Trade estimates for Friday's monthly supply/demand report have been released. For soybeans, the estimates show few surprises. All will be adjusting old crop stocks to USDA's finalized numbers from the September 30 quarterly Grain Stocks report, from 340 million bushels to 342. The big question for this report is with yield changes. The average guess suggests a slight decline from last month's 53.2 bpa to 53.1 (ALDL 53.2). Of the 18 analysts surveyed by Reuters newswire that submit estimates guessing USDA's numbers 10 suggested lower, one unchanged (Allendale) and seven were higher. There was a minimal range in these estimates. 17 of the 18 were within 0.8 of last months number, either higher or lower. Crop Progress ratings would suggest a light increase. Also, in recent years there has been a tendency for higher bean yields into fall. However, this year's August and September dryness was significant. It is reasonable for us, and the rest of the trade, to be a little conservative on this report. The average production estimate, 4.579 billion, is only a revision of 7 million bushels (ALDL 4.586). The trade is also standing pat on any real changes for demand. The trade estimate is 549 million bushels for stocks, about unchanged from last months 550 (ALDL 553). If we are removing South American weather risk from this market then you can argue pricing back to economic value around $10.05.

Back in September we discussed a study regarding years with a dry August and September finish. We're still waiting on official numbers for September in our dataset. If you assume it was -20% from normal, a conservative estimate, then our Midwest weighted average rain for the two months is only 5.1 inches. That is the 9th lowest rainfall in those two months of the 44 years we looked at from 1980 - 2023. We then looked at yield changes in the 10 years that were closest to this amount, higher and lower. Of those 10 years, nine of them posted a peak yield for the year from July - September. Those nine years saw yield declines thereafter.

There were no overnight export sales this morning. The two day total for the week is 338,500 tonnes, near last week's good 352,000.

The Mississippi River recently crested at +6.5 feet stage height in Memphis. This is quite a transition from the September 24 low point of -10.4. Current levels are back down to -0.9 and are forecast to fall back to -6.8 by October 23. This would restart barge restrictions. They kick back in at -5.0.

The US soybean export price advantage vs. Brazil, $40 - $42 per tonne last week, has been reigned back to $24 - $25. When including their $10 - $15 shipping advantage we are still moderately ahead. The US soybean market, in addition to removing light South American risk premiums, has also lowered its view of US exports from above-USDA to now at-USDA.

Anec, the Brazilian export association, estimates 4.12 million tonnes for October soybean exports. This would be -1.4 from last year in the same month. Apr – Oct exports would be -3.2 from last year's record exports in the same period. Let's not get too bullish from this news. Year to date exports are a #2 record so far, 70.5 mt. That is just off last year's 73.7.

Weekly export sales will be out tomorrow. As a reminder, we are still officially behind the pace needed to meet USDA. We, and the trade, expect a few more weeks of okay/good sales to get us on target. There is not much disagreement with that view. At this time we no longer have a story suggesting surpassing their goal. The estimate range for tomorrow's report is 800,000 - 1,700,000 tonnes. This would be -45% to +16% vs. the 1,460,691 five year average. We will note this low end estimate of 800,000 does not make sense. The prior three weeks saw overnight sales 11% to 17% of the week's total. Off 352,000 tonnes of overnight sales for that week this same percentage would imply 2,070,588 to 3,200,000. We are not saying that same relationship HAS to happen this week as well, just that the low end estimate seems unrealistic.

Crop Progress was out Monday afternoon. US soybean ratings were unchanged from the prior week at 64% good/excellent. The trade expectation was also 64%. This is a stout rating for this time of year, tied for #9 out of 38 prior years. This was the last weekly condition rating of the year. Only harvested will be reported next week and beyond. A simple model looking at final ratings and yield deviation would imply +3.1% from USDA's starting 52.0 bpa yield, 53.6. USDA's September yield estimate was 53.2.

Monday's report showed the US harvest at 26% complete. The trade expected 24%. The five year average is 18%. USDA has carried harvest numbers on these Crop Progress reports since 1985. This year is tied for the fifth fastest harvest by this point of those years.

AgRural estimates the current Brazilian soybean planting is 4.5% complete. That is under last year's 10%. Safras e Mercado estimates planting at 4.1% complete, under 7.8% last year at this time.

Friday's Commitment of Traders report showed Managed Money bought another 40,092 contracts from Tuesday 9/24 to Tuesday 10/1. That marked a sixth week of buying. They are now net short -34,886 contracts. In this specific week price advanced by 15 cents. We will point out since the major Managed Money low of -185,750 on 7/16, they've bought a large 150,864 contracts. That sounds good but don't forget the total soybean price advance since then is only +14 cents. Our focus is not on fund buying or selling numbers. Instead, we strongly monitor the market's acceptance or rejection of it. By that measure, this is a sluggish market.

Soybean basis in Central Illinois on October 4 was -52 cents per bushel. That is over the -47 average from the prior five years that held heavy supplies on that date. Soybean basis typically improves 20 cents from October 4 to the end of December in these heavy supply years.

Last week ADM announced they would idle their Des Moines, Iowa soybean crush plant from mid-October through November. This is due to planned maintenance. This plant is the second largest in the US. It can process up to 5 million bushels per month. This hits for two reasons. It is at harvest. Additionally, it comes off a low August crush that was -1% from last year. The completed old crop 2023/24 marketing year ended with 2.285 billion bushels of domestic crush. That is +3.3% vs. the prior year. With a larger US supply in this new crop year, and still hope for biofuel increases ahead, USDA sees the new crop crush +5.7% from last year at 2.425. This update could lightly trim that expectation.

The Head & Shoulder bottom on the December soymeal chart is now in question. It is quite common for these formations to move back below their neckline/armpit line breakout point for a day or two. We'll see if it comes back. This formation implies $366.80 for an upside objective.

Outside Market Factors:

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.

The federal funds futures market has reigned in its expectation of large rate cuts at the coming November and December FOMC meetings. The current expectation is -0.25% at both. On September 18 the Federal Open Market Committee starts its first lowered interest rate activity, -0.50%. Historically, lower interest rates are lightly supportive to soybean prices.

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 12/29/22 to 8/1/24. With the recent US rate cut that value has changed by 5%. We need to see this loosen up further. That could come with further interest rate changes. Monetary policy is not the driver of US grain prices. It is a light background influence though.

Weather:

The Brazilian forecast has shown a change for now three days. Over the past five weeks their soybean area has seen rainfall -53% from normal. We will point out today's forecast was lightly stepped down for the Center-West and Central areas, now 1.1 - 3.2 over two weeks. Given a 1.1 inch normal each week for this time, 2.2 would be normal for two weeks. The Southern region will remain wet at 3 - 6 inches. The market is now removing whatever light psychological risk it previously felt. Brazil plants soybeans September - December.

Argentina's forecast has also shown a change for now three days. Over the past five weeks their soybean area has seen rainfall -80% from normal. The two week forecast shows improvement for their two dry states. All three states, including the dry two, will see 1.1 - 3.5 inches of rain. Normal at this time, for a two week total, would be 1.2. They plant soybeans in November - December.

Drew Lerner has now cast further doubt over La Nina for Argentina. “The US NOAA ENSO forecast model continues to predict a La Nina event is imminent, as it has done so all year long. But it has not evolved and World Weather Inc. is highly skeptical that it will evolve anytime in the remainder of this calendar year.” That is quite a hefty statement. The gauge of ocean temperatures, 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. A similar year trading perspective would now be turning from lightly bullish to neutral.

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: The uptrend in soybeans has been broken. The market is now seeking signs of stability. For general targets this market has tested 50% retracement of the prior moderate rally, 1012 ½. It is holding so far. Next support beyond that would be the lows from September, 995 ½. The super bear argument would be the idea of a move down to fill the last open intraday gap on the chart, the 8/16 close of 957. That may be unrealistic at this time. Additionally, we still hesitate to suggest the open upside gap at the 7/5 close of 1129 ¾ is realistic.  ...Rich Nelson