TFM Midday Update 11-10-2023

CORN

Corn is trading lower this morning after the negative tone on yesterday’s USDA report. However, the December contract so far is holding support today at 460, so the sideways trend may have simply been shifted lower until the market knows more about South American production.
Brazil weather looks to remain warm and dry in the central and northern areas until about November 21, after which both the American and European weather models have rain in the forecast. Those areas do need rain, but this could result in premium being taken out of the market.
Chairman Powell spoke yesterday with a more hawkish tone, indicating that the Fed may actually be more aggressive in fighting inflation. This is in contrast to the more dovish comments after the FOMC meeting. This has put some uncertainty into the financial markets, which may spill over into grains.
According to the Buenos Aires Grain Exchange, 25% of Argentina’s corn crop is now planted. Conditions there have improved significantly over the past few weeks. They are expected to receive more rain this weekend.

The USDA left Chinese demand at 100 mmt, but with the recent announced sales that number may need to be adjusted down the road. The big question is, if there is a shift in Brazil’s weather pattern, will China stop buying US soybeans?
Yesterday’s announced sale of 67.2 mb of soybeans sold to China was the seventh largest daily total on record.
March soybeans on China’s Dalian Exchange remain expensive, around the equivalent of $16.36 per bushel. This was down about 1.4% Friday, but still remains near this year’s high price.
Despite weather issues, the USDA left their estimate of Brazil’s soybean crop unchanged at 163.0 mmt. For reference, CONAB is using a crop of 162.4 mmt.
This coming Wednesday, President Biden is set to meet with Chinese president Xi Jinping for a summit in the San Francisco area. This will be their first in-person meeting in a year, and they aim to reduce their rivalry and tensions between the two nations.

On yesterday’s report, the USDA did lower the Indian and Argentine wheat crops but raised the Russian crop as well as Ukraine exports.
In the face of reports early this week that a Russian missile hit a merchant ship in the Black Sea, there are said to still be about 30 vessels in Ukrainian ports waiting to load cargo.
Despite the USDA’s slight increase in their ending stocks projection to 684 mb for 23/24, it is still the second lowest number in 10 years. Additionally, excluding China, the world ending stocks at 4.58 bb is the lowest estimate in 15 years. These factors should provide some support for wheat, which could result in a short covering rally for the funds (who still hold a large net short position).
According to the Buenos Aires Grain Exchange, the 23/24 wheat crop production is still at 15.4 mmt, but harvest has advanced to 14.4% complete, vs 9.3% last week.
On a bearish note, a vessel carrying 35,000 mt of French wheat is reported to be headed for New York. This comes after the USDA increased their estimate of US wheat imports to 145 mb (the highest level in 6 years).

Brandon Doherty