The following marketing analysis is for the week ending Nov. 2.
CORN — Thank you everyone for the kind thoughts and notes during my recovery from back surgery. While I’m not playing hopscotch yet, it’s getting better every day.
The corn market edged higher this week on spillover strength from political statements that rallied the soybean market. Without the surge higher in soybeans, corn remained stuck in its $3.60 to $3.75 trading range. Export demand for corn has been uninspiring, but basis was steady-to-firm as growers tucked bushels away in both on and off-farm storage, or on delayed price contracts. Demand from ethanol and feed users has been good. Mexico bought 201,000 metric tons of U.S. corn in routine business this week. Corn harvest continued to plug along. As of Oct. 28, corn harvest was right on the average at 63 percent complete. Growers pushed to combine ahead of forecasted rain showers for the week of Nov. 5.
Trade estimates are emerging for the Nov. 8 World Agricultural Supply and Demand Estimates report. The average estimates from the Bloomberg survey for the 2018-19 marketing year are: corn production, 14.729 billion bushels using 180.1 bu./acre yield, ending stocks at 1.775 billion bushels, world ending stocks at 159.2 million metric tons, Argentina’s 2019 corn production at 41.2 mmt, and Brazil’s 2019 at 94.6 mmt.
On Nov. 2, the U.S. Department of Agriculture released their 10-year baseline forecasts. For the 2019-20 U.S. corn crop, they are predicting 92 million acres (down 2.9 million from this year), 176.5 bu./acre, production 14.93 billion bushels and carryout of 1.603 billion bushels. The national average farm price is estimated at $3.90 per bushel.
Weekly export sales for corn were a disappointment at just 15.5 million bushels. Total export commitments, however, are up 28 percent from last year at 859.5 million bushels. New crop sales for 2019-20 were a meager 200,000 bushels. New crop commitments are sharply lower than last year at 4.1 million bushels vs. 16.7 million bushels on the books last year. Weekly ethanol production was up 35,000 barrels per day to 1.06 million bpd. This was the second biggest weekly increase in the last 26 weeks. Ethanol stocks fell 1.15 million barrels to 22.75 million barrels. This was the largest single week decline since August 2010. Stocks are still nearly 6 percent higher than last year at this time. Margins were up 2 cents but were still a negative 8 cents per gallon. The National Agriculture Statistics Service’s September Grain Crush report showed corn for ethanol used 449.3 million bushels.
Outlook: December corn rallied 3.5 cents higher this week as it followed soybeans, closing at $3.71.25 per bushel. The March contract gained 3.25 cents at $3.83.25 and the new crop December 2019 contract was 1.25 cents higher at $4.03.75 per bushel. Seasonally, December corn declines from November 8 through November 19. Corn may continue in its recent range ahead of the November WASDE report, and without fresh news, any significant gains may be difficult to come by.
SOYBEANS — Politics reared its head this week to jumpstart the soybean market. On Nov. 1, President Trump tweeted he had a “very good conversation” with Chinese President Xi concerning trade issues. This drove futures prices up over 30 cents on a closing basis as fund short covering ensued. The gains were extended into Nov. 2, with January soybeans trading as high at $9.00.75 per bushel. Prices retreated from the highs as chatter surfaced that a deal was still a long way from being done, despite talk that President Trump had asked the Cabinet to draft a Chinese trade proposal. At least one Trump administration official denied that a trade proposal was requested by President Trump. President Trump and President Xi are scheduled to meet at the G-20 conference in Argentina later this month. China’s soy complex tumbled lower on the trade talk. Their soymeal traded down the 5 percent limit. On the U.S. weekly charts, soybeans posted a key reversal higher, which may attract additional fund short covering.
China imported 7.59 mmt of Brazilian soybeans during September, up 28 percent from last year and accounted for 95 percent of China’s September soybean imports. During October, Brazil exported 5.353 mmt of soybeans, up 116 percent from last year. There has been chatter that Brazil’s soybean crop may have been underestimated by as much as 2 mmt. China announced recently they are lowering the “recommended” protein levels in pig feed by 1.5 percent and by 1 percent in chicken feed. These are not mandatory reductions. According to China’s Ag Ministry, this would cut China’s annual soybean consumption by 13 percent or 14 mmt and their soymeal usage by 15.5 percent or 11 mmt.
Turning to Brazil, they elected a new president in the last week. Jair Bolsonaro’s administration is expected to look for more bilateral trade deals. Bolsonaro has also indicated he is concerned about China’s buying controlling interests in oil, mining and energy industries, as well as farmland, railway, port and highway projects. At one point, he was quoted as saying, “The Chinese are not buying in Brazil. They are buying Brazil.” Market watchers are also waiting to see if a soybean export tax may be implemented to give Brazil’s coffers a kick. Brazil’s soybean planting and early development is off to a record start. A fast start in soybean planting can lead to early planting of the safrinha corn crop, which then favors higher corn yields. As of Oct. 26, Brazil’s soybean planting was 44 percent complete vs. 27 percent on average.
The average trade estimates for the 2018-19 marketing year from Bloomberg’s survey are as follows: soybean production 4.536 billion bushels using 53.0 bu./acre, ending stocks at 906 million bushels, world ending stocks 111 mmt, Argentina’s 2019 beans at 56.8 mmt, and Brazil 2019 at 120.7 mmt. There have been just few times in the past when the USDA raises the October U.S. soybean yield — which happened this year. They leave the November yield unchanged or lower it. History doesn’t favor a yield decline on the November report next week.
The USDA also released the 10-year baseline projections on Nov. 2. They are initially forecasting 2019 U.S. soybean acreage at 82.5 million acres (down 6.6 million acres from this year) with a yield of 50 bu./acre and production of 4.09 billion bushels. They project 2019-20 carryout at 723 million bushels and an average national farm price of $8.75 per bushel.
The September NASS Oilseed Crush report showed a record number of soybeans crushed in September at 169.2 million bushels, but slightly less than anticipated. Soyoil stocks were smaller than expected at 1.99 billion pounds.
Weekly export sales were 14.5 million bushels, bringing total commitments to 788.2 million bushels. This is down 29 percent from last year. Cancellations to unknown and China continue. New crop sales for 2019-20 were 2.2 million bushels. Total new crop commitments are in line with last year at 5.6 million bushels.
Outlook: January soybeans surged 30 cents higher to close the week at $8.87.75, March followed with a 29-cent gain at $9.00, and November 2019 bounced 23.25 cents to settle at $9.33 per bushel. Soybeans saw their biggest weekly gain in 16 months. Whether soybeans can continue to build on this week’s political news is unknown, but even if we are headed to a trade deal, it will take time to complete. Soybean harvest was 72 percent complete as of Oct. 28 vs. 81 percent on average. Can soybean futures rally beyond the $9.00 mark and maintain it? The next few weeks leading to the G-20 conference may be volatile and be swayed by tweets and the Nov. 8 WASDE report. The fast, favorable start to Brazil’s soybean crop is another factor to consider in any bullish sentiment.
Nystrom’s Notes: Contract changes for the week ended Nov. 2: Minneapolis December wheat was 2.75 cents higher, Chicago up 3.5 cents, and Kansas City wheat 4 cents higher. Crude oil dropped $4.45 per barrel for the week, ULSD crashed 13 cents lower, RBOB lost 10.5 cents, and natural gas managed a 6-cent gain. The U.S. dollar index was 177 ticks higher after touching its highest level in a year and a half.