Corn and Wheat Retreat. Soybeans Eye Brazil's Weather Window

Grains

Friday's monthly employment report was lightly positive. Up ahead we have monthly inflation on Tuesday , the Consumer Price Index, and the next Federal Reserve announcement on Wednesday.

Drew Lerner reminded us today the Center/West of Brazil will see clear dryness this week then moderate rains next. There is still no fix for the two main states in this region.

Argentina is off Allendale's list of concern. We have their corn and soybean crops at trend yields. Precipitation over the next two weeks will bounce around but the main argument is now “mostly normal” As a reminder, strong El Nino years like this generally bring above-normal moisture and above trend yields.

Corn

Corn ended the week with another attempt to test minor upside resistance on the chart but it was rejected by the close. USDA choose to push most of the bigger questions on today's report until January. Even considering a likely export sales increase ahead the general US supply story remains.

China's National Bureau of Statistics left the official view of 2023 corn production unchanged at 288.84 million tonnes. USDA is at 277.0.

AgRural estimates Brazil's corn planting at 95% complete. Last year it was 96% at this time.

For Brazil's crop USDA is at 129.0 million tonnes and Conab is at 118.528. They have both been at odds with corn estimates for some time. Last month was 129.0 and 119.066 respectively.

El Nino and Argentine Corn Yields: Argentina plants corn mid-September through November. Over the past 25 years there were 8 with an ENSO reading of +0.5 during their yield determination (January). All 8 years posted above trend yields (+3.4% to +15.0%). The influence is relatively consistent.

USDA lowered US ending stocks by 25 million bushels to now 2.131 billion. Only an adjustment for exports was noted. While there will be further export estimate increases ahead Allendale warns they may be countered by for ethanol decreases. No matter the mix of changes ahead for exports or ethanol the general story for the year has yet to change. Anything over 1.8 billion bushels suggests economic value under 410 for futures. With the market balancing its concerns with South American weather we see a reasonable downside target at 430.

March Corn Seasonal: Allendale monitors seasonal price factors but does not adhere to them religiously. For corn the seasonal is for a harvest low October 3, minor rally to October 23 then retest of the harvest low on December 7. The 15 year seasonal suggests that December low is the major low and higher prices into spring. This year's price pattern since harvest is moderately similar. The 9/19 harvest low was broken by 12 cents to the current 11/19 low. Separate from our view on fundamentals the seasonal would suggest higher prices into spring.

March Corn Chart: The long term downtrend remains. There is no breakout yet from recent highs which are minor resistance at 493 ¼ - 496 ½. Last week's trade rejected 493 ¾ and 492 upside attempts.

2022/23 Producer Marketing: Completed 2022/23 marketing year net of $7.01 (USDA seas. ave for Central IL $6.60). Previous hedges on 50% using options, 25% on 2/28/22 and 25% on 6/7/22, were lifted 7/26/22 for +56 4/5 cents (adj. to 100% of the crop nets +28 2/5 cents). Cash sales of 25% 1/18/23, 50% 1/26/23 and 25% 2/10/23 for net $6.73 via Cental IL.

2023/24 Producer Marketing: Profit of 163 7/8 cents from two prior hedges on 75% of the crop (123 cents when brought to 100% of the crop). Currently holding the third hedge on 75% enacted 11/13/23 using purchased CH 460 puts at 10 1/4/sold 520 CH calls 6 ¼ for net 4 cents. No 2023/24 cash sold. 1st hedge on 75% using short CZ23 futures were lifted on 5/1/23 for +68 4/7 (sales of 50% at 600 on 1/19/23 + 25% at 595 on 2/10/23 lifted 5/1/23 at 529 ¾). 2nd hedge on 75% using options were lifted 11/13/23 for +95 2/7 (sales of 50% on 6/16/23 using purchased CZ 560 put 35/sold CZ 640 call 27 for ((net 8 cents)) lifted 11/13/23 at 97 and 1/8 ((net 96 7/8)) + 25% 6/20/23 using purchased CZ 580 put at 41/sold 660 CZ 660 call 32 for ((net 9 cents) lifted 11/13/23 at 117 ¼ and 1/8 (net 117 1/8).

Corn Summary: We can agree with a light psychological premium in corn from the Brazil story. It is quite difficult to make this a “buy US corn” story at this time though. While many are looking at the seasonal charts with hope we are skeptical of them working this year. At best, perhaps sideways or a lower than expected downtrend. Our general discussion of 430 futures for a target remains. For producers we continue to hold hedges...Rich Nelson

Working Trade:

(11/30) Sold March 480 call 15, risk 28, objective 0. Closed 15 ½.

Soybeans

A little drier forecast for Brazil helped add further premium to futures. We are nearing the important January weather window for them. January is now 44 cents off last week's low. Next chart point to monitor is the intraday gap to 1356 ½.

An overnight export sale of 132,000 tonnes of US soybeans was reported this morning for an Unknown buyer. We call this routine business.

China's National Bureau of Statistics revised 2023 soybean production. On Friday their version of a WASDE report was at 20.89 million tonnes. That was increased to 23.84 today. USDA is at 20.5.

AgRural estimates Brazil's soybean planting at 91% complete. Last year it was 95% at this time.

USDA has Brazil's soybean crop at 161.0 while Conab is at 160.77. Weather specifically during the reproductive phase, January/early-February, is the key yield determinant. These are lightly off last month's 163.0 and 162.42 estimates respectively.

Later tonight the Malaysian Palm Oil Board will release November's palm oil statistics. Production is expected at 1.809 million tonnes. That would represent a drop of -6.6% from the prior month. Exports are seen 1.526. End of November stocks are expected 2.437. This would stop six months of increases.

USDA recently left their US ending stock forecast unchanged at 245. Domestic crush is a little behind their whole-year goal. Export sales, at least in the recent four weeks are quite strong. USDA is holding from export increases as Brazil still holds a better export price as the Mississippi/Panama Canal dryness issues remain. Unlike corn, the soybean balance sheet is still very much in play with Brazil’s weather likely a key influence. We compute a 200 ending stock as implying 1400 futures, 220 at 1360 and 250 at 1295. We would expect prices to hold a light premium over this implied 1295 price in the coming weeks.

El Nino and Argentine Soybean Yields: Over the past 25 years there were 7 with an ENSO reading of +0.5 during their yield determination (February). 6 years posted above trend yields (+3.2% to +22.3%). 1 saw below trend yields (-1.3%). The influence is relatively consistent. El Nino brings above trend yields to Argentine soybeans. At this time we are not yet seeing a change from normal precipitation to normal El Nino above-normal.

March is now the lead contract for soybean futures.

March Soybean Seasonal: Allendale monitors seasonal price factors but does not adhere to them religiously. The general price pattern for soybeans is different than corn. Here, a major harvest low is generally made October 3. After a minor rally to October 23 there is one last minor bear move to November 13. That moderate move down to November 13 does not take out harvest lows and is a spring board for higher trade into spring. The 2023 contract has a harvest low posted on 10/11 and a rejected rally to 11/15. Separate from any fundamental based views seasonal traders would be looking for low.

January Soybean Chart: The three week downtrend is now being tested. Support on the chart is the harvest low from 10/11 at 1270 ¼. Bulls would like to discuss a move to at least the intraday gap left from the 11/22 close of 1356 ½. After that we have resistance points from the 11/15 high of 1398 ½ then the high from 8/28 at 1420. Also, let's point out there is an an open upside intraday gap to the 8/28 close of 1416 ½.

2022/23 Producer Marketing: Completed 2022/23 marketing year net of $15.08 (USDA seas ave for Central IL $14.20). Previous hedges were on 40% using options (20% on 2/14/22 and 20% on 2/28/22 lifted 7/26 for +7 1/9 cents). Adj. to 100% of the crop nets +3 5/9 cents. Cash sales of 25% on 1/3/22, 25% on 1/17/22, 25% on 2/15 and 25% on 2/23 for net $15.05 via Central IL.

2023/24 Producer Marketing: Profit of 29 cents from two prior hedges on 75% of the crop (22 5/8 cents when brought to 100% of the crop). Curently unhedged and holding cash. 1st hedges on 75% using options lifted for net +60 7/8 cents. (50% sold on 1/19/23 using 1360 Nov puts 78 7/8/sold 1180 puts 17/sold 1500 calls 40 1/8 for net 21 3/4 cents + 25% sold on 2/15/23 using 1360 Nov puts 68/sold 1180 puts 12/sold 1500 calls 35 1/2 for net 20 1/2 cents. All lifted 5/2/23 at 86 1/8 (115/17 1/2/11 3/8 for 50% and 81 ¾ (115/22 1/4/11 3/8) on 25%. 2nd hedges on 75% using options expired 10/27/23 for net -31 7/8 cents. (Sold 6/30/23 on 75% using bought 1240 November puts 47 3/8 and sold 1460 calls 15 ½ for net 31 7/8, expired at 0 on 10/27).

Soybean Summary: Let's get the upside intraday gap filled first. Beyond that point we wonder if we'll have to wait for January before seeing this discussion of 1400. There are still a lot of ups and downs ahead as we near the very important January weather window for Brazil. If the forecast turns back to normal precipitation then you can validly remove all risk premium. For producers we are holding cash beans unhedged...Rich Nelson

Working Trade:

(11/21) Sold March 1300 soybean put 17, risk 36, objective 0. Closed 20 1/4.

Wheat

Rain ahead for the Plains, both directly ahead and in the 11 - 15 day forecast is noted. December Russia wheat export estimates do not yet hold the hoped for declines. Russia announced a ban on durum wheat exports but so far there are no restrictions on the all important milling wheat exports. There were no Chinese buys this morning.

The Interfax news agency reports the Russian goverment has banned all durum wheat exports from now until May 31. This is a relatively small crop for them. The trade will call this disappointing as it was not a ban on the important milling wheat crop.

SovEcon estimated Russia's December wheat exports at 4.2 million tonnes. We call this lightly bearish. It is +0.2 mt from last year. We only have November showing export declines. That was due to weather. The trade still has an expectation of year over year declines ahead.

Rains of 0.2 - 2.5 inches will be seen for Southwest Kansas - Texas. In the 11 - 15 day forecast a bit more is coming. Through last week there was no confirmation of that wholesale forecast change for December - February, above-normal moisture for the Plains.

USDA lowered US ending stocks by 25 million bushels to now 659. This is reasonable given last week's China buys.

March Chicago Wheat Seasonal: Allendale monitors seasonal price factors but does not adhere to them religiously. After a minor peak on October 21 this is generally a bear market into July. For KC the March contract's seasonal break is limited from October 23 to December 8. On the July KC there is a similar break into December 8 then a moderate rally to March 4. That rally is generally a major peak for sharp bear move to new contract lows into July.

Wheat Summary: We are still suggesting a changed view of this wheat market. Separate from China's purchases last week we do agree with the view of this 18 month downtrend in wheat prices coming to an end. It is likely Russian exports will subside in the coming months, even more than they seasonally do. Additionally, a changing view of US interest rates later in 2024 could add support. It is no coincidence that the early 2022 peak in wheat prices coincided with the Federal Reserves interest rate increases. We are not exactly wheat bulls. We can say we are no longer bears...Rich Nelson

Trade Recommendation:

(11/17) Stand aside.