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Markets brace for slow holiday trading session

morning market recap.jpg
Morning report: A stronger dollar and energy prices overnight could impact this morning’s prices. (Comments are updated by 7:30 a.m. Central Time.)

Good morning! Markets close early today at noon, so the PM newsletter will be arriving in your inbox a little earlier than usual today. I hope you and your loved ones had a happy and healthy Thanksgiving yesterday and that you are out grabbing good deals on Black Friday!

Since ag markets were closed yesterday and will not reopen until later this morning, there was no overnight price action to report on this morning. But global markets continued to churn out headlines, so that will be my focus today.

One final reminder about the markets today – a lot of traders are out of the office for the holiday, so the low volumes could create some erratic price activity. Trading will revert back to normal(ish) conditions when everyone returns to the office on Monday.

Have a good weekend!

Corn

Markets are prepping for this week’s Export Sales report from USDA, which will be released a day late (this morning) due to the holiday yesterday. Weekly corn export sales are forecast between 66.9 million – 98.4 million bushels for 2022/23 sales and 24.6 million – 61.5 million bushels for 2023/24 sales following several substantial corn export purchase orders booked by Mexico over the November 11-17 reporting week.

Monday’s Export Inspections report from USDA saw an 8% weekly decline in corn volumes inspected for export – a total of 19.5 million bushels, which could limit some of the optimism coming from the sales side of USDA’s weekly report.

Cash offerings for corn were mixed on Wednesday as markets prepared for the Thanksgiving holiday. Basis rose at an Ohio elevator and Indiana ethanol plant though it eased slightly at an Eastern Iowa processor. Corn cash trends have not changed significantly during the week. If anything, basis has slightly strengthened at Midwestern ethanol plants this week as new farmer sales remain slow.

That prospect was evidenced in Wednesday’s weekly Petroleum Inventory Status update from the U.S. Energy Information Administration. The weekly report found that for the week ending November 17, U.S. daily ethanol output averaged 1.041 million barrels of production per day, which marked a 3% increase from the previous week.

It was the second-highest average output recorded since early August 2022, which helps justify the growing cash premiums offered at U.S. ethanol plants across the Midwest over the past couple weeks.

Processors, buyers in the Western Corn Belt, and ethanol plants continue to derive premiums from their cash sales while Eastern Corn Belt elevators and export terminals are still offering basis at a discount to nearby futures contracts.

Soybeans

Weekly soybean export sales estimates expected in this morning’s weekly USDA report range between 18.4 million – 62.5 million bushels for 2022/23 sales and up to 5.5 million bushels for 2023/24 sales based on pre-report analyst estimates. Export volumes are expected to edge higher from last week, if Monday’s Export Inspections report is any indicator.

The Monday report from USDA found 19% more soybeans had been inspected for export than the previous week. Through the week ending November 17, 85.6 million bushels of soybeans were inspected for export at U.S. terminals.

USDA released a daily flash export sale announcement Wednesday morning, which fuel soybean gains during the trading session. China reportedly ordered 4.0 million bushels of U.S. soybeans to be delivered during the 2022/23 marketing year.

New farmer sales of soybeans on the cash market on Wednesday were slow despite the futures price uptick. Cash offerings for soybeans were largely unchanged as a result.

While soymeal futures prices edged slightly higher on Wednesday on China’s purchase, cash soymeal prices were largely unchanged across U.S. rail and truck terminals. Markets have been quiet during this holiday week as many buyers had already booked supplies last week in advance of Thanksgiving. Merchandisers expect today will also be a quiet day in the soymeal cash markets.

Soyoil futures could open higher this morning and lift the rest of the soy complex up with it, based on bullish palm oil price activity this week. Palm oil prices gained 7% this week amid robust export paces in Malaysia.

Argentina has sold 72.6% of its 2021/22 soybean crop, according to Argentina’s agriculture ministry. That number continues to trail year ago paces of 75.6% despite a surge in farmer sales following Argentina’s currency devaluation in September.

The Argentine government is considering another currency devaluation in December to spur another round of soybean sales from farmers. Soybeans and soymeal exports are a key revenue source for the Argentine government, which has been struggling with far higher inflation values for far longer than the rest of the global economy. The entire Argentine economy could face trouble next year if soybean crops fall short again this year.

Soybean prices continue to hold at a price floor as markets remain uncertain about the fate of the Brazilian soybean crop during a third consecutive La Niña year. And while Brazil has received beneficial rains in recent weeks, its southern neighbor, Argentina, has not, research firm Hightower noted in a memo, as reported by Reuters.

Argentina’s crops are facing severe yield shortfalls as dry weather persists. "The situation in Argentina remains catastrophic as a result of the continuing drought. After having impacted wheat production, corn and soybean sowings are well behind a normal year," consultancy Agritel told Reuters this morning.

Brazil is the world’s largest soybean exporter, while Argentina ranks as the third largest and the largest soymeal exporter. Brazil and Argentina are the world’s second and third, respectively, largest corn exporters.

South American trucker strikes

Truckers and farmers in central and southern Peru blockaded major roads yesterday to protest rising fertilizer and fuel prices. Peru is not a major grain or oilseed exporting country, but it does offer a cautionary tale for the ill effects of high inflation.

The war in Ukraine has kept energy and fertilizer prices high this year and the slower shipping speeds have meant that Peruvian farmers have not had access to these key inputs when needed the most.

Further east in Brazil, road blockades were also staged this week to protest results from the country’s recent runoff election. The Brazilian farmer lobbying group, Abiove, reported that Brazilian corn freight prices surged 20% higher this week amid this latest market disruption.

Access to Brazil’s northern ports haven been the most contentious over the past week. Some Brazilian Abiove members are worried that they will not be able to deliver on corn export contracts due to the delays and are anxious about incurring demurrage charges at the ports if the road blockages continue to slow cargo loading speeds in Brazil.

Brazil is the world’s second largest corn exporter. After the South American grains powerhouse entered into an agreement with China earlier this fall, Brazil shipped its first corn cargo to China earlier this week. That means that provided more delays do not slow down shipping speeds, Brazilian corn will be more competitive against its U.S. counterparts this year, especially if Brazilian crop growers can escape a third consecutive La Niña cycle unscathed.

More Brazil

If you follow my E-corn-omics columns, you’ll know that I went down a rabbit hole after Brazil’s runoff election earlier this month.

A Wall Street Journal article published on Wednesday dives deeper into the nature of Brazilian politics and explains how its wealthy agriculture sector is fighting to keep legislative power, even though leftist former president Lula da Silva was ultimately reelected to Brazil’s presidency.

Wheat

Wheat export sales expected for the November 11-17 reporting week in this morning’s weekly report from USDA are forecast to range between 9.2 million – 22.0 million bushels for 2022/23 sales and up to 1.8 million bushels for 2023/24 sales.

Export inspection volumes for wheat from Monday’s USDA report came in nearly two-thirds higher than the previous week at 10.3 million bushels, which is a positive sign for the U.S. wheat export market headed into today’s trading session.

Top global wheat buyer Egypt booked a 6.4-million-bushel tender yesterday through a series of private agreements, according to traders. The sale is likely to be broken into three shipments originating from both Russia and Ukraine. The price was approximated at $9.83/bushel C&F.

Wheat growers in India are looking to expand planted acreage in the coming year after the Black Sea conflict turned it into a major player on the global export market this past spring. The Indian government expects that as of October 1, 37.8 million acres of wheat, up almost 11% from year ago sowings.

Prior to this year, India had harvested three consecutive bumper wheat crops. The Asian country typically keeps most of its supplies limited to its domestic markets via pricing controls, but the Black Sea conflict drove prices outside of that scope and led the Indian government to open its wheat export market to the rest of the world.

It remains to be seen if India will once again be a significant player in the wheat export market this year after a severe drought curbed production prospects this past summer. But it does suggest that India is prepping to take a more active role in global export markets in the near future.

Winter wheat crop conditions in France, the European Union’s largest soft wheat producer, are growing ahead of schedule, according to French farm office FranceAgriMer. About 38% of France’s soft wheat crops are already at the tillering stage thanks to milder than usual October weather. The same time a year ago, that metric stood at 7%.

The E.U. is the world’s second largest wheat exporter. Crop shortfalls due to drought across the Northern Hemisphere this past summer tightened supplies and kept wheat prices high. But if France’s crop continues to develop in such a positive direction, 2023 wheat harvests may be more bountiful than those recorded in 2022.

A senior Ukrainian government official warned that this year’s grain harvest could drop to 51 million metric tonnes (MMT). Last year, the country harvested 86MMT of grain – a significant portion of which remains in the country as the Russian war stalled Ukrainian ag exports for five months.

Ukrainian farmers have already harvested 76% of 2022 crops, though corn remains unharvested and the market incentives to finish harvest – as well as plant winter crops for the 2023 season – are drying up as the Russian invasion continues.

Cash offerings for soft red winter wheat in the Midwest were unchanged on Wednesday and continues to be offered at a $0.30/bushel (ish) discount to nearby Chicago futures contracts. Basis for hard red winter wheat in the Southern Plains largely held steady on Wednesday, though a Goodland, Kansas facility weakened its cash offering slightly. Farmer sales were slow ahead of the holiday.

International buyers came to the international market with their checkbooks today. Thailand snapped up 2.2 million bushels of feed wheat for shipment between January and March 2023. Traders expected the deal was priced around $9.39/bushel C&F and that the shipment would originate in Australia. Algeria also started buying durum wheat for delivery over the next two months, though further details were not available at press time.

European wheat prices eased after a flurry of sales over the past week. Some spillover weakness was also present after Euronext rapeseed futures fell 3.2% following lower energy prices. But front month (likely a Dec22 contract) prices are likely to hold firm as market chatter continues of a large Chinese purchase of French wheat.

Rumors continue to swirl that European wheat is being imported into a Florida mill, though the belief that it will be sourced by a German or Polish seller is wavering.

“Currently the consensus seems to be that Baltic wheat is believed to have been sold to one U.S. flour mill only, suspected to be in Florida,” a German trader told Reuters. “The attention will now be on whether this low price/cheap shipping window will be used by other U.S. mills or feed makers.”

U.S. wheat is currently very expensive on the world market and European supplies are being offered at a discount to domestic prices. This particular deal is likely to involve European wheat supplies harvested next summer (2023), so it could shake up new crop pricing substantially in the coming weeks.

“Currently U.S. wheat is looking too expensive,” another German trader said. “This price window had been available for European wheat for some time. There is also market talk about more recent sales of Russian wheat to Mexico, although details are unavailable.”

Weather

Mostly clear skies are forecasted for the Heartland today, according to NOAA’s short-term forecasts. The Southern Plains are likely to see a chance of rain today. East Texas could see up to two inches of moisture, but areas on the fringe are likely to see at least a tenth of an inch over the next 24 hours.

NOAA’s 6-10-day forecasts are now trending warmer and wetter for the end of the month. Higher than average temperature prospects are at play for the Southern and Central Plains and Eastern Corn Belt through the end of November, but cooler chances are prevailing for the West and Northern Plains in that time period. Chances for rain will be above average for the North and Central Plains and entire Midwest during that time while the Southern Plains remain dry.

Those trends will stay consistent in the 8-10-day outlook with only slight shifts expected. Temperature forecasts will remain warmer than usual for the Southeastern half of the country, but cooler temperatures will start to shift into the Upper Midwest during that time. However, above average chances for moisture will extend across the entire country during the first week of December, with the greatest chances likely in the Eastern Corn Belt.

Financials

Deere & Co. released positive fiscal year earnings results Wednesday morning. The equipment behemoth’s stock share price soared to a new record high after net profits were projected 75% higher than last year thanks to strong performance across the entire company.

Deere also expects to top net income projections in the coming year as farmer profits remain strong. Deere has already filled orders all the way through its third quarter in 2023 (April-June 2023) and is optimistic that ongoing supply chain bottlenecks are beginning to clear.

"They had broad-based strength across all their divisions," Matt Arnold, an equity analyst at Edward Jones, told Reuters Wednesday morning. "The demand environment is really healthy, and (Deere) is translating that into a big upturn in earnings."

This year’s avian influenza has officially set a new record high, according to USDA data released yesterday. The outbreak has resulted in the culling of 50.54 million birds in just the first 11 months of this year, surpassing the previous record of 50.5 million birds killed in 2015.

This year’s outbreak began in February and has been more virulent among wild birds and backyard flocks, which increases its potency for commercial flocks. The mass culling has led to soaring egg, turkey and chicken prices and been a contributor to inflationary pressures facing the economy this year.

S&P 500 futures edged 0.12% higher this morning to $4,038.00 amid thin trading volumes. The market is already pricing in lower Black Friday sales volumes. Oil markets are trading higher this morning thanks to European Union leaders’ latest plan to wean off their dependence on Russian energy supplies.

What else I’m reading this morning on our website, FarmFutures.com:

  • What future fuel will you burn on your farm? Diesel and gasoline have long been the energy source of choice on the farm, but that could be changing.
  • Mike Downey asks – what is the practical value of your farmland?
  • Farm Futures executive editor Mike Wilson reports that farmers looking to invest profits, lower tax bills and boost productivity may need to get in line as drainage contractors try to meet hot demand.
  • Advance Trading’s Brady Huck tells farmers the four necessary steps to take to become a better grain marketer.
  • Bryce Knorr has calculated out crop budgets for the 2023 growing season and all signs point to profits as 2022 comes to a close.
  • Is another rail strike on the horizon? This Bloomberg article reports how farmers will be impacted by a railway shutdown.
Morning Ag Commodity Prices - 11/25/2022
Contract Units High Low Last Net Change % Change
DEC '22 CORN $ / BSH  - - 6.6325 0 0.00%
MAR '23 CORN $ / BSH  - - 6.6625 0 0.00%
MAY '23 CORN $ / BSH  - - 6.655 0 0.00%
JUL '23 CORN $ / BSH  - - 6.6 0 0.00%
SEP '23 CORN $ / BSH  - - 6.205 0 0.00%
DEC '23 CORN $ / BSH  - - 6.085 0 0.00%
AR2 '24 CORN $ / BSH  - - 6.155 0 0.00%
AY2 '24 CORN $ / BSH  - - 6.18 0 0.00%
JUL '24 CORN $ / BSH  - - 6.1675 0 0.00%
JAN '23 SOYBEANS $ / BSH  - - 14.36 0 0.00%
MAR '23 SOYBEANS $ / BSH  - - 14.42 0 0.00%
MAY '23 SOYBEANS $ / BSH  - - 14.4875 0 0.00%
JUL '23 SOYBEANS $ / BSH  - - 14.51 0 0.00%
AUG '23 SOYBEANS $ / BSH  - - 14.3425 0 0.00%
SEP '23 SOYBEANS $ / BSH  - - 13.9675 0 0.00%
NOV '23 SOYBEANS $ / BSH  - - 13.7775 0 0.00%
AN2 '24 SOYBEANS $ / BSH  - - 13.78 0 0.00%
AR2 '24 SOYBEANS $ / BSH  - - 13.6675 0 0.00%
AY2 '24 SOYBEANS $ / BSH  - - 13.615 0 0.00%
UL2 '24 SOYBEANS $ / BSH  - - 13.6125 0 0.00%
DEC '22 SOYBEAN OIL  $ / LB - - 74.91 0 0.00%
JAN '23 SOYBEAN OIL  $ / LB - - 72.2 0 0.00%
DEC '22 SOY MEAL $ / TON - - 409.7 0 0.00%
JAN '23 SOY MEAL $ / TON - - 407.4 0 0.00%
MAR '23 SOY MEAL $ / TON - - 404 0 0.00%
MAY '23 SOY MEAL $ / TON - - 400.9 0 0.00%
JUL '23 SOY MEAL $ / TON - - 399.8 0 0.00%
DEC '22 Chicago SRW $ / BSH  - - 7.935 0 0.00%
MAR '23 Chicago SRW $ / BSH  - - 8.135 0 0.00%
MAY '23 Chicago SRW $ / BSH  - - 8.2325 0 0.00%
JUL '23 Chicago SRW $ / BSH  - - 8.2575 0 0.00%
SEP '23 Chicago SRW $ / BSH  - - 8.315 0 0.00%
DEC '23 Chicago SRW $ / BSH  - - 8.4025 0 0.00%
AR2 '24 Chicago SRW $ / BSH  - - 8.435 0 0.00%
DEC '22 Kansas City HRW $ / BSH  - - 9.3025 0 0.00%
MAR '23 Kansas City HRW $ / BSH  - - 9.1975 0 0.00%
MAY '23 Kansas City HRW $ / BSH  - - 9.125 0 0.00%
JUL '23 Kansas City HRW $ / BSH  - - 9.02 0 0.00%
SEP '23 Kansas City HRW $ / BSH  - - 9.0025 0 0.00%
DEC '23 Kansas City HRW $ / BSH  - - 9.0225 0 0.00%
AR2 '24 Kansas City HRW $ / BSH  - - 8.97 0 0.00%
DEC '22 MLPS Spring Wheat $ / BSH  - - 9.5775 0 0.00%
MAR '23 MLPS Spring Wheat $ / BSH  - - 9.5225 0 0.00%
MAY '23 MLPS Spring Wheat $ / BSH  - - 9.5325 0 0.00%
JUL '23 MLPS Spring Wheat $ / BSH  - - 9.51 0 0.00%
SEP '23 MLPS Spring Wheat $ / BSH  - - 9.2825 0 0.00%
DEC '23 MLPS Spring Wheat $ / BSH  - - 9.315 0 0.00%
AR2 '24 MLPS Spring Wheat $ / BSH  - - 9.28 0 0.00%
DEC '21 ICE Dollar Index $ 1-6.12 105.605 106.025 0.058 0.05%
 JA '21 Light Crude $ / BBL  79.9 76.89 79.6 1.66 2.13%
 FE '21 Light Crude $ / BBL  79.92 77.05 79.64 1.57 2.01%
DEC '22 ULS Diesel $ /U GAL 3.4384 3.3344 3.435 0.0757 2.25%
JAN '23 ULS Diesel $ /U GAL 3.358 3.2477 3.34 0.0632 1.93%
DEC '22 Gasoline $ /U GAL 2.4793 2.4258 2.4695 -0.0049 -0.20%
JAN '23 Gasoline $ /U GAL 2.4-86 2.35 2.3971 0.0041 0.17%
JAN '23 Feeder Cattle $ / CWT - - 179.25 0 0.00%
MAR '23 Feeder Cattle $ / CWT - - 182.35 0 0.00%
 DE '21 Live Cattle $ / CWT - - 153.35 0 0.00%
 FE '21 Live Cattle $ / CWT - - 155.425 0 0.00%
DEC '22 Live Hogs $ / CWT - - 83.95 0 0.00%
FEB '23 Live Hogs $ / CWT - - 88.8 0 0.00%
NOV '22 Class III Milk $ / CWT 21.-5 21.02 21.04 0.02 0.10%
DEC '22 Class III Milk $ / CWT 21.-8 20.3 20.31 -0.69 -3.29%
JAN '23 Class III Milk $ / CWT 2-.44 20.02 20.06 -0.38 -1.86%


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