Grain markets monitor the first phase of Brazilian rains

Good Morning from Allendale, Inc. with the early morning commentary for October 14, 2020.

Grain Markets have stabilized for now two days after Monday’s sharply lower action. Traders will be monitoring Brazilian rainfall this week as well as overnight export sales for general direction. Crop Progress will be seen as mixed for Wednesday’s market with both a strong harvest pace but also lower ratings.

Harvest activity was better than expected. Corn harvest rose from 25% to now 41%. This was over the 39% expectation. Soybean harvest rose from 38% to now 61% complete. The trade expectation was 59%. Good to excellent ratings for both crops fell by 1%.

Winter wheat planting was also better than expected, rising from 52% to now 68%. The trade expectation was 67%.

Ethanol production will be released at 9:30 am CT this morning. Last week’s production run will be compared against a 971,000 barrel per day pace. USDA’s current 5.050 billion bushel corn for ethanol goal would be 6.5% under a 5.400 “normal” level. Production in recent weeks has ranged from -3.9% to -8.0%.

Tuesday morning’s overnight sale of corn to Mexico was for 110,000 tonnes. The last overnight corn sale, those of 100,000 tonnes or larger, was also for Mexico. It was posted back on the 5th.

Rumors of an increase in China corn import quota, ongoing since Friday, have yet to be realized. In addition, the last overnight sale to China was back on 9/22. We currently have 9.975 million tonnes on the books to China and 3.871 to Unknown, most of which are likely China. Allendale sees 15 mt to China this year with potentially 20 if China completes the trade deal.

Brazilian rains are expected to run 0.50 – 1.40 inches through Monday. Those near-daily rains will have two separate legs, Tuesday night through Thursday then again restarting over the weekend.

Traders are still evaluating whether Monday’s sharply lower trade was simply a correction in a general uptrend or the sign of a clear top. Open interest, the number of contracts in the market, rose for corn on Friday as well as Monday, +6,913 and +5,425. OI rose for soybeans both days, +9,547 and +2,774. It also rose for Chicago Wheat both days, +1,135 and +2,607. Since we didn’t see the expected liquidation, it implies all those new longs over the past few weeks are still in the market.

Cash cattle bids were posted in the South today at $108 with no takers. Yesterday’s small trading at $109 insures they’ll be holding out through mid-week. Showlists are running 6,600 head under last week.

Wholesale beef has yet to confirm the seasonal post-Labor day price decline is over. New lows for the cutout were noted today. In the prior two years the low for choice was on October 7 and 10.

Hog slaughter in Minnesota could be reduced if a federal judge deems USDA’s 2019 Modernization of Swine Slaughter is revoked. This measure removed maximum line speeds for some processors. Unions suggest this move increases risk of worker injury.

China’s pork imports from January – September total 3.29 million tonnes. This sounds great at 132% over last year. We call it neutral as it implies a 380,000 import in September. That is right within the prior four months of 350,000 – 430,000 tonne imports.

China’s government estimated their hog herd at 80% of normal levels. The trade expects them to be back up to full speed in 2021.

October lean hog futures and options expire today at noon Central. October soy product futures expire today as well.

Post Archives

Allendale Insider

On The Go

Market Movers


Trader Insights

Morning Wake up Calls