Corn, soybeans, and wheat all started the week under pressure as much of the fundamental support the market has been using shifted to a more neutral bias over the weekend. Widespread rains moved through Brazil over the weekend and planters are now rolling across much of the country. While overall plantings remain well below normal, we may see totals catch up rather quickly. Improved weather for the US and Black Sea also weighed on trade today. Investors exited several markets today which put additional pressure on the commodities. We did see flash sales today with 120,700 metric tons of soybeans to an unknown and a meal sale of 135,000 metric tons to the Philippines which gave the soy complex support.
We have seen a surge in Brazil soybean sales this marketing year compared to average. A reported 55% of the Brazilian soybean crop has already been sold, which is not surprising given recent market appreciation. Sales have stalled in recent weeks though as concerns over production and soybean availability have risen. Many buyers in Brazil do not want to extend their coverage either as they are worried over the cost of storage for the remainder of the marketing year.
Trade is keeping a close eye on how much fall tillage is completed this year. While a considerable amount of this has been done in the heart of the Corn Belt, the fringe areas are again struggling to get field work completed. The recent shift to cold, wet patterns in these regions is again stalling harvest and likely going to limit the amount of fall work that can be completed. This is not as bad as last year but could again have an impact on acres next spring.
Any basis pressure that came with this year’s harvest has been erased in much of the Corn Belt. Country movement came to a halt in regions where harvest has concluded, and buyers are already struggling to secure coverage. Buyers are now looking at winter months and trying to buy bushels in that time frame as well. Given this demand and need for coverage, and significant basis declines are unlikely at this time.
This strong basis trend is not being welcomed by all, however. The most concern is coming from the ethanol industry where strong basis values have dropped processing margins into negative territory. While none have done so yet, if this trend continues, we will likely see plants again start to slow production. The firm basis on corn is also deterring feed usage with more consumers shifting to wheat as a feed ingredient.
More interest is being placed on Chinese corn interest from the global market. China has indicated it will be increasing its corn imports from all sources, including the US. The immediate reaction to this was it would be supportive for corn futures. One concern with this is that the increased demand will give interior basis even more strength and further weigh on domestic usage.
China has seen a considerable rebuilding of its domestic hog herd this past year. China currently has 370 million hogs in its system which is just 16% less than prior to the African Swine Fever outbreak. China wants to cover at least 80% of its pork demand with domestic production and this volume puts them on track to reach it. This is a primary reason for China to claim its pork reserves are adequate heading into the Lunar New Year, and also behind the recent cancellations of recent purchases.
Export loadings for the week ending October 22nd favored soybeans over the grains. For the week the US inspected 97.9 million bu of soybeans for export which was well above the volume needed to reach USDA yearly projections. Corn inspections fell short of the needed amount at 25 million bu, as did wheat with 13.4 million bu.
The October cattle on feed report was released last Friday and does raise hopes for additional feed grain demand. A record 11.7 million head of cattle were on feed on October 1st, a 4% increase from a year ago. This increase was from a 6% yearly increase in placements at 2.23 million head. We did see a 6% increase to marketings in September as well to a 1.85 million head total.
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