Another day of ups and downs yesterday as a recovery in energies helped corn and beans hold support, pushing higher by the end of the day.
Wednesday's sell off in energies didn't last long as a member of the U.S. Energy Department walked back the idea that the administration would start releasing supplies from the strategic reserve.
Interesting to note that much of the sell off from the news we would see reserve releases was apparently more emotion driven than anything else, as Goldman Sachs says any such release would only give oil about 3 dollars’ worth of downside. Granted the bank remains steadfast in their prediction of 90/barrel oil by year-end.
Soy oil caught a big bid on some concern over potential major biodiesel supply disruption in Europe, as well as a renewed round of talks regarding renewable diesel being used as jet fuel. While corn picked up on continued strong ethanol margins and the idea the administration may hold off on announcing any major changes to RFS blending requirements until they get their spending and infrastructure bills passed.
Export sales were a marketing year high for corn, coming in above pre-report expectations at 1.2 mmt. Mexico accounted for the lion’s share of sales and was in to buy more based on the flash sale from the USDA announced yesterday morning as well. Bean sales were in line with expectations, with the lion’s share there heading to China.
Sales and shipments still remain well behind last year's pace for beans, leading many to discuss a potential cut to export demand in next week's report. From a historical standpoint it is rare to see a cut to export demand made by the USDA this early in the marketing year, but with the current pace down like it is it wouldn't necessarily come as a surprise.
CONAB (Brazil's version of the USDA) released their first Brazilian production estimate for the new crop season, putting full year corn production at 116 mmt with soybean production expected to come in just under 141 mmt. These estimates compare to last year's production figures of 137 mmt of soybeans and 87 mmt of corn. They are also lower than the USDA's current estimate of 144 mmt of beans and 118 mmt of corn production for the country.
Other private analysts falling into the range between CONAB and the USDA when it comes to what their expecting out of Brazil.
One well-followed private analyst released his overall South American production outlook earlier in the week with similar increases to production in Brazil, outlining other production potential in neighboring countries.
According to his analysis, we could easily be looking at an additional 450 million bushels of soybeans working their way into the global pipeline (this without any adjustments to the current US production outlook) with 1.4 billion bushels of potential increases in corn production. Of course, Mother Nature will have the final say, with a developing La Nina pattern looking to start impacting South American weather- especially Argentine production areas in the coming weeks and months.
Looking ahead we will continue to monitor what is happening in outside markets. China is back from holiday and likely buying some beans based on the moves we're seeing in the overnight. We've tested recent downside support in beans 3 different times this week and failed, so it wouldn't be surprising to see us work higher into the end of the week especially if soy oil continues on its tear.
Remember to keep realistic targets in mind when it comes to pricing bushels here in the short-term, current market trends continue to indicate a range-bound trade, so be sure to keep in mind the high side of those ranges when making decisions.
Corn 2-4 higher
Beans 10-12 higher