Futures posted a slight recovery today. The US dollar was higher while energies and equities were mixed.
Corn, soybeans, and wheat all started the last session of the week firmer as weak short positions were exited before the weekend. A lack of fresh bearish news also took the pressure off the commodities, but a lack of buying interest and technical resistance limited gains. The Fed rate decision also capped advances today as the data drew investors from the commodities to the equity markets. The current yield on a 2-year Treasury note is 5.12%, the highest since 2006. The yield on the 10-year note is 4.48%, the highest in 15 years. This also drove the US dollar to a six-month high. As a result, very few investors are showing interest in commodities, especially with bearish global supply and demand data. Seasonal harvest pressure and ongoing export worries also weighed on today’s trade. Support came from building drought conditions across the US even though it is not much of a factor for this year’s crops at this time. Brazil and Argentina remain dry, but rain chances are starting to increase. If soil is still dry as we approach December it will be more of a market factor.
Corn futures struggled today but managed to hold close to steady for much of the session. Brazil remains our top competitor in the global market and has been selling large volumes to China. Brazilian corn basis is starting to firm though, and this may trim their global interest, and possibly bring the US more business. Current year to date corn export sales stand at 462 million bu. (mbu). This is a 6% reduction from last year while trade is projecting a 23% increase in sales. Until this spread narrow trade will question overall demand outlooks. Ukraine has exported 39% less corn than a year ago which may bring the US more business if Brazil loadings slow. Ukraine is now loading vessels though and this may elevate their exports. Ukraine has also dropped its fight against the EU on imports following threats to suspend financing of the war with Russia from Poland if they proceeded. The technical trading range between support and resistance on December corn is narrowing which is setting us up for a break-out in the near future. December futures finished the week with a 1 ¼ cent gain.
Soybean futures hit both sides of unchanged today as position squaring dominated the days trade. There are two very different scenarios impacting the US soybean complex right now. On the domestic side all interest is on yield and the tight stocks to use that is being forecast. That said, global oilseed production is getting larger, and buyers are passing on US offers in favor of cheaper alternatives. Right now, importer focus is on Brazil, Argentina, and Malaysian palm oil. These are where China, the world’s largest importer, is covering its needs. Argentina is starting to exhaust its exportable surplus and will end their peso incentive at the end of the month. The question is how much demand will be left for the US to cover. Year to date US soybean sales currently total 628 mbu. This is 34% lower than last year’s sales currently while the USDA is predicting just a 10% decline. This shows rationing is working and higher values are not needed currently. November soybeans broke below the 100-day moving average yesterday and this is now the initial line of upside resistance. The November contract finished the week 44 ½ cents lower.
The wheat complex showed more strength today, but advances were still limited. All eyes in the wheat complex remain on Russia and their exports which is where the bulk of import business is going. Trade is focusing its attention on global production issues in Australia and Argentina, although Australia is starting to see rainfall which tempered market bullishness today. We are now seeing more interest on Black Sea weather as temperatures are starting to rise and rains are becoming sparse. There is no threat to crop loss yet, but with tightening global wheat reserves this needs to be monitored. Cumulative US wheat exports for the year stand at 317 mbu. This is a 17% reduction from last year with USDA expecting sales to decline just 8%. Ukraine wheat exports are down 19% from last year but with vessel loading starting to resume this number will likely improve. Chicago December wheat was 24 ¾ cents lower on the week.
More attention is starting to fall on South American production forecasts, mainly in Brazil. One of the most widely varying numbers in Brazil is what we will see for a corn crop. The USDA has 2023/24 Brazilian corn production at 129 million metric tons. Others believe the crop will be smaller, with some upwards of 10 mmt under the USDA. If correct, this will have a definite impact on global balance sheets. One of the greatest uncertainties on Brazil’s corn production is what we will see for acreage. There are beliefs that the country will reduce corn acreage by 5% this year due to better returns on soybeans. Weather may also play a role, especially if producers wait to seed soybeans until rain develops and time becomes an issue.
The US red meat production data for the month of August has been released and showed a 3.2% decline in output from last year. Beef production declined 5.7% from August 2022 at 2.36 billion pounds. This was mainly from a 6.1% decline in slaughter numbers. Pork production decreased a slight 0.4% to 2.29 billion pounds. This came even with a 1.2% increase in hog slaughter. Weights played a major role in meat production as steer weights in August increased 3 pounds from last year while hog weights were down 4 pounds.
Have a great evening!
Emery Manager & Originator:: Topflight Grain Cooperative, Inc.
593 Emery Rd :: Maroa, IL 61756
This material should be construed as market commentary, merely observing economic, political and/or market conditions, and not intended to refer to any trading strategy, promotional element or quality of service provided by Topflight Grain Cooperative, Inc. Topflight Grain is not responsible for any redistribution of this material by third parties, or any trading decisions taken by persons not intended to view this material. Information contained herein was obtained from sources believed to be reliable but is not guaranteed as to its accuracy. Contact Topflight Grains designated personnel for specific trading advice to meet your trading preferences. These materials represent the opinions and viewpoints of the author, and do not necessarily reflect the viewpoints and trading strategies employed by Topflight Grain Cooperative, Inc.
|Copyright DTN. All rights reserved. Disclaimer.|