Markets Balance Election Results With Export Sales Hopes

Good Morning from Allendale, Inc. with the early morning commentary for November 4, 2020.

Grain Markets traded mixed to lower overnight. Traders are eager for any signs of new export sales to validate current beliefs. U.S. presidential election results remain to be known.

Though the election votes have been cast, there is still a bit of uncertainty ahead. Virus numbers remain quite high and the economic implications are clear for US biofuels. We expect the first WASDE poll release either later this afternoon or early tomorrow morning.

Export sales remain in the trade’s focus. There are expectations for further corn sales, and some soybeans, in the coming weeks. Recent activity has been light though. Over the past seven days there were two overnight corn sales for unknown totaling 344,000 tonnes. Over the past seven days there were only three overnight soybean sales for unknown totaling 362,200 tonnes. The trade has gotten used to 1.1 – 1.6 million tonnes in weekly sales, overnight sales plus not-reported, to China in recent weeks.

COVID-19 findings continue to be monitored by the market. New daily findings peaked on 10/30 at 99,750 cases. Numbers since have been high as well at 88,871 on 10/31, 69,459 on 11/1 and 86,190  on 11/2.

EIA ethanol production figures, out later this morning, will be closely watched. Last week’s report, covering the week ending 10/23 saw production 6.3% under last year. This morning’s report will be compared against last year’s 1.014 million barrel per day rate for the same week. USDA’s 10/9 goal would suggest -6.5% year/year in corn for ethanol for the marketing year.

EIA implied gasoline demand numbers are a separate concern for US agriculture. The two most recent weeks were quite weak at -13% and -14% vs. last year. Today’s numbers will be watched closely.

Brazil purchases of US soybeans are a general rarity. We have only shipped them product in nine months over the past 20 years. In the last year, Jan – Dec 2018 we sent them 52,000 tonnes. The all-time peak was 281,000 in 2002. We see this week’s 38,000 tonne shipment story as more psychological than balance sheet changing.

Argentine dryness is starting to get some interest from the trade. Our favored meteorologist, Drew Lerner, told us “…rainfall this week is expected to be limited and temperatures warm enough to spur additional drying. That will lead to a greater level of concern over soil conditions for the next couple of weeks.”

Brazil rains in the Central/Northern areas are seen as balancing factors against the drying conditions ahead for the South.

Rains in the US Plains early next week are expected to run 0.40 – 1.40 inch in moisture equivalent. This may ease concern over the hard red crop before the next phase of dryness resumes.

Deliveries against the November soybean contract fell to 14 contracts. This eases perceived pressure on that contract. The total deliveries tendered during this period come to 933.

Allendale’s WASDE estimates call for US corn stocks to decline from 2.167 billion USDA to 2.079, declines in soybean stocks from 290 million USDA to 248 and for wheat from 883 USDA to 879.

December live cattle futures continue to flirt with the 50% retracement mark at 108.195. This is the midway point between August highs and October lows.

Boxed beef has showed gains for choice for four days in a row now, up 3.49. Confidence of a seasonal bottom in beef, and likely stronger interest in cash cattle, is growing.

Wholesale pork prices have fallen in six of the past eight days. Current prices are down 10.26 during this eight day period. Off the price peak for pork, current levels are down 18.43.

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