Corn pushes to new lows for the long term downtrend.

Grains

Brazil's weather will hold more importance as we get into reproduction for the soybean crop and 1st crop of corn in January/February. The current one week forecast still holds below normal rains for the closely-watched Center/West. The two week now shows normal rains with some areas lightly above normal. The South will see normal to below-normal for week one and mostly normal for week two.

The next two weeks are forecast for mostly normal rains in Argentina. Some areas will see lightly above normal. We have zero concern with Argentine yields at this time. As a reminder, strong El Nino years like this generally bring above-normal moisture and above trend yields. If we see above normal rains consistently we will up our forecast.

Corn

A push to new lows and a new lowest close was noted for this long term downtrend. March is now 104 ½ cents from its high this past July. A short term period of normal rains is now seen for Brazil's Center/West region. Though there are clear concern over second crop planting next month the trade is hesitant to say it will be enough to change the US balance sheet.

Ethanol production the prior week, 1.071 million barrels per day, was +4.1% from one year ago. With our current year to date pace at +4.0% the remainder of the year needs to run at least +2.5% to meet USDA's goal. Only two of the past 10 weeks have met that goal. General gasoline demand this past week was +0.5% from last year. Since September 1 year to date demand is +0.3%.

Chinese president, Xi Jinping, remarked at the annual Central Rural Work Conference that the government will focus on increasing yields. Part of this will be the approval of more GMO seed varieties.

Weekly export sales from USDA's Foreign Agricultural Service will be out tomorrow morning. This covers sales made Friday 12/8 - Thursday 12/14. The trade expects 800,000 - 1,500,000 tonnes for this report. This specific week is usually a big one before a seasonal dip over about four weeks. This range of estimates, compared with the five year average of 1,703,182, would be from -53% to -12%. Of the three main grain/oilseed products we monitor it has been corn that has been most consistent. Over 11 prior weeks sales have been astounding at +43% vs. the five year average. In addition, the US still holds a price advantage over Brazil.

There is more talk of concern for Brazil's corn crop. And it is coming from Brazilian sources. There were three concerning stories on Monday and one on Tuesday. Tuesday's story was that the Brazilian pork and poultry producer organization, ABPA, warned of higher costs for domestic corn in 2024. They also raised the possibility of increased imports from Paraguay, Argentina or even the US. The president of the organization said production would decline from the 2024 harvest vs. 2023. Tuesday's chart shown in this commentary showed Brazil's interior cash corn price had risen 57% rally from lows in July. As you know US corn prices are driven from a significant extent on the US balance sheet. Just because their price is rallying does not mean our price had to.

The argument for big imports in Brazil is wrong from two fronts. It is very early in the growing season to make strong high confidence claims about production. Also, Brazil does not exactly import much when they have crop problems. Over seven prior years, yes including crop problems, their imports ranged from 0.9 - 2.8 million tonnes. USDA's current “all clear” balance sheet suggests 1.2. This ABPA story is more psychological than solid at this time.

There were three positive Brazil stories out on Monday. The first was that a director with a Brazilian company called VLI suggested agribusiness is expecting problems from general Brazilian dryness in the Center/West. The official with this railway and port terminal firm suggested the corn harvest, in the Northern region, would fall 15%. The second was that US fertilizer producer, Mosaic, expects Brazil's 2nd crop corn production to drop by 12%, 12.7 million tonnes. This is just under Conab's current view. The company's vice-president of market and strategic analysis reports, "I would call it a very plausible downside scenario because of how late the crop's going to go in, how dry it currently is and how it's likely that rains will shut down before that safrinha corn matures". The third was that an official at another fertilizer producer, Oslo-based Yara's Brazil unit, suggests farmers in the Center/West region only have 60% of fertilizer needs booked. That is down from a normal amount of 80% by this point. This would suggest some hesitancy with the coming large 2nd crop corn planting next month.

Though there is concern over this coming 2nd crop corn planting in Brazil it is not yet time to officially hit production numbers. USDA this month left their view unchanged from last at 129.0 million tonnes. Conab, which already started out with a lower estimate than USDA, lowered theirs from 119.066 to 118.528.

Last week Argentina devalued the peso against the US dollar by more than 50%. So far this is no confirmation of the government's plan to raise the current 12% corn export tariff to 15%. The peso devaluation more than offsets the light coming increase in the export tariff.

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 has ending stocks at 2.131 billion. Export increases are likely still ahead. However, corn for ethanol needs to be lowered. 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. A new low and lowest close made today, for this long term downtrend, are bearish issues. 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 must disclose the bull stories coming out of Brazil. But we must also point out the US market has yet to change. New lows were made and with confidence today. 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 9 1/2.

Soybeans

A period of normal rains for week two of Brazil's Center/West forecast helped push soybeans to a new low for this four week long downtrend. This would be the third lowest close of this four week downtrend. Additionally, the trade notes this week's overnight export sales appear low after three days.

Of the three days this week there is only one overnight soybean export sale, 132,000 tonnes to Unknown.

Chinese president, Xi Jinping, remarked at the annual Central Rural Work Conference that the government will focus on increasing yields. Part of this will be the approval of more GMO seed varieties.

A UK based subsidiary of Brazil's largest bank, Itau BBA, lowered its Brazil soybean production view down from 158 million tonnes on 12/5 to now 153. This puts them at the lowest of private analysts. All others range from 158.23 -

Weekly export sales tomorrow are expected to show 1,500,000 - 2,500,000 tonnes for soybeans. These numbers should be big considering overnight sales, those +100,000 tonnes that require immediate reporting, totaled 1,436,500 tonnes last week. The trade estimate should be 1,800,000 at the low end and up to 2,500,000. It must be pointed out this specific week is usually a big one. This specific report should be the last of the big seasonal sales. We are getting past the seasonal time to sell US soybeans. Every week after this typically runs under 1,000,000. The trade estimates for this report, compared with the large 1,874,274 five year average for this week, would be -20% to +33%. The prior four weeks of sales have run +19%.

Last week Argentina devalued the peso against the US dollar by more than 50%. This week their government said they would try to raise export tariffs from 31% to 33% for soymeal and soyoil exports. So far, the goverment says no change to soybeans which are currently at 33%.

A director with a Brazilian company called VLI suggested agribusiness is expecting problems from general Brazilian dryness in the Center/West. The official with this railway and port terminal firm suggested soybean production, in the Northern region, would fall to under 5%.

Last week USDA lowered their Brazil soybean production view from 163.0 to 161.0. Conab lowered their prior 162.42 view to 160.77. Bulls would be disappointed by the lack of serious declines so far. We have no problem with these minimal declines though. They are completely reasonable given that yields are not really determined by weather during the vegetative growth stage. Weather specifically during the reproductive phase, January/early-February, is the key yield determinant. Allendale's current worst case scenario has only been -4% so far, 156.5. Yes, we do expect that number to decline. But we can't do it until we see next month's weather show.

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.

USDA has ending stocks at 245. We can now prove their domestic crush estimate is low by 10 - 20 million bushels. We cannot really jump export sales much at all. 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.

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.

March Soybean Chart: The general multi-month trend for soybeans is sideways. But the now four week downtrend from November highs remains in place. The downtrend still has not been challenged. Tomorrow it is at 1338. Instead, we just broke the 12/7 low of 1311 ¾. The only remaining resistance is the 10/11 major low at 1282 ½. If we can break upside resistance bulls would like to discuss a move to at least the intraday gap left from the 11/22 close of 1374 ¼. After that we have resistance from the 11/15 high of 1410 ¾ then others.

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: On the balance sheet we can prove USDA needs to lower their stock number a little, and prices should be supported over 1295, but the argument needed for a rally is not quite solid. The trade needs to agree on both lower Brazil production and also higher purchases from the US. The second of those two arguments is not solid at this time. We have what will be five weeks of good sales. But there are concerns with low shipments, a price disadvantage with Brazil and the Mississippi River. It is not time for bulls to abandon higher prices. That story still has time to play out. But will will agree the market's behavoir here, on just one week of normal rains ahead, shows more bear confidence than we would expect. 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 29 ¼.

Wheat

Moderately lower trade was noted. The market has realized big world buyers have been stepping up in the past two weeks. However, concerns over the Argentine and Australian harvests, and the US winter weather, have eased. Interest in the planting issues for France have yet to take hold.

Argus Media claims winter wheat planting for the 2024 summer harvest would fall 11% from prior to only 4.24 million hectares. Heavy rains during planting may reduce the total to the lowest since 2000. The government's most recent view is for a 5.1% reduction.

Wheat export sales tomorrow are expected 200,000 - 600,000 tonnes. This would run -58% to +26% compared with the five year average. The prior 20 weeks, with a lot of variability, averaged +9%.

Egypt's state grain buying agency announced a 480,000 tonne purchase of Russian wheat for February delivery. Prior recent purchases were 420,000 tonnes on 12/7 and 180,000 on 12/5. The last one before that was 470,000 on 10/12.

The current one and two week US Plains weather forecast is normal to above normal moisture. It appears as though the Climate Prediction Center's call for above normal moisture in December - February is coming true.

Saudi Arabia's wheat purchase on Monday, from a tender last week of 715,000 tonnes of milling product, ended with a large 1.353 million tonne actual purchase. In their prior 11/6 purchase the total was said to be 710,000.

Last week Argentina devalued the peso against the US dollar by more than 50%. The government wants to raise the current 12% wheat export tariff to 15%.

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.