TFM Daily Market Summary 12-08-2021


U.S. ethanol output last week hit a five-week high and was among the best weeks on record, with 1.09 million barrels/day and total production of 7.63 million barrels, as profit margins stay strong for the industry. This total was up 5.31% vs last week and 9.99% vs last year. Stocks ticked up for a 3rd week to 20.464 million barrels, as stocks have stayed overly low on a historical basis, signaling good implied demand for ethanol. Corn bushels used last week totaled 110.66 million bushels, which is ahead of the USDA target pace. It is likely the USDA could adjust the ethanol usage on the demand table for the USDA report on Thursday. The strong profit margins and ethanol usage has provided firm support underneath corn prices over the past handful of weeks.



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CORN HIGHLIGHTS: Corn futures finished at 5.84-3/4 in Dec, down 1-1/2 cents while Mar gained 1-1/4 at 5.87-1/4. New crop Dec 2022 ended the session down 0-1/4 at 5.54-3/4. Firmer soybean prices provided support, while weaker wheat values acted as an anchor. Positioning before tomorrow’s USDA WASDE report was a likely feature in today’s trade. New news was lacking. South American weather remains mostly good enough in the near term for first crop production. A large announced sale of corn to Mexico of over 70 mb was supportive but may have been considered old news.

Most forecasts are suggesting less than average rainfall for the second half of December. Tomorrow’s report is expected to show a small decrease in carryout as ethanol usage is on pace to well exceed USDA’s current forecast. The average pre-report estimate for projected ending stocks is 1.485 bb. The November estimate was 1.493. Our bias is the carryout number may drop 50 mb. Most are anticipating the export figure to drop. At this point, it may be too early into the marketing year to adjust this figure much. In fact, increase exports to Canada could be reflected tomorrow which might surprise the trade with no net change to exports. Ethanol usage could be increased near 50 mb. Yield is not estimated on this year’s crop. The final yield estimate will be in January.


SOYBEAN HIGHLIGHTS: Soybean futures finished the session with solid gains of 10 to 12 cents. Impressive was the turnaround from early in the day, considering futures were trading with double-digit losses early in the session. An announced sale of 130,000 mt to China helped give prices a boost. Sharply lower soybean oil, due perhaps to less than positive news on the biofuels front, kept prices in check. Tomorrow’s USDA report may indicate a small bump in soybean ending stocks due to lower export expectations. A weaker dollar in today’s trade was supportive.

The average pre-report estimate for carryout is 353 mb, which would be up 13 mb from last month, a minor change. World projected carryout is expected to come in at 104.3mmt, above last month’s 103.8, likely reflecting an increase to the U.S. The key focus in the weeks ahead is the weather in the Southern Hemisphere and exports. Many are concerned that the export pace is too slow. Yet, we are not concerned as higher values this year compared to last keep end-users buying as needed. The demand is still there but will take the form of a buy as needed mentality rather than buy strongly ahead. Remember, Hurricane Ida also impacted exports. Over time we anticipate export sales will be close to the USDA. Drier weather forecasted for Argentina provided support for soymeal. Argentina is the world’s largest exporter of soymeal.


WHEAT HIGHLIGHTS: Wheat futures had a rough day with double-digit losses. Expectations for larger Canadian and Australian crops likely played a hand, as did a high U.S. Dollar Index and trader positioning ahead of tomorrow’s report. Mar Chi lost 14 cents, closing at 7.94-1/2 and Jul down 10-3/4 at 7.90-3/4. Mar KC lost 15-1/2 cents, closing at 8.12 and Jul down 11-3/4 at 8.06-1/2.

The trading range in which Chi and KC wheat currently exist shows a period of recent consolidation. MPLS was more resolute with a mostly neutral close. Chart patterns suggest a breakout to the downside, with a head and shoulders pattern forming in KC and a bearish pennant in Chi. Another bearish note comes in the form of census export data for which October was at the lowest level since the 1970s (1.217 mmt). Adding to the negative tone, Stats Canada reported the Canadian spring wheat crop was larger than anticipated, and Australia is projecting a larger crop than the USDA estimate. One thing that could help to make U.S. hard wheat more competitive is Russia’s rising export tax, which is expected to reach 90 dollars per metric ton next week. U.S. exports are still behind last year and current USDA projections. Tomorrow will feature the monthly WASDE report on which there are expected to be only minor changes for wheat. If there are any changes, they may come in the form of lower U.S. exports due to poor results on that front so far, and the USDA could therefore raise the carryout. Perhaps the more important report will be the January WASDE on which we will get final yield numbers (these are not included on the December report). Fundamentally, the outlook remains bullish with low global supplies supporting the market. The Russia / Ukraine situation remains in the headlines and should be watched closely, as the conflict there could increase the volatility of wheat prices.


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John Heinberg

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