Good Morning from Allendale, Inc. with the early morning commentary for November 25, 2020.
Grain Markets were steady/firm in the overnight session. Optimism in outside markets and concerns over South American weather remain front and center. The trade was also impressed with the previous two days of trading this week, a strong advancement followed by a rejection of lower trade. Wheat is making gains on renewed concerns about the quality of the US winter wheat crop as well as potential acreage changes.
Equity prices, as measured by the Dow Jones Industrial Average, closed to a new high of 30,046.24 on Tuesday. It was a new high as well as a break over a general psychological barrier. The DJIA closed up 5.2% for the year. The S&P 500 stock market index came close to its current November 9 peak.
Outside markets are expecting stability in 2021. Three separate vaccines will be available, a new president and the return of former Fed Chairperson, Janet Yellen, are seen as stabilizing factors ahead.
COVID-19 findings on Tuesday came to 157,531. Though under the 192,673 peak addition posted on Thursday, many officials suggest the seven day average is a good metric as it smooths out heavy additions near weekends. By that metric, we are at record new additions. The separate daily death tolls would suggest the same.
Ethanol production, covering activity from 11/7 – 11/13, will be out at 9:30 am Central. This period will be compared against a 1.059 million barrel per day production pace from last year. We expect some type of production decline from the prior week’s -6.9% run. USDA is calling for a 6.5% cut for the whole Sep – Aug year.
Ethanol producers hope the EPA eventually complies with court orders from a suit filed in 2016. They were successful in that suit in alleging the EPA had inappropriately announced a Renewable Fuel Standard below the mandate from the 2007 Energy Independence Act. The EPA, according to court filings again by the RFA yesterday, has yet to comply with those orders. Separately, the RFA also assumes there will be no RFS numbers from the EPA for next year for months.
Chinese cancellations of US soybeans was deemed as part of the reason for Tuesday’s initial price break. While many in the trade would question the idea there is some historic precedence. Allendale went back 10 years and found from 2 – 13 weeks of net negative soybean sales to China in each of the eight normal years. In the two China trade war years there were 17 weeks of negative sales to China each year.
Winter wheat plantings have ended. The HRW crop is headed to dormancy in what many would suggest is a weakened state. The trade is now openly talking of spring replanting with the current superstar in the Plains, sorghum. The fall 2019 planted hard red winter wheat crop totaled 21.362 million acres. Many in the trade were previously looking for higher plantings this fall. The spring 2020 sorghum planting totaled 5.790.
Holiday trading hours call for a normal close for grains and livestock this afternoon. There will be no Wednesday electronic grain trade. There will be no grain or livestock day session on Thursday. There will be no electronic grain session Thursday night. The next session for both grains and livestock will restart Friday morning at the normal 8:30 am Central start. Friday’s day session trade will post an early 12:05 pm Central close for grains and livestock.
First Notice Day for December grain futures is on Monday.
Wholesale beef is now up 5.95 in just two days this week. That puts the rally 38.35 off the October 28 lows. Many wonder how much is left given the fact choice is now 5% over last year levels. At the start of this month prices were 11% under last year.
Tuesday’s cattle rally was impressive given the fact it comes after a bearish Monday afternoon Cold Storage report. It found 500.5 million lbs. of beef at the end of October. That was far over our 460 estimate. During October a large 37 million lbs. of beef moved into storage. The five year average is only for an increase of 8. This is the second largest October in-flow in history.
Hog processing levels are being monitored closely. We are at the peak of the year’s hog offerings and this is a holiday-shortened week. So far it is going okay with two days at a strong 497,000 head.