Traders Monitor South American Rains October 28, 2020
Good Morning from Allendale, Inc. with the early morning commentary for October 28, 2020.
Grain Markets were lightly pressured as traders note regular South American rains are coming at the same time as impatience mounts over the next round of Chinese purchases of US products. Strength remains in grain markets but questions remain over US pricing for soybeans as we transition into November.
Tuesday’s grain trade was characterized by new highs for the uptrend for corn and soybeans as well as the inability to hold those levels into the close. December corn closed 6 1/4 cents of the day’s high. January soybeans finished 12 cents off their highs.
Chart support for grain markets remains some distance away. The long term uptrend for December corn comes in at 386 5/8 today. For January soybeans it comes in at 1061 1/2.
Ukraine corn production was lowered to 33.8 million tonnes according to APK-Inform. This follows two new estimates from Monday at 30.0 and 33.0 from the Ukraine traders union and the Ag Ministry. USDA’s 10/9 estimate is 36.5. The trade will monitor production estimates of the world’s #4 exporter closely. Over 80% of their production is exported.
EIA ethanol production will be released on Wednesday. Recent weeks have seen erratic production levels, from -3.5% year/year to -8.3%. USDA’s current Sep 1 – Aug 31 estimate for the year is for a 6.5% decline. Given virus concerns and the economy, the trade does not have high confidence about a boost in USDA’s current estimate yet. For today’s report we will be compared against last year’s 1.004 million barrels per day production rate for the same week.
Funds in corn were holding a net long position of 218,825 contracts on Tuesday the 20th. Private estimates suggest they are currently +240,000. This is nearing the previous peaks in net longs from recent years. Those levels were +233,063 for 2018, +252,295 for 2016, +279,665 for 2015 and +270,137 for 2014. We see no need to revisit the 342,893 all time net long peak from 2012.
Brazil’s soybean export prices remain far over US values in the short term. However, as November rolls around buyers will be procuring for the spring market where South American supplies will be abundant, despite short term planting concerns. Traders wonder how China will react during this time.
Tropical Storm Zeta will strengthen into a light hurricane when it makes US landfall Wednesday evening. Given its weaker standing than the most recent one, Delta, it is not expected to cause a problem for agriculture. In the most recent week 80% of US ocean-going corn was shipped out of the Mississippi Gulf. Soybean and wheat ocean-going shipments in that week were 37% and 0% respectively of the week’s total.
US virus cases spiked on October 23 and 24 using the CDC database. At 82,929 and 83,851 new cases per day respectively, these numbers surpassed the July peak of 74,818.
USDA’s Data Users meeting, often a bi-annual or annual event, will be conducted online tomorrow from 11:30 am – 2:30 pm Central. This meeting allows all private sectors of agriculture to hear about new reports, changes to reports or methodology as well as to question USDA officials. We do not look for any market moving news from this meeting. Allendale will attend as usual.
Cash feeder prices tumbled at the closely followed sale barn trade on Monday in Oklahoma City. 725# steers are $24/cwt. off their levels from six weeks ago. 525# steer calves are $20 from six weeks ago.
Choice beef prices started October with a 3% premium to last year. Current values are a full 9% under last year. Trades suggest virus concerns are keeping this portion of the beef complex from its seasonal low from two weeks ago.
Last Trading Day for October feeders comes Thursday. For October live cattle it comes on Friday.
Rising hog numbers are set for the coming weeks. This past Saturday processed 237,000 head. This coming Saturday is planned for 264,000. Runs in November will surpass the current theoretic limit of 300,000.
Wholesale pork pushed to lower prices on the afternoon report, compared with the morning, for now two days in a row. Monday’s morning report showed +2.99 on the morning but -1.39 in the afternoon. Tuesday’s morning estimate of +3.03 was revised down to a net -3.03 by the day’s end. Pork is now 12.59 off the peak from the 15th.
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