated into the holiday season, with acute focus to be paid to S American weather beginning in early Dec. Jan Chicago soybeans are viewed as overvalued above $12.75.

• HEADLINES: President Biden and Chinese President Xi to hold a virtual summit Monday; Soymeal rises above 100-day ma.

• Chicago ag futures have traded both sides in reduced volume from recent daily trading sessions. Corn and soybeans are the upside leaders while wheat follows. Managed money was a buyer following the morning Chicago reopening. The announcement of the Russian floating weekly export tax came as no surprise which was digested in Thursday’s rally. With Paris wheat futures unchanged, US wheat futures lack overseas leadership heading into the weekend. We look for a mixed close with cash strength in corn/soymeal/soybeans providing underlying support. Wheat values may “catch their breath” awaiting the next round of world trade demand.

• Chicago brokers estimate that funds have bought 5,400 contracts of corn, 4,300 contracts of soybeans, while being flat in wheat. In soy products, funds have been sellers of 2,100 contracts of soyoil and buyer of 2,900 contracts of meal

• The USDA/FAS announce the sale of 256,930 mt of US soybeans to an unknown buyer. Most of the sale is rumoured to be heading to China.

• FAS weekly export sales were within trade expectations. For the week ending November 4, the US sold 10.5 million bu of wheat, 42.0 million bu of corn, and 47.4 million bu of soybeans. And US sorghum sales were the best in months at 10.3 million bu. For their respective crop years to date, the US has sold 488 million bu of wheat (down 139 million or 23%), 1,262 million bu of corn (down 82 million or 6%), and 1,223 million bu of soybeans (down 608 million or 33% from last year). US sorghum sales stand at 129 million bu, down 31 million or 21%.

• We would note that WASDE 2021/22 soybean export forecasts are too high by at least 100-125 million bu, wheat too high by 15-20 million bu while corn is in line with historical averages. A further cut in the 2021/22 US soybean export estimate is forecast for December.

• US President Biden and Chinese President Xi will be holding a virtual Summit on Monday. It is the second time this year that both presidents will talk about the relations of both countries, their economies, trade, and climate goals. It is hoped that Biden will prod China to return to trade negotiations and review the Phase One Pact. Asian sources indicate that China would be willing to extend the Phase One deal if the US would reduce or eliminate 35% tariffs on $265 billion of Chinese goods. Reducing the tariffs would lower the cost of household goods coming into the US and help beat back inflationary pressures.

• Russia is again amassing troops/military hardware along the Russian/Ukraine border which has some fearing a new geopolitical conflict. The US warned Europeans that Russia may be weighing a potential invasion of Ukraine as tensions flare. The Russian Ruble has weakened on the news, with Moscow denying the US alert. We note that similar tensions erupted last spring when Russia amassed 100,000 troops along the border which eased after Biden called Putin and lined up a June Summit. If Russia were to invade Ukraine, it would be bullish as two key suppliers engaged in mutual aggression.

• The midday weather forecast is consistent in keeping rain/snow over the next 10 days confined to the far Upper Midwest and Great Lakes. No threats to the completion of harvest are forecast across the Plains and principal corn/soy belt. Model guidance is colder across the Central US.

• Chicago soymeal futures have rallied above the 100-day moving average for the first time since July which is sparking new chart buying and the soybean rally. Oil/meal spread unwinding has been aggressive this morning. China is still bidding for Ukraine corn but shows no US interest. China is rumoured to be dropping their DDG duties in January to allow US imports to resume in 2022. Inflation buying of Chicago grain has been widespread since the November report, but this is no place to chase the rally.  Remember that bull markets always let you in.

• HEADLINES: Fund buying cools at midday; US/EU wheat stay positive.

• Chicago ag futures have eased off morning highs. Fund buying at midday has cooled following a flurry of new influx due to ongoing ideas of long-term inflation and as fresh wheat input remains bullish. Expect elevated wheat market volatility amid extreme exporter stocks tightness and as US and European futures have quickly become overbought, technically. The wheat outlook remains bullish, but choppy trading will be the mantra into late year at decade-high prices.

• Additionally, there is much confusion surrounding Brazil’s biosafety commission approving the import of GMO wheat flour this morning. First, only flour has been approved and already Brazilian millers aim to fight the ruling politically. Arbitrigo, Brazil’s wheat industry association, has asked the Brazilian administration to further analyse the decision with the hope of having it reversed.

• Ultimately, this is an issue of consumer preference, which globally does not favour the consumption of GMO wheat/flour and which will not change in the 2021/22 crop year or for many years in the future. Our message is that the risk that N African/Mid-East importers reject cargoes of Argentine wheat due to the finding of GMO is intact. This issue must be monitored closely as Argentina’s wheat export program ramps up seasonally in Dec-Jan. We also note that the long-term wheat outlook is bullish into mid/late winter even if there are no disruptions to Argentine grain flows.

• Soaking rainfall of 2-4” has impacted South Australia and key portions of New South Wales and southern Queensland in the last 48 hours. Additional rain falls across eastern Australia into Friday and concerns over wheat quality remain elevated. A drier pattern does become established next week, but odds are high that above normal precipitation returns to E Australia late Nov and throughout Dec as La Niña strengthens. E Australia’s Jan wheat future rallied to a new contract high of 374 $AUD/mt ($273/mt) overnight.

• Spot rapeseed/canola futures in Canada and Europe have rallied to new contract highs with ease this week. Feb rapeseed in Europe looks to settle today at $808 per tonne, which compares to Jan Chicago soy at $449. Cash rapeseed oil in Europe is quoted at $0.85/lb for Dec-Jan delivery. Soaring global rapeseed/rapeseed oil prices will act as a buoy for the Chicago soy complex on breaks. Rapeseed prices must work to shift demand to other oilseeds, including soy and sun.

• Finally, we hear that China is booking US soybeans for Dec-Jan shipment. Official sales announcements will be watched for on Friday morning when the federal government reopens.

• The midday US weather forecast is consistent in keeping rain/snow over the next 10 days confined to the far Upper Midwest and Great Lakes. No threats to the completion of harvest are forecast across the Plains and principal corn/soy belt. Model guidance is colder across the Midwest & East Coast Nov 21-26, which should act to keep natural gas prices elevated in the near term.

• The S American weather forecast is slightly wetter in RGDS in S Brazil early next week, with needed rainfall of 0.50-1.00” projected there. Otherwise, soaking rain occurs in Argentina this weekend. A drier pattern develops next week, and Argentine weather moving forward must be monitored closely. Favourable conditions persist into late month across Central and Northern Brazil.

• US/world wheat markets will continue as the bullish leader into the winter months as any slowdown in Russian shipments only implies stocks tightening in other exporting countries. Corn market focus shifts to S American weather exclusively beginning in late Nov. Soybeans stay the laggard, though we would mention that RGDS and Parana in S Brazil do account for 30% of total Brazilian soy production. The risk of drought in S Brazil is elevated.

• HEADLINES: China rumoured to be buying/bidding for Ukraine corn for Jan-June; Russia wants to slow wheat trade; Brazilian GMO decisions on Argy wheat Thursday.

• Rising US inflationary pressures have rallied Chicago corn, soybean, and wheat futures this morning. The upside leader has been the grains while traders are reluctant to chase a soybean rally due to slowing Chinese demand. We look for a strong Chicago close with a test of recent contract highs in wheat due later this week. Note that due to the US Veteran’s Day Holiday on Thursday, the FAS Weekly Export Sales report will be released on Friday. The market tone is bullish with fresh inflows from managed money being felt across the screen.

• Chicago brokers estimate that funds have bought 4,300 contracts of wheat, 6,500 contracts of corn, and 2,100 contracts of soybeans. In soy products, managed money has secured 3,100 contracts of soyoil while selling 1,200 soymeal. The funds are adding to their commodity exposure, a trend that we argue will prevail into the end of the year.

• There are rumours that China is bidding for Ukrainian corn for January-June shipment. Yesterday, 200-250,000 mt of Ukraine corn was sold to China. New sales are pending as negotiations continue. We note that China is expected to release new TRQ Import licenses before the end of the year, which at hefty import margins, should find willing private buyers of US/Ukraine corn. S American corn does not have a phytosanitary certificate and is excluded. The rise in domestic Chinese corn prices during and post-harvest has world exporters raising their import estimates of 2021/22 Chinese corn.

• Reuters is reporting that Russia will soon be setting an annual wheat export quota for January-June of 2022. This is about 6 weeks earlier than prior expectations (mid-February). And Russian Ag minister Patrushev is becoming frustrated that its export tax calculation is not pushing Russian wheat out of world trade. Today, even with the export tax, Russian fob wheat is reported to be the cheapest in the world and the ag ministry is threatening to change how the tax is calculated to somehow slow trade. Russian domestic wheat/flour prices are perched near record highs while domestic Russian food inflation is running at 6-7% annually. And Russian farmers are in no hurry to sell stored wheat based on regional drought conditions impacting their new seedlings.

• Brazil is expected to determine Thursday whether it will approve drought tolerate GMO wheat that was seeded on 60,000 Ha in Argentina. The decision will be important. However, Brazilian millers won’t care what the Brazilian Government declares, we understand they will test and reject any Argentine GM wheat that is found.

• US weekly ethanol production was 305 million gallons, down 20 million from the prior week, but up 6% on last year and 1% on 2019. US ethanol stocks rose 7 million gallons to 852 million which was up 1% on last year, but down 3% on 2019. The EIA ethanol grind was not as big as expected with the data slightly bearish for corn. Yet, key Midwest ethanol producers are raising cash corn basis bids with reports of some Central Illinois plants paying 30-35 cents over December.

• The midday Central US weather forecast is like the overnight run with showers to push eastward into the W Midwest in the next 24 hours. W Midwest rainfall totals look to range from 0.25-1.25” with locally heavier amounts. Dry and cooler weather follows with the next chance of rain being late next week over the Ohio Valley. The Plains stays in an arid weather trend into Nov 23.

• It is a “risk-on” day with world wheat values surging on the potential that Russia may further restrict trade through taxes/quotas while wet weather is causing downgrades to the E Australian wheat harvest. New contract highs are expected. Corn is surging on rising cash basis bids from US ethanol producers and rumours that China is securing Ukraine corn. Soy is a follower of the grain rally. Upside wheat price risk is sizeable if Brazilian millers seek US HRW on Argentine GM worries.

• HEADLINES: USDA surprises soybeans with cut in US yield, World wheat stocks decline on trade; Focus now on demand into 2022.

• The USDA November crop report was bullish with soy futures leaping to sharp gains while corn/wheat follow. The big surprise was a decline in the 2021 US soybean yield of 0.3 bushels/acre to 51.2 bushels/acre. The trade was expecting a gain in the US soybean yield to near or above 52 bushels/acre, which was not uncovered. The smaller yield will prevent 2021/22 US soybean end stocks from ballooning much higher until more is known about S American crop production and Chinese demand.

• Research maintains a bullish view in wheat, moderately bullish view in corn and neutral outlook in soybeans. Key support should hold at $5.40-5.50 basis spot corn and $11.75-12.00 soybeans. Wheat is scoring a trading low as Russian wheat exports seasonally slow. The report allows the market’s focus to return to demand. The supply side of the US market is largely known into 2022.

US End Stocks (million bu)

                      Oct        Nov

            2020        2021        2021

Corn            1,236        1,500        1,493

Soybeans        256        320        340

Wheat            845        580        583

• NASS estimated the 2021 US corn yield at a record 177 bushels/acre, an increase of 0.5 bushels/acre from October. The yield gains came from MN at +4.5 bushels/acre, SD at +3.0 bushels/acre  and KY at +2.2 bushels/acre. The IL corn yield fell -1.4 bushels/acre to 207 while IN was down 2.6 bushels/acre to 189 bushels/acre. NASS indicated that it harvested 94% of its yield plots.

• WASDE lowered 2021/22 US corn end stocks by 7 million to 1,493 million bu with the crop growing 43 million bu while ethanol demand was raised 50 million bu. The average farmgate price held steady at $5.45. We would note that WASDE is too low in its ethanol demand forecast by as much as 150 million bu which would push 2021/22 US corn end stocks to 1,343 million bu, some 100 million bu larger than last year. Amid smaller 2022 US seeding due to soaring fertiliser prices, corn has a longer-term bull story.

• US 2021 US soybean production was lowered 23 million bu to 4,425 million with a yield of 51.2 bushels/acre. The final 2021 US soybean yield could equal last year at 51.0 bushels/acre which would allow for another cut of 18 million bu.

• WASDE cut 2021/22 US soybean export demand by 40 million to 2,050 million bu. The cut was needed and most of the bears would argue that it is too small. However, even if the cut is another 60-80 million bu, crush rates will be elevated which keeps 2021/22 US soybean end stocks below 450 million bu. The worst-case bearish outlook was extracted today from soybeans with downside price support at $11.75-12.00. Soybeans will struggle on rallies above $12.75 keeping the market in a range trade into 2022.

Global End Stocks (million mt)

                    Oct        Nov

               2020/21    2021/22    2021/22

Corn            290.0        301.7        304.4

Soybeans        99.2        104.6        103.8

Wheat            288.4        277.2        275.8

• USDA wheat data leans bullish and the ongoing tightening of the exporter balance sheets which suggests that lasting highs will not be scored until mid, or even late winter. US wheat end stocks were raised 3 million to 583 million bu as reduced imports and higher projected seed use were more than offset by a 25 million bu cut to exports. We view the USDA’s trimming of exports as premature as Russian shipments continue to slow amid a soaring export tax there. The USDA’s EU export forecast of 37.2 million mt is also unsustainable in our opinion, and work maintains that some measure of world demand finds the US from February onward.

• More importantly, USDA raised 2021/22 global import demand by 3 million mt to a new record high 201.1 million mt. Higher global wheat demand lowered exporter stocks/use to 12.1%, vs. 12.6% in October. Additional tightening of the exporter balance sheet occurs in December if Aussie production gains fail to offset expected production losses in Canada. The US and global wheat markets must encourage acreage expansion and a lasting bearish trend requires confirmation of trend/above trend N Hemisphere yields next summer.

• Soybeans will remain the Chicago laggard, but supply concerns associated with the USDA’s November WASDE have come and gone. Recall seasonal price trends in all major global ag markets are positive into winter/early spring. It is noteworthy that Chinese corn futures have scored newer seasonal highs at $10.80/bu and that Brazilian corn prices have stabilised at $6.50. All eyes now turn to S American weather and US demand. US ethanol and crush rates will be record large further boosting USDA forecasts. Wheat is the bull leader followed by corn, and soyoil.

• HEADLINES: Soybeans test key support at $11.75-12.00 January, Wheat rallies on tightening world stocks; Corn caught in-between.

• Chicago ag markets are mixed at midday with wheat futures higher while soybeans sag to fresh lows on pre-USDA report positioning. The trade is expecting a bearish USDA November crop report as the US soybean yield rises at least 0.5 bushels/acre and demand is cut by USDA adjusting exports lower by 50-75 million bu (according to traders). The positioning for a bearish USDA report has punished Chicago soybeans by $0.60/bu over the past 4 trading sessions and dragged corn/wheat values lower. The supply side of the equation has outweighed demand with domestic US ethanol and soybean crush margins at or near record highs as cash soy products trade at a sizeable premium to Chicago.

• Grain futures are more mixed with soybean shorts wanting to be long of corn/wheat as an offset. We note that a considerable amount of bearishness has already been digested by Chicago, but you just never know what the USDA will do in terms of yield. End users are waiting for the USDA crop data before extending forward coverage. Chicago lows should be scored early this week.

• Participants in the China International Import Expo signed purchase agreements for 8.4 million mt of soybeans. The buyers are rumoured to be China’s state-owned importers, Sinograin/COFCO, while the sellers to include the ABCD’s of the world grain industry. The framed contracts could push US exporters to announce large sales in the USDA daily reporting system.

• Weekly FGIS export sales were massive for soybeans at 97.3 million bu while grain exports were disappointing. For the week ending November 4, the US exported 22.2 million bu of corn and 8.5 million bu of wheat. Last week’s US soybean exports were revised upwards to 95.8 million bu. For their respective crop years to date, the US has now shipped out 237.7 million bu of corn (down 62 million or 21%), with US wheat shipments at 364 million bu (down 66 million or 15%) and US soybean shipments at 509 million bu (down 227 million or 31%). China shipped out 66.5 million bu of soybeans or 68% of last week’s export total.

• The USDA is expected to cut 2021/22 Russian and raise EU wheat exports based on pace analysis. The vessel line-up for Russian wheat is in fast retreat. The EU marketplace cannot decline too far (Paris wheat), or another push of EU wheat export buying looms. Paris wheat futures price must ration future demand.

• Brazilian wheat importers/truckers will be testing Argentine wheat for GM material starting next week. Argentine farmers seeded 55,000 HA of GMO wheat which is worrisome with Brazilian/world wheat millers mandating that Argentine wheat be GMO free before offloading.  The odds are high that an importer will find GM material in an Argentine wheat cargo which would set in motion a rash of phytosanitary concern. This needs close attention in future world wheat trade.

• The midday GFS weather forecast is faster with a storm system pulling across the Central US late this week. The system produces showers across the NW Midwest midday Thursday into Friday. Dry/cooling weather follows. We estimate that that 86-88% of the soybeans and 82-84% of the US corn crop was harvested through Sunday. The forecast this week is mild/dry which will push the last of the crop into the bin. The extended range forecast stays dry for the US Western Plains for the next 2 weeks.

• Fear of a bearish USDA November Report has pushed soybeans to sharp losses in recent days with values becoming oversold. Longer term, it is the price of fertiliser, energy and chemicals that places a peg under Chicago grain futures. In the bull leadership role will be corn as world producers cut future seedings due to cost. We are returning to a more bullish outlook on wheat/corn following the needed supply focused correction.

• HEADLINES: Grain rally fails; Fresh US export news absent.

• Chicago ag markets are mostly lower at midday as corn and wheat’s attempt to crawl back to unchanged has been met with ample selling interest amid morning strength in the US$. Harvest activity resumes across the Eastern Midwest this weekend, and following decent movement of corn this week, elevators are less anxious to build stocks. Chicago soybeans continue to drift lower, with Jan targeting strong chart-based support at $11.95-12.00. Key heading into the weekend is whether speculators opt to buy corn/wheat weakness at the close.

• FAS failed to announce any new export sales this morning, Chinese state-owned firms quietly/slowly adding to US soy purchases. World wheat tender news is also absent following Jordan’s purchase earlier in the week. Pakistan made no purchase from its tender. There is just a general lack of news, which will allowed for modest long liquidation across US and global ag markets.

• Soybean planting in Mato Grosso this week is likely to reach 92-94% complete, vs. 83% last year and vs. 92% in 2019. Soybeans from Central Brazil will begin to make their way towards ports in late Jan/early Feb, which places a much heavier burden on the pace of US soy export sales between now and late December. The market is aware that as of today, beans are offered from Southern Brazil for Feb shipment $9 per ton below the US Gulf. We have previouslyreported that backlogs at the Panama Canal are the latest logistical issue working against US soy exports.

• However, global crude futures have mounted a comeback, with spot WTI up $2.50 per barrel at midday. Spot RBOB gasoline has found buying interest at early October’s low ($2.30 per gallon). Ethanol economics remain highly supportive of record/near record production in the weeks ahead. The Dow is up 240 points. Energy markets moving forward look to be a battle of unchanged OPEC production against slowly rising US output. It is clear, for now, crude below $80 is cheap while rallies struggle to exceed $85 amid uncertainty over economic growth and the spread of Covid during the winter months.

• The Aussie forecast at midday is wetter in New South Wales, with the GFS now in much better agreement with its Eu counterpart. Next week’s rainfall of 1-3” by itself will not threaten milling wheat quality in E Australia, but the odds of additional excessive precipitation in late November remain elevated. Crop quality loss in Australia would be a big deal for wheat and canola markets.

• The midday GFS weather forecast is wetter in Southern Argentine crop areas, with 1-2” offered to key areas of La Pampa, southern Cordoba and Buenos Aires Nov 14-15. It is important that this rain falls, but model consistency in recent days has boosted confidence in its arrival. Normal tropical showers continue in Mato Grosso do Sul, Mato Grosso and Goias, which account for 40% of Brazilian soy production.

• We do note that closer attention must be paid to weather in far southern Brazil, including major producing state Parana. Limited precipitation will impact the southern third of Brazil beyond the weekend. Soil moisture there is adequate for now, but the return of widespread heavy rain will be needed by late month.

• Chicago soybeans are nearing oversold territory. Jan soy is expected to hold major chart-based support at $11.95-12.00. Additionally, we estimate that managed funds have established a modest net short position in soybeans. It is the wrong time of year to be overly bearish in our view. Recent price action has dialled in corn/soy yield hikes in next Tuesday’s USDA report.

• HEADLINES: Chicago slides sharply on China demand concern for US soybeans; Corn/wheat follow on fund selling.

• An early Chicago rally failed with corn, soybean and wheat futures sliding lower into the midday hour. Soybeans have been the downside price leader on slowing Chinese demand as the wait times to pass through the Panama Canal rise with Brazil offering new crop cargoes for sale for late December. Heading into the USDA November Crop report, traders are understanding that the window of export opportunity is closing on the US Gulf with any additional demand to be sourced off the PNW (to China).

• The US export sales pace in corn, soybeans and in wheat is under last year, but domestic margins for US soybean crush and ethanol production continue to rise, and are record large for ethanol. This is producing fancy cash basis bids for spot corn/soybeans. The market rallied on the strong domestic margins but slid recently on unexciting US export demand. It is a battle between the strong domestic market and weakening demand for US soybeans from China.

• Chicago brokers estimate that funds have sold 9,000 contracts of soybeans, 7,600 contracts of corn, and 1,500 contracts of wheat. In soy products, funds have sold 4,900 contracts of soyoil and 4,700 contracts of soymeal. The fund selling has been aggressive in the soy complex from the opening bell.

• US weekly export sales for the week ending October 28 were; 14.7 million bu of wheat, 48.2 million bu of corn, and 68.5 million bu of soybeans. The soybean and corn sales were larger than expected. For their respective crop years to date, the US has sold 478 million bu of wheat (down 138 million or 22%), 1,221 million bu of corn (down 86 million or 6.5%), and 1,187 million bu of US soybeans (down 591 million or 33%). The US soybean sales pace argues for a US soybean export estimate of 1,900 million bu or less compared to the USDA forecast of 2,090 million bu.

• The Panama Canal is the next supply chain snarl with traffic causing backlogs of 14-16 days that are expected to lengthen to 19-23 days by early December. The canal backlogs are raising the cost of exporting US product to SE Asia. The additional ocean freight cost is adding up. China is comfortable with its US soybean supply afloat, and they are turning their any new purchases to the PNW. Note that Brazil is offering their new crop soybeans for late December out of the Northern ARC (northern export terminals) export terminals which will cost about $0.20/bu less on a CIF basis to China. Therefore, Chicago is concerned about declining US soybean exports in early 2022 and the slow pace of sales to date. January soybean futures have fallen to initial support at $12.10-12.20 with the next level being the October lows at $11.96.

• The midday GFS weather forecast is like the overnight run with widely scattered showers that will develop across the E Midwest during November 12-14. Cumulative rainfall of 0.5-1.50” is offered for IL, IN and OH.  Dry and warming weather follows in the 11–15-day period.

• Boosts in soil moisture occur in C and N Brazil indefinitely. Needed rain impacts Argentina this weekend. The GFS forecast continues to hint at the return of Argentine rainfall Nov 14-16, but whether this is pulled into the nearby period will be monitored closely in the days ahead.

• Commodity values are falling across the spectrum as risk off is the mentality as world energy prices decline. We suspect that the break might be temporary, and that inflationary buying will return following the USDA November Crop Report. Key support rests below $5.50 in December corn and $12.10 in January soybeans. Wheat remains a bull market with KC wheat having support below $7.80. A trading bottom should occur early next week. The US farmers will be virtually finished their corn/soybean harvest and seasonally, it is historically the wrong time of the year to be overly bearish. Lastly, S American weather can’t get much better.

• For what it is worth, a recently released EU publication was accompanied by the following note:

Soaring fertiliser prices, in part driven by a strong run-up in natural-gas prices, are poised to add more uncertainty to global food markets well into the 2022/23 season. With international prices of most food crops (with the exception of rice) already at multi-year highs and their exportable supplies barely adequate to meet demand, any weather or input induced shortfall in 2022 could have worrying implications for global food security. To reverse the alarming rise in hunger in a pandemic-ridden world calls for concrete actions to guarantee supplies and access to food, particularly for the most vulnerable. 

• To us at least, this is a very telling statement!