Export Concerns:

Positive, we are still getting soybean export sales in the near term. The recent weekly report showed a strong 1.7 million tonne sale for the 10/2 - 10/10 period. That was the second best sale in history for that specific week.

Last week's Monday - Friday overnight sales were strong at 598,800 tonnes. That could imply this week's Thursday report will run a strong 1.7 - 2.2 million tonnes. This will be compared against a 1.8 five year average for that specific week.

This week's overnight sales are starting out strong. Unknown buyers picked up 116,000 tonnes and 264,000 tonnes. Day 1 of this week and we already have 380,000 on the books.

Negative, there are growing concerns over future export sales. US/Brazil export bids flipped last week. Before including Brazil's shipping advantage they are $10 to $20 per tonne cheaper right now.

The bearish Mississippi River story remains in play. Current levels in Memphis, -8.2 feet stage height, are forecast to drop to -9.5 early next month. The river is getting close to the -10.4 low level from 9/24.

The Brazilian real has depreciated further in recent weeks. We want it to appreciate.

The market is keeping an export risk priced in for now. With the Trump/Vance campaign making positive strides over the past two weeks the trade is eager to suggest this means a second trade war with China. Last year we shipped them 54% of all US soybean exports. A study paid for by the National Grain & Feed Association and the American Soybean Association suggested a second trade war similar to the first two years of the last one would discount US soybeans by -$0.60 to -$1.00 per bushel.

Futures are now priced with some type of 25 - 50 million bushel psychological export discount. We can't argue against that view right now.

Other:

AgRural estimates Brazil's soybean planting at 18% complete. That is under last year's 30% pace. We are not ready to suggest any shift for acreage in various crops yet. This is still early in the season.

Crop Progress will be out this afternoon. The trade expects US soybean harvest to advance from 67% complete last week to 82%. We will remain sharply ahead of the five year average pace, 66%.

You may remember we noted the Friday 10/11 Commitment of Traders report was a disappointment. Managed Money was a buyer of 13,088 contracts in the Tuesday 10/1 to Tuesday 10/8 period. However, soybean futures fell -41 cents during this period. The Friday 10/18 report was also disappointing. Funds were sellers of -18,543 contracts and price fell -25 ¼ cents. The market rejected fund buying. It accepted fund selling.

Falling futures prices have enabled a moderate tightening in Midwest basis levels. Central Illinois soybean basis has narrowed from -0.54 fall lows up to -0.40. This is better than the -0.51 average level of the five most recent heavy supply years. In these years there is typically further tightening into December, another 0.24.

USDA Old Crop: On September 30 the Grain Stocks report released finalized old crop ending stocks. They were found to be 2 million higher than the prior estimate, now 342.

USDA New Crop: The new crop balance sheet started with a 2 million bushel increase to beginning stocks. On this report a light -0.1 revision was noted for US yields, now 53.1. Production was lowered a slight 2 million bushels, now 4.582. The supply story is still hefty. It is still a record, over any prior year. It is also a full 492 million over last year’s total supply. That leaves demand as the remaining variable. New crop ending stocks were left unchanged from the prior month’s 550 million. Our models suggest a stock level of 550 million would imply futures at $10.05. Renewed export risk has the market trading a larger stock than 550.

Outside Market Factors:

Retail Sales for September, out on October 17, showed a +0.4% increase from the prior month. That was just over the +0.3% trade expectation. The market will increase its confidence of only -0.25% interest rate cuts next month.

The Department of Labor reported September retail inflation. The rate of retail price action, the Consumer Price Index, fell from +2.5% year over year in August to +2.4% in September. This was just over the trade's estimate of a fall to +2.3%. Markets maintain their current view that the Federal Reserve will lower short term interest rates -0.25% at the next November 7 meeting of the Federal Open Market Committee.

Monthly non-farm payroll data on October 4 was a surprise. September job growth totaled 254,000. This was far over the 140,000 expected. It is also the best number in eight months. The prior 142,000 August estimate was raised to 159,000. The most recent 89,000 estimate for July was raised to 144,000.

For corn and soybeans our focus for currencies is not the US dollar index. This is what people refer to as “the dollar”. The dollar index is the US dollar against a basket of EU and Japanese currencies. Instead, our focus is the dollar against the Brazilian real. The real depreciated 18% against the dollar from 12/29/23 to 8/1/24. It took 4.851 real to equal 1 US dollar at the start of the year. In August it moved up to 5.7483. Since that August peak it has been range bound, 5.4121 on the low end. Current rates are back near the highs, 5.6971. Monetary policy is not the driver of US grain prices. It is a light background influence though.

Weather:

Brazil now has two weeks of near normal rains. Last week's was 0.8 inch vs. the 1.3 average. This near-normal rain will transition to above normal. Over two weeks ahead the Northern state of Mato Grosso and the Southern state of Rio Grande do Sul may see 1.6 - 3.2 inches. Central areas may see a heavy 1.9 - 4.3. The two week average for comparison would be 2.6. Brazil plants soybeans September - December.

Argentina has two weeks of near normal rains. Last week their soybean areas saw 0.7 inch. The average for that week is 0.8. This is now transitioning into above normal rains. The two week forecast shows 1.5 - 3.8 inches for most areas. For comparison the two week average is 1.6. Argentina plants soybeans November - December.

Concern over La Nina has been sharply reduced over the past two months. Drew Lerner notes the US NOAA forecast for ENSO, temperatures in the Pacific Ocean east of Australia, is more aggressive than others. ENSO is at El Nino when it reads +0.5 or higher and La Nina at -0.5 or lower. The latest official ENSO reading for June/July/August was +0.1, down from the big El Nino peak in December at +2.0. Drew is now favoring the Australian Weather Forecasters model. That suggests a light dip to -0.4 or -0.5 by December then a rise. In other words, expectations for La Nina in Argentina's January yield determination period are not strong. La Nina, if it is around in January, does have a tie to lower yields. Seven of the past 11 La Nina's gave Argentina below-trend yields (one unchanged and three above-trend). It is not reliably tied to yield losses for Brazil.

Pricing:

Economic Value: Allendale's pricing models suggest 200 million ending stocks implies 1400 futures, 250 stock implies 1295, 300 implies 1230, 350 implies 1160, 400 implies 1110, 450 implies 1080, 500 implies 1040 and 550 would see 1005.

Similar Year Study: A composite of price action in other years with similar balance sheet characteristics often give us a map for the shape of a year's pricing. It worked incredibly well last year. It has done a decent job this year. In these years, from a spring peak of 1230 ½, a drop to 1032 summer lows would be projected. Our recent trade has met, and exceeded, that target with a move to 955. In prior commentaries we noted the next move would be +8.9% from that low. That would imply 1040 before expiration. This goal was accomplished.

Trading Range Study: November soybeans typically post a good sized trading range between January 1 and expiration. Over the past 20 years that range has been from 133 ¾ to 811 ¾ cents. Earlier this year we started out with a view of a 200 cent wide range as a reasonable starting point. From the January 1 price high of 1237, to this recent low, we now have a 282 wide range for 2024. We have met our view of a reasonable minimum trading range.

November Soybean Seasonal: 2024 November soybeans are following the general seasonal 15 year pattern quite well. This year's peak on May 7 was a little earlier than the June 8 peak from the 15 year analysis. If we shift 2024 price 22 trading days early then will the fall low, normally October 3, be pushed up to late August/early September. The current August 16 low would be just a little early for this view.

Chart: New lows for the short term downtrend were made last week. This market has recently broken support levels and is now nearing two points of interest. On the day of the major lows, 8/16, the market left an unfilled intraday gap at the close of 957. Also on that day, the major 955 lows were made. Bulls are not in control. The open upside gap at the 7/5 close of 1129 ¾ would be considered realistic.  ...Rich Nelson

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