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Morning Comments

Dec corn + ¼ at 4.095

Jan beans + ½ at 11.0425

The DOW is Down

USD is

Crude oil

 

Good morning,

Overnight grain markets were mixed but come into the break trading steady to a touch higher. It has been an important week for the market because the rallies back have not only negated the poor technical signals from last week but in the case of beans, we have an outside week up (with a close here) into new highs. The strength in the soybean market this week comes in anticipation of a further tightening on US and global balance sheets in next week’s crop report along with weather uncertainty in the southern hemisphere. The forecasts do offer some relief but also feature plenty of holes in coverage the next couple of weeks.

The USDA reported four new export sales this morning at 8. 132 tmt of beans to China. 272 tmt of beans to unknown. 207 tmt of corn to unknown. 30 tmt of soybean oil to S Korea. All for 20/21. The bean sales were rumored in the trade the past couple of days.

In the product trade, meal is slightly higher and oil lower to start the day. Meal is attempting to extend its rally into new highs while oil is attempting to defend its move into new highs yesterday. Palm oil closed -.84% with a reversal out of a new high established yesterday.

The Buenos Aires Grain Exchange estimates Argy soybean planting at 4% complete out of a projected 17.2 million hectares, about half of what was planted this time last year. They est. production at 46.5 mmt compared to 49.5 mmt last year.

Zero soybean deliveries with 150 certs cancelled as we wind down deliveries and the November contract set to go off the board in a week. SX-SF back at a carry this morning. Bean basis is widening is out in some interior markets by a nickel (Cedar Rapids, IA and Decatur, IL) along with Gulf export bids dropping by 8 cents to +75.

US jobs data better than expected with non-farm payrolls in Oct. +638k vs. +530 expected and unemployment dropping to 6.9% vs. 7.7% expected. The dollar continues lower -.21 to 92.30 and poised for a challenge of the September spike low to 91.75.

USDA baseline tables to be released this afternoon which will include the first peak at their acreage projections for the spring, for what that is worth.

Overnight, the corn market was surprisingly quiet, straddling either side of unchanged, finishing fittingly steady by the morning pause. Heading into “Big Friday”, corn is on track for ten cent weekly gains. It is also a relatively quiet news day; outside markets are a little more mixed after a ‘risk-back-on’ stampede over the past couple days – stocks are flat/weaker, crude is lower, the dollar is trying to creep lower still. The tilt back toward “La Nina” dryness in South American forecasts continues to underpin the corn and soybean markets after a couple of good weeks. Though the full report had still not apparently been made available, some headlines coming out of the USDA Attache’s report on China stirred some interest yesterday evening. Media reports suggested the USDA was finally prepared to update their thoughts on China corn imports; they apparently raised the 20/21 total to 22 million metric tons (from all origins) versus the oft-criticized 7 mmt prior level. Judgment call, but this is probably toward the low-end of what most in the trade are expecting at this point? It is also not clear if this data will be included in the latest WASDE report, which is due out in just two business days? One more thing to monitor in the report, we guess, though we suspect in isolation, this may not have much of an impact on bottom-line carryout forecasts (since U.S. exports are not allocated by country, they can theoretically go to anywhere – including China). Goldman fund roll out of December contracts starts-up today, which could influence spread trade. After the close, the USDA will publish their ‘baseline’ statistics, which is a quick and dirty ten year S&D used for gov’t budgetary purposes.

We think markets could be violently mixed for a time, as bears worry about Covid and bulls promote strong export potential. Add to that a somewhat unsettled world weather situation, and we have a volatile brew! As expected, corn found some support near $3.90. By the same token, we would expect some liquidation at or near last Tuesday’s gap area of $4.15 CZ, which happened yesterday.

Thursday was another positive day for the corn market, though unlike Wed’s late-inning rally, the highs were made mid-morning with enthusiasm waning some as the day dragged-on. Corn finished the day with 3-4 cent gains; CZ finished eight cents below the session’s high. Managed Money traders remained on the ‘buy’ side, picking up another 25,000 corn, which would leave them net long just under 300,000 contracts. CFTC will offer a welcome update to this tally tonight. Cash trade was headlined by a modest bounce at the Gulf after a week-long drubbing. Though somewhat old news (as per usual), the weekly export sales report helped corn race out to those early Thursday gains. Old crop (20/21) new sales of 2.611 million metric tons (mmt) were 75% above the prior four week average and toward the very high-end of analyst expectations. Mexico was the big buyer of note (they also picked up 541k for new crop), followed closely by unknown (782k), China (210k), South Korea, and Colombia. This leaves outstanding corn sales at a whopping 26.335 mmt, which is more than triple the amount of sales on the books at this time last year (granted, last year was a sluggish one!). Though shipments to date have been behind trend, we suspect they will pick up soon, especially given the growing diversity of export originations. There was a small 8 AM corn sale today after a fairly quiet week; 206,000 metric tons to ‘unknown’.

Germany Confirms Bird Flu on Poultry Farm: Bird flu of the type H5N8 has been found on a poultry farm in the northern German state of Schleswig-Holstein, the state’s agriculture ministry said on Thursday, after it has already spread among the wild bird population in the region. Eight chickens died within a short time on a farm in the state, the ministry said, adding that the rest of the poultry on the farm had been culled and disposed of professionally. The Dutch Ministry of Agriculture on Thursday ordered the culling of 200,000 chickens after highly pathogenic bird flu was found at a farm in the eastern town of Puiflijk and Britain on Monday ordered a cull of 13,000 birds at a farm in Frodsham, Cheshire, after detecting cases there.

Global Food Prices Continue Surge: Global food prices remain on a tear as tightening crop markets boost grain costs by the most in eight years. A United Nations gauge of food prices rose for a fifth month to the highest since January, nearing a multiyear peak set just before the coronavirus crisis took hold. Last month’s increase was largely fueled by a rally in grains, with the UN’s Food & Agriculture Organization cutting estimates for crop production and stockpiles as adverse weather threatens corn and wheat supplies. The FAO’s gauge of grains prices jumped +7.2% in October to the highest in six years, pushing up global food costs by +3.1%. The FAO lowered its estimate for grains output in the 2020-21 season by about -13 million tons to 2.75 billion tons and trimmed its inventory outlook by almost -14 million tons. Vegetable oils, sugar, and dairy prices also climbed last month.

 

Darren, David, and Elizabeth

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