The the week gets underway with strength in soybeans and weakness in corn/wheat
Grain futures are mixed this morning with weakness in corn and wheat, a follow-through from last Friday’s close, while soybeans push higher as S Brazil's weather remains too wet in the South while the Central and North are too dry for the next 9 days. This is of concern with Brazil’s soybean crop, around 57% planted vs 72% on average. The EU weather model offers the possibility for rain in the 10–15-day Brazilian forecast, but the GFS is trending drier. The EU model has been more consistent in validating rains in S Brazil but missing the dryness in the north. New weather model releases will be watched closely this week.
India’s Solvent Extractor’s Association estimates palm oil imports in the year ending Oct 31, 2023, were up +24% and a record high. Sunflower imports were up +54% and a record, while soyoil imports were down -12%.
It’s anticipated with the government back to work this morning, we will get a morning announcement of 300-500,000 MTs of soybeans sold to China last week. This sale would push this round of Chinese buying of US soybeans to three MMTs. Tears will also be watching to see if the US government closes next weekend on the House Budgetary dispute while Argentina on Sunday will elect a new president will be installed in mid-December.
Over the weekend, extreme heat and dry weather occurred in the northern two-thirds of Brazil, with high temperatures in the mid-90s to lower 100s. Several readings set daily records across Paraguay and motto Grasso do Sul in Brazil with highs in the 106-110°. This heat/dryness has produced acute crop stress. The potent storm system rolled through southern Brazil on Saturday/Sunday with rainfall totals of .4-3.00” of rainfall. High temperatures in the southern third of Brazil range from 70s to lower 90s under cloud cover.
It has been uncharacteristically hot and dry for Northern and Central Brazil for November. This high-pressure Ridge holds across Northern Brazil, which fans the hot and dry weather, while a low-pressure trough and fast-moving jet stream promotes excessive rainfall in the South. The Ridge supposedly relaxes nine days out and offers some widely scattered rain in the 10-15 day period, but it is not the normal monsoonal flow. Total rainfall in this time window is guessed at .5-2.00 when the average rainfall for November should be 6 inches plus. The drought in Brazil will start to garner market attention at the end of the month if dryness does not show rectification. December typically brings 8 inches of rain for N Brazil.
Last week’s steep losses in live and feeder cattle futures have become quite the talk, as December live cattle last week fell almost $10.00 and January feeder cattle were down $13.00 on massive fund liquidation. It even pulled negotiated cash trade sharply lower last week while the dressed trade was $5 lower at $287. Live sales in the IA/MN region lost $6 and $179, while dressed sales were $5-9 lower at $283-287. This coming week should bring about the end of the massive liquidation as the cash basis on the five-area average rose to more than $6 for the week, the highest since late July and a record for early November. The five-area average prices are typically $1-3 under the CME. The market length by index funds is heavily underwater, and that liquidation looks to finish this week. Bank-induced forced hedging on large lots was prevalent last week.