November soybean crushing exceeds expectations.

Grains

The Federal Reserve policy making board ended its last meeting of 2023 with no change in short term rates. That was the trade expectation. The focus for the trade today was on plans for 2024. 17 of 19 voting members of the Federal Open Market Committee expected lower interest rates by the end of 2024. The expectation is the current policy of 5.25% - 5.50% short term interest rates is expected to drop by -0.75% over three separate declines in 2024. The general financial trade will view this as a confirmation of the current view of a “soft landing”.

As we inch closer to that all-important January/February weather window for Brazil's soybean and 1st crop corn yield determination period there is no real change in the forecast ahead from current conditions. This fits in with Drew's latest long term forecast released back on December 1. For week one ahead clearly below normal rains area seen for the dry Center/West. Week two is normal to lightly below normal for that region. Allendale is assuming some level of lightly below trend yields for this region. For the wet South the next two weeks may bring a little relief, lightly below normal rains.

The forecast for Argentine rains remains. We'll bounce from above normal rains in the next four days to normal after. 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

Corn ended the week slightly lower. Weekly US corn export sales are great. But they are offset by problems with ethanol production. Argentina will see above-normal rains for the period through Monday. So far, no one is really lowering Brazilian corn production.

Safras e Mercados estimated Brazil's corn crop at 129.16 million tonnes. This implies no real problems yet. USDA this month left their view unchanged from last at 129.0. Conab lowered theirs from 119.066 to 118.528. USDA and Conab remain off for both the completed 2023 harvest and this coming 2024. But the general message is still the same. No one is really lowering their starting estimates much. Over the past 30 days the private trade is 119.3 - 128.7 depending on which government number they were starting from. We do not view the 112.51 guess from Patria Agronegocious on 11/30 as realistic.

The Biden administration confirmed they will use a method for figuring ethanol's benefit over traditional airline fuel that is closer to the ethanol industry's view when figuring coming Sustainable Airline Fuel policy.

The US holds a significant pricing advantage with corn export bids over Brazil, $0.78 to $0.41 per bushel.

Weekly export sales over 11 weeks have been great at +43% vs. the five year average. US export prices have an advantage over BZL. If sales run even with last year through August we'll beat USDA's current goal by 25 million bushels. A +10% pace pushes that to 125. A 20% pace would increase to 226 over. Allendale is +50 million bushels vs. USDA's whole-year goal.

Wednesday's weekly ethanol usage, +1.2% year/year for last week's activity, was better than prior weeks. It is still under the general +2.1% pace that is needed to meet USDA's whole-year hopes. If the remainder of the year runs +1.0% we'll miss USDA's goal by 97 million bushels. If they run even with last year the miss will be 149. Allendale currently has a miss of 25 on our books.

This 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%.

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. Main support is the main low from 11/29, 470 ½.

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 16.

Soybeans

Including today's trade soybeans will end the week with moderate gains. This week saw positive US export sales and domestic crush. Argentina will see rains this weekend and Brazil is not yet a market mover.

This week wrapped up with a much larger Chinese/Unknown purchase than expected. While there was the big 2.983 million tonne overnight purchase in the first week of November, 3.853 mt total that week, the next four saw moderate 393,000 - 587,300 sales. Including this morning's two sales of 134,000 to Chinese buyers and 447,500 to Unknown buyers this week will wrap up with 1.437 million tonnes. We should have 2.0 - 3.0 million tonnes in total sales for next Thursday's weekly report. That will be over the strong 1.874 mt five year average for that specific week. We will now have six weeks in a row of a sharply changed export sales pattern.

The National Oilseed Processors Association released its estimate for domestic soybean crushing for member plants in November. The trade monitors this report closely at it covers 95% of US crushing and is released before USDA's own all-US report. In November member plants processed 189.083 million bushels of soybeans. This was a full 5.5% over last year. It was also a bit over the 185.980 trade estimate. This helps make up for the first two months of the year at +4.6% and +2.9% year/year. Remember, USDA's 2.300 billion bushel goal for the year is +4.0%. We have a pace that needs to be maintained. Today's report brings the year to date pace to +4.3% year/year. We are now ahead of USDA's whole-year goal and can dip slightly to +3.9% the remainder of the year. Given the fact we have new plants coming online as the year progresses this should not be a problem. Allendale is currently +10 million bushesl vs. USDA's goal. That would be made from a conservative +4.5% run the remainder of the year.

There has been little change in US/BZL soybean export pricing. Brazil holds a moderate short term advantage and a significant advantage for extended delivery, $0.57 to $1.09 per bushel.

The Mississippi River at St. Louis is currently -1.3 feet stage height. The forecast suggests a decline to -4.1 by the 27th. This is not as bad as the -5.0 forecast noted last week. The 2012 drought year low saw St. Louis at -4.4.

Weekly export sales last week were -4% from the five year average. Brazil’s clear price advantage remains. Allendale is +10 million bushels over USDA's whole-year view. We would increase this further if we did not have the Brazilian pricing and Mississippi River issues.

This week Argentina devalued the peso against the US dollar by more than 50%. Their government is not seeking increases to soybean, soymeal or soyoil export tariffs.

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.

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 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. There is a three week downtrend still in place. Support on the chart is at two places, the recent 12/7 low of 1311 ¾ and the 10/11 major low at 1282 ½. 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: Let's get the upside intraday gap filled. 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 26 5/8.

Wheat

Wheat ended the week lower. Chicago's loss was minimal vs. KC. Chinese buyers have favored soft red. The two week weather forecast has turned beneficial for the US Plains with above normal moisture.

March Chicago advantaged to its best price against March KC since July 2022.

USDA reported 1,490,470 tonnes for last week’s wheat export sales. Over 20 weeks through the run is +9% vs. average. This week, within that 20 week count, was +162% vs. average. Allendale is +20 million bushels vs. USDA.

China new has 2.2 million tonnes of US wheat procured. Their total imports will run 10 - 12 mt for the year. This 2.2 pace is the third best of the past 15 years.

This 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%.

Saudi Arabia's state grain buyer has tendered for 715,000 tonnes of milling wheat for February - May delivery. In their prior 11/6 purchase the total was said to be 710,000.

USDA recently lowered US ending stocks for this old crop 2023/24 marketing year by 25 million bushels to now 659. This is reasonable given recent 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.