Posted on November, 6, 2023 at 10:22 am
The last full week of October was a rough week as all of the major grains slipped into the red. But overall October was not a bad month for the grains. The only market that was able to push higher the fourth week of October was soybean meal. For the month of October, most of the grains showed gains with soybean meal leading the grains.
After staging a recovery in the third week of October, which pushed corn above $5 and soybeans above $13, the grains came under heavy technical selling at the end of the week, pulling most of the grains off major resistance levels. Although all of the grains were still able to end the week with gains, technically Friday’s close was concerning.
Buenos Aires Grain Exchange is estimating Argentina’s wheat crop at 47% poor/very poor, up 5% from the previous week due to dry conditions. There are rumors that producers are starting to switch acreage away from corn to later season crops to take advantage of late season rains.
Brazil’s hot and dry conditions continue for the northern regions of Brazil. This is starting to result in some first crop corn acreage being switched over to soybeans. The southern regions of the country remain wet and also see delayed planting activity.
For the month of September, China imported 7.15 million metric tons of soybeans. Of that, Brazil was responsible for 6.88 million metric tons, which was a 23% increase over last year. The U.S. was responsible for 133,000 metric tons of that total, which was 88% lower than last year. But U.S. purchases have started to increase due to competition from the Pacific Northwest and the slowdown in shipments in Brazil due to drought impacting river levels.
The last full week of October had wheat bucking the trend and pushing higher in the face of a lower corn and soybean complex. Wheat was supported by the escalation in the Middle East war. At this point Israel is threatening ground invasion at any time. If this occurs the war will likely spill over into other countries. If the war does expand into other regions of the Middle East, it could spur countries to add to their wheat supplies.
Dry conditions in Argentina and a poor crop condition rating all added support to wheat as well. Rumors have producers in Argentina abandoning wheat and planting later season crops in the hopes rain comes in time.
Corn and soybeans were lower most of the session due to harvest pressure. Weather forecasts for the U.S. are showing a major weather pattern change for late week and this is pushing harvest activity. Technical selling also remains a feature as traders push corn and soybeans to the low end of their trading range.
Monday afternoon’s Crop Progress report showed decent progress as U.S. corn harvest is now estimated at 59% complete versus 54% average. Last week producers were able to put another 14% of the nation’s crop in the bin. Soybean harvest was estimated at 76% complete versus 67% average. Last week producers were able to put 14% of the nation’s soybeans in the bin. Winter wheat planting progress was estimated at 77% complete versus 78% average, up 15% from the previous week.
Weather continues to be a driver in the grains as well. A wintry mix of weather in the northern Plains and western Corn Belt will delay harvest activity. Depending on the next few days, there might be some crops that do not get harvested this fall due to the late October snowstorm.
The grains put in a lower session on Wednesday with all of the grains posting losses for the day. Selling was tied to improving weather forecasts for both the U.S. and South America. The U.S. southern Plains have seen good rains over the past few days and more is on the way. This was enough to push Kansas City wheat to new contract lows. Brazil and Argentina have also been seeing rains, more hit and miss, but it seems like the hot dry conditions are being replaced with more seasonal weather pattern.
Technical buying and the need to keep some war premium in wheat helped to give all three wheat exchanges strength overnight. That spilled over to help corn trade with gains. Corn had traded lower the past four sessions in a row and has broken through support. Corn needs to see a recovery or could face testing recent lows.
Soybeans seem like they are looking for a reason to push higher. Traders are concerned about soybeans stocks. Stocks are tight and any more adjustments to yield will only tighten the ending stocks estimate for soybeans. This has made traders reluctant to really push soybeans too much lower. Mix in with that the fact that China is short of their November, December, and January soybean needs and the fact that Brazil is running low on exportable soybean supplies, and you have the potential for U.S. soybeans stocks to become extremely tight.
Soybeans have also been getting help from soybean meal. Soybean meal traded to a new contract high this week and has since some under profit taking pressure. U.S. soybean meal set a new high off reports that 2022 was an all-time record for soybean meal exports. And soybean meal could see another record setting export pace in 2024 partly due to production concerns in Argentina but also due to the increased crush capacity in the U.S.
Cattle put in another rough week, as both live cattle and feeder cattle saw continued pressure. The front month October contracts were able to go off the board with little fanfare and near the levels where cash is trading. A bearish October Cattle on Feed report and economic concerns all piled on to push cattle lower with live cattle dropping near $15 and feeders falling near $30 before finding support.
It seems that both the technical picture and fundamental picture for cattle has changed to be a little more bearish as supplies are starting to show small increases while demand is starting to show small declines. USDA’s Cattle on Feed report showed increasing numbers while the September Cold Storage report showed more meat in the freezer.
Source: AG Week