Morning Comments November 16, 2021

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Soybeans and meal were back at it again yesterday, trading higher and pushing meal over $65/ton above its recent lows, while soybeans are trading back up to some pretty stout resistance levels. Corn and wheat spent much of the day trading sideways, though wheat caught a bid into the close.

When looking at the meal market, it is almost as though folks had forgotten meal has incredible value in animal rations all around the world. The move higher in oil had been everyone's focus for so long we saw an incredible build of long oil/short meal spread trades put on, as folks began to believe we will crush for oil, not meal going forward.

An old timer once said, "never trust a soy oil-led rally" and here we are having trusted one.

In reality though, meal demand could see some continued strength as there is only around half the canola coming out of Canada we saw a year ago, and the lysine issue we talked about yesterday isn't going away tomorrow. 

Though they aren't the same, one must look to Minneapolis wheat as a bit of a cautionary tale though as we've seen that market do some damage to outside traders, trading a nearly 50 cent range yesterday alone. 

It is interesting to note that some substantial outside buying interest has come into both markets, with 36% of Minneapolis wheat's open interest being made up of spec traders. Once you get up to nearly half of your investors not actually trading the physical product, things can get a little hairy when they decide to leave. Funds were big buyers of meal according to the commitment of traders’ report showing positions going into the start of the week last week, with a strong continuation of buying happening post-report.

Speaking of crush, we saw the National Oilseed Processor Association (NOPA) report released yesterday. After a lackluster crush figure from September, it was imperative we see a big uptick in crush for October and we did. At 183.99 million bushels crushed, October crush was nearly a record, coming in just slightly below last year's all-time record and slightly higher than expectations. 

Meal yields have fallen off according to yesterday's figures, while oil yields have been solid. Soy oil stocks were the highest we've seen since October 2012, with meal production up from last month. Overall, it was nothing the market wasn't expecting, though the large supplies of soy oil may start to become concerning if we see the build continue.

In addition to NOPA figures, we got updated export inspections. Bean inspections were large, with last week's numbers bumped up slightly. Based on recent business we've been seeing, it's likely we'll continue to see reasonably decent soybean shipments through the end of the year, though we are still lagging both last year and the 5-year average when it comes to percentage of USDA export projections shipped.

Corn exports were better than what we've been seeing the last few weeks, but still lagging what we need to ship each week significantly. We shipped just over 33 million bushels last week, we need to average around 54 million a week to meet USDA export projections.

Interesting to note, Reuters confirmed a trade conversation from a week ago in an article released Sunday night. China reportedly came in buying a relatively decent chunk of Ukrainian corn last week with some talk of up to 700,000 tonnes or 27 million bushels traded. Buried in the story is the fact that the USDA is currently projecting Ukrainian corn exports to come in some 7.7 million metric tons (303 million bushels) more than a year ago thanks to near record corn production versus a drought plagued crop in 2020.

Looking ahead, we will be watching Russia closely as overnight the German government suspended the application for the Nord Stream 2 pipeline. As you may remember, this is a new pipeline running from Russia into Germany. A handful of weeks ago Putin was accused of pressuring the EU to approve this pipeline by limiting gas flows into Europe. Putin denied the claim, of course.

According to the German government, the pipeline's parent company Nord Stream 2 AG, based in Switzerland, must become a German subsidiary. A move the company says they are working on.

Outside of the politics of Russian natural gas flows, we will likely get more insight into last night's meeting between Biden and Chinese President Xi. Based on initial reports, it doesn't appear as though much of substance was really discussed, though outside observers all agree the conversation was amicable. 

We're starting to see some big intraday moves in all of these markets, make sure to remain aware of opportunities when they present themselves and don't be afraid to place target orders. We will likely start to see more folks move to the sidelines as they realize next week is a holiday week and no one wants their turkey ruined by holding on to a winning position too long.

Corn steady to 1 lower

Beans 1-2 lower