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Editor’s note: Catch Randy Martinson every Friday after markets close on the
Agweek Market Wrap
at agweek.com.
It has been a couple weeks since our last article so to take a look back on how the grains performed might be a bit cruel, but needed to help understand where the market is now. The third week of November started by posting solid gains in most months but then slowly faded those gains to close the week pretty much lower across the board, except for corn, which closed with small gains. Wheat was the worst performer while soybeans posted small losses.
Strong demand helped support the grains early as China was in and bought 204,000 metric tons of U.S. soybeans. An unknown destination was in and bought 220,000 metric tons of U.S. soybeans later in the week. Corn had the most export interest with Mexico in buying two different jags of corn, one for 144,000 metric tons and the other for 102,000 metric tons. Japan was in and bought 102,000 metric tons of U.S. corn as well.
Soybeans were also supported by weather forecasts for Brazil. Hot and dry conditions continued to plague northern Brazil while heavy rains persist in southern Brazil. Both are causing a slow down in planting progress and will likely result in less second crop corn acres.
Dr. Michael Cordonnier released his latest production estimates for South America. His estimates for Brazil were slightly friendly and confirm some of the issues that have started to be reported. For soybeans, he lowered his production estimate by 2 million metric tons to 158 million metric tons. He also lowered his corn production estimate 2 million metric tons to 121 million metric tons. Dr. Cordonnier left both of his production estimates for Argentina unchanged with soybeans at 50 million metric tons while corn is at 52 million metric tons.
The October NOPA crush estimate continued to show strong crush demand as once again the crush pace for soybeans was at all-time record high of 189.8 million bushels versus expectation of 189.1 million bushels.
The third week of November’s Crop Progress report was a little friendly as the report put harvest progress slightly below expectations. Corn harvest was estimated at 88% complete versus 86% average. This was 2% below expectations. Soybean harvest was estimated at 95% complete versus 91% average. This was 1% below expectations. Sunflower harvest is 68% in the bin versus 72% average. Winter wheat planting is estimated at 93% complete versus 93% average. This was 2% below expectations. And winter wheat crop conditions dropped 3% to 47% good/excellent. This was 3% lower than expected. The biggest changes over the past week, Montana’s crop rating dropped 12% while Texas’ dropped 4%.
The fourth week of November was a short week due to the Thanksgiving Day holiday. There is a saying in the trading world that whoever feasts at Thanksgiving gets nothing for Christmas. Well, if that is the case, the month of December should be good for the commodities as although the first part of the short week was not all that bad for the markets, Black Friday was.
Wheat continued to take the path of least resistance. Chicago and Kansas City traded to new contract lows while Minneapolis wheat fought hard to hold above recent lows. Poor demand and expectations for improving conditions for the U.S. winter wheat crop pressured wheat. Rumors that Ukraine has a long list of vessels lining up to move grain out the Black Sea region now that there is reasonable insurance available for vessels to purchase added pressure.
Brazil is helping to support corn and soybeans.
First off, planting progress continues to be slow. As of Nov. 16, Argentina was reporting soybean planting progress at 19% complete versus 26% average. Corn planting was estimated at 34% complete versus 44% average. As of Nov. 17, Brazil had 68% of their soybeans planted versus 78% average. First corn crop planting was estimated at 86% complete versus 88% average.
The slow planting progress in Brazil is starting to cause concern for the potential acreage for the second corn crop in Brazil. The later the planting goes for soybeans the less likely producers will take the risk of following up with the second crop corn. This has the potential to drastically reduce production of the second corn crop in Brazil, which is where most of Brazil’s exportable corn bushels comes from.
Soybeans were higher to start the short week due to reports of disappointing weekend rains in Brazil. Reports of 0.5 to 2 inch rains were reported, but the northern region did not see much relief. At this point most analysts have already reduced the crop to be below 160 million metric tons, 4 million metric tons off its peak.
The fourth week of November’s Crop Progress did not bring any new news to the market. Soybean harvest has wrapped up across the U.S. for the most part and corn harvest is fast approaching completion. As of Nov. 19, 93% of the nation’s corn was harvested versus 88% the previous week and versus 91% average. Sorghum harvest is 96% completed versus 92% last week and 92% average. Sunflower harvest is the only harvest that is running behind as 78% of the nation’s sunflowers are in the bin versus 68% last week and 78% average.
Winter wheat continues to see slow planting progress as only 95% of the nation’s crop has been planted versus 93% last week and 96% average. Emergence is at 87% versus 85% average. The crop condition rating for winter wheat improved 1% to 48% good/excellent, 35% fair, and 17% poor/very poor. The largest change for the week came in Illinois, which improved 9% while Texas also saw a 5% improvement. Oklahoma declined 5%.
Informa released their updated acreage estimate for 2024 acreage. They are projecting all wheat acreage at 48.9 million versus 49.6 million last year. Winter wheat acres are estimated at 36.2 million versus 36.7 million last year. Other spring wheat acreage is estimated at 11 million versus 11.2 million last year. Corn did get some help from Informa’s 2024 acreage estimate. They are estimating corn acreage at 91.4 million versus 94.9 million last year. But soybeans were slightly pressured by Informa’s 2024 acreage estimate. They are estimating soybeans acreage at 87.2 million versus 83.6 million last year.
Although the fourth week of November was a short week, there were multiple export sales reports. To start the week, Mexico was in and bought 104,000 metric tons of corn. That was followed up on Wednesday with reports that China was in and bought 110,000 metric tons of soft red winter wheat while an unknown destination bought 128,000 metric tons of U.S. corn. On Friday there were reports of China buying 129,000 metric tons of soybeans while an unknown destination bought 323,000 metric tons of soybeans.
Cattle put in a mixed performance over the last two weeks of November with the third week of the month ending with small gains in the live cattle market while feeder cattle spilled slightly lower in the expiring November contract but posting gains in the January contract. But the fourth week of November had the wheels coming off the cattle market as heavy selling pressure dominated both classes.
Although the November Cattle on Feed report was neutral to the cattle due to most estimates coming in close to expectations, the numbers from the October report still haunted traders. The rumor that the higher placement estimate from the October report is a signal of herd expansion seems to be a bit overdone as there are no other indicators showing herd expansion. The fact that Canada’s imports were up 36% in September and Mexico’s imports increased 138% in September over the previous year might be more of the story than herd expansion.
The end of October’s Cold Storage report might have more to do with the selloff than anything as it showed a 5% increase in beef in freezers over the previous month. But stocks are still 13% below last year and 10% below the 5-year average.
To say cattle are oversold and in need of a technical correction is an understatement. But as long as the funds want to unload positions, it is going to be hard for cattle to stage anything more than a minor retracement.
“The risk of loss in trading futures and/or options is substantial and each investor and/or trader must consider whether this is a suitable investment. Past performance, whether actual or indicated by simulated historical tests of strategies, is not indicative of future results.”
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