The overnight grain trade ended with mixed one-penny movements.
The markets are still absorbing yesterday’s negatively construed report data as the USDA November report data showed a corn yield of 174.9 bpa and a soybean yield of 49.9 bpa. This was the largest “bearish surprise” for corn in the November Report in six years. Market sentiment going in the report was so bearish that corn is not just hovering at the September low. Soybeans are not that far off of last year’s November report when yield was estimated at 50.2 bpa. Historically this is a good time to hold beans vs corn as soy futures tend to rise while corn futures tend to fall.
The December crop report will only carry updates for supply and demand and a guess on South America’s crop. The final production number is scheduled for January. If the government is in shutdown mode due to budget impasses, then we will not have a December report and possibly a January final number. From here forward it’s all going to be about the weather that has the most significance on day-to-day movements.
Searing heat is now forecasted across the northern two-thirds of Brazil for another 10-11 days with record temperatures being set in the 104-110° range. Numerous days will be in the 100s. The 12-15 day forecast brings the prospects of a potential .50-1.00 inch range occurring at the end of the month. November is a month that typically brings 4 inches of rainfall to Mato Grosso. Keep in mind that this tropical area is used to heavy rains next to a rainforest to the northwest. The current weather pattern is not what is expected for tropical areas. Also, the soils are sandy so rain has to occur in a timely manner to even think of trendline yield potential.
Following Russia’s attack on a Liberia-flagged civilian vessel in the Black Sea, shipping brokers say that freight costs have risen for the “alternative” shipping corridor. The attack has raised the cost of shipping Ukraine cargoes by $18-22/MT according to brokers. Several shipowners have decided to avoid shipping Ukraine cargoes on the new risk. A second Russian attack on a private cargo vessel will confirm that it is a deliberate attempt and Ukraine’s nascent Black Sea shipping corridor.
Yesterday live and feeder cattle futures put in a headline day with the collapse of near limit down for feeder cattle while live cattle were down $4-5. The fund liquidation accelerated on news of the sharply lower cash along with now bankers forcing large lots to protect the banks equity with hedges that cascaded the event. Yesterday negotiated fed trade kicked off in Nebraska down $3.50 for the week at $181.50, while dressed sales were $5 lower at $287. Live sales in IA/MN were $5 lower at $8 zero, while dressed sales were nearly $7 lower at $285. Sales in Kansas were $5 lower at $1 80, and that Texas trade also was down $4 at $181.
Yesterday’s WASDE report made few changes to the 2023 cattle and beef outlook but raised the 2024 production forecast by 2%. Quarterly average prices were lowered by $1-2 to $182-185. The second quarter’s forecast was down $1 at $184. Historically, the November forecast has been too high 51% on time by an average of $6, and to low 45% of the time by an average of $7. The CME cash equivalent of Thursday’s close was $4 under the forecast. Fund liquidation continues to cascade, with the board usually getting worse before it gets better in this kind of environment.