The grains put in a strong performance the first week of November with most of the focus shifting back to weather concerns. The last week of October had the grains on the defense with most of the selling tied improving fundamentals, primarily weather. Rain had fallen or was falling in the Black Sea region, the U.S. Southern Plains had picked up moisture, and it was raining in northern Brazil. And to top all that off, uncertainty over the upcoming U.S. election and increasing COVID-19 cases added to the fun.
But all that changed the first week of November. A change in forecasts for the Black Sea region and the U.S. Southern Plains helped wheat to push higher to start the week while corn and soybeans struggled because of a lack of Chinese buying. China has been visibly absent from the U.S. export market over the past few weeks. China was an aggressive buyer of U.S. soybeans and corn earlier this fall but it appears they have now covered most of their short-term needs as they have been sitting on the sidelines. But exports have not faltered as other countries have stepped up. It almost seems like China has been sitting on the sidelines waiting to see election results.
The Nov. 2 Crop Progress report added fuel to the fire as harvest progress for corn and soybeans was slower than expected. The Crop Progress report estimated corn harvest progress at 82% complete, 1% lower than expected by the trade. Progress continued to be a little slower than expected as only 10% of the crop was harvested last week. Soybean harvest was even slower. Harvest progress came in at 87% complete, 4% slower than expected by the trade. Only 4% of the nation’s soybean crop was harvested last week, showing that the snow and rain had producers switching over to harvest corn.
On the winter wheat front, 89% of the crop is planted, 2% less than expected by the trade. In the past week, only 4% of the crop got planted, as rain and snow in the Southern Plains also slowed planting progress. But the much-needed moisture was not enough to make a big dent in the crop ratings. Winter wheat’s crop condition rating improved 2% to 43% good/excellent, 2% less than expected by the trade. This shows that a lot more moisture is needed in the Southern Plains to help this crop.
Traders were busy positioning themselves ahead of the election. Most were preparing for a repeat of 2016, when the market traded in a wide range in the overnight session only to recover and trade with sharp gains in the day session. The expected volatility was enough that most clearing firms increased margin requirements for some markets to 120% of exchange requested rates. Traders were concerned about the control of the Senate versus the presidential race. The control of the Senate will really be the deciding factor on what happens in Washington over the next two to four years. The House is expected to stay under Democrat control (but the Democrats did lose a few seats), so if the Republicans lose the Senate but keep the presidency, then gridlock continues as the legislative branch will see a lot of bills get vetoed. If the Senate stays Republican (it looks like the Republicans will hold a one seat advantage) and the president is Democrat, gridlock continues. At the time of this writing, Biden was leading in the electoral votes and was one state away from clinching 270 electoral votes.
The market is fine with the Senate staying in Republican control and the House and presidency in Democratic control. What this translates into is maybe a little more gridlock in Washington, but it also means no new Green Deal, no major change in energy except maybe a little more shift to renewable fuels, no new taxes, and a small stimulus package. This was everything the market was hoping for. The market does not like uncertainty, though, and if it takes time to ratify the results, traders will get nervous.
Additional concern is coming from the surge in COVID-19 cases around the world. Not only is the U.S. setting records on the number of new cases but so is the rest of the world. This has caused some countries to go back into lockdown, which will affect demand. The market is also struggling with the lack of progress on a stimulus package. The rumor now is Senate Leader Mitch McConnell has agreed to entertain a stimulus package in the lame duck session. This should help to bring both sides to the table. The end result will not be a $2.2 trillion stimulus, but it might be close to $1 trillion when completed. The country is bleeding cash, and some sort of stimulus is needed to bridge the gap from now to when we have a vaccine for a lot of companies.
Wheat exports continue to be lackluster at best but are starting to show signs of improvement. Russia is still the leader in exports, but their dominancy may be tested this year due to production concerns. Last week’s wheat export shipments pace was estimated at 10.5 million bushels and sales were estimated at 21.9 million bushels. After 22 weeks, wheat shipments were at 43% of USDA’s expectations versus 41% last year while sales are at 63% of expectations versus 57% last year.
Corn seemed to be content playing the follower last week. Although there was friendly news for corn, most of the week’s news was already known. Weather forecasts calling for Brazil and Argentina to see hot dry conditions over the next two weeks added support. There are reports planting has stopped in some regions again because of a lack of moisture. And the expectations of increased corn demand added support as most are looking for China and Brazil to buy U.S. corn in an attempt to control domestic prices. A Chinese official was quoted as saying China will need to import as much as 17 million metric tons of corn just to balance out needs. And at this point, it stands to reason to buy U.S. corn as we are the cheapest in the world. Price of corn in China is over $9 while Brazil’s corn price is at $6.13 -- up 28% in just October.
Last week’s ethanol production was up 20,000 barrels per day to 961,000 barrels per day while stocks were just slightly higher.
Last week’s corn export shipments pace was estimated at 28.4 million bushels and sales were at a marketing year high of 102.8 million bushels. After nine weeks, corn shipments were at 12% of USDA’s expectations versus 8% last year while sales are at 56% of expectations vs 26% last year.
Soybeans led the market this week on forecasts calling for hot, dry conditions to return to Brazil and Argentina. Early in the week, reports had planting progress kicking into high gear in Brazil as producers were reportedly planting about 1 million hector per day. This puts the current planting progress estimates at 35% complete versus 16% last week and 39% average. But by the end of the week, planters were starting to be parked due to dry conditions. Even with that news, a Brazilian analyst increased their estimate of Brazil’s soybean crop from 132.2 million metric tons to 133.5 million metric tons. USDA is currently estimating 133 million metric tons.
There were no soybean export sales announcements this week, but on Thursday, Nov. 5, USDA did report a sale of 33,000 metric tons of soybean oil to India, their first purchase of any U.S. soybean oil since 2016-17.
Last week’s soybean export shipments pace was estimated at 76.5 million bushels and sales were at 56.2 million bushels. After nine weeks, soybean shipments were at 28% of USDA’s expectations versus 21% last year while sales are at 81% of expectations versus 46% last year.
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