Markets evaluate support for day number three

Good Morning from Allendale, Inc. with the early morning commentary for December 2, 2020.

Grain Markets were lower overnight. A third day of declines may be noted as traders adjust to a changed South American message. The planned end to the Argentine grain inspectors strike for this morning was not a market mover. On the charts the 11/17 gap, 1155 1/4 – 1156 1/4, for January soybeans, was one downside target.

Brazil rains will be average for all areas but Mato Grosso for week one. Week two shows mostly normal moisture with light dryness for select areas in Mato Grosso and portions of the South. This remains an improvement over last week.

Argentine rains will be just below average when averaged out over the next two weeks. This remains an improvement over last week.

COVID-19 cases have come off their highs. The peak in daily cases was 192,673 on 11/20. The seven day average peak was 173,518 on 11/25. Monday’s additions were 152,022 with a seven day average of 159,167.

Two-day decline for March corn comes to 19 cents. In the two most recent corrections off new highs, the declines were three days each and ranged 24 3/4 and 22 1/4 cents.

Brazilian soybean forecasts from Datagro and StoneX were released today, 134.98 and 133.9 million tonnes respectively. Those are the largest private market estimates yet. 128.3 – 133.5 was the range from the prior five estimates we have collected.

Brazilian corn forecasts from Datagro and StoneX were noted at 114.04 and 109.34 million tonnes respectively. Those are on the higher end of the 106.5 – 112.865 five previous private market estimates.

October soybean crushing totaled 196.6 million bushels, on the trade expectation. We actually call it a little negative as the previously released NOPA numbers were 5.6% over last year. Yesterday’s report, covering all US plants, was only 5.0% over last year.

Corn used in ethanol production over the month of October was released yesterday. 433 million bushels were processed in October, -1.5% year/year. September data was -1.0% year/year. These two numbers are so far beating USDA hopes of a 6.5% lower than last year Sep to Aug season.

Ethanol production covering last week will be compared against 1.060 million barrels per day last year in the same week. Recent rates have been better than expected at -6.5% and -6.9% year/year.

Ethanol production margins remain a concern in the short term. Allendale’s model slipped in the last two weeks to losses of -$0.13 and -$0.14 per gallon produced.

Brazilian real values have been a significant problem for US agriculture. At the start of 2019 1 US dollar would equal 3.8804 real. At the start of 2020 it was at 4.0260. The peak this year was 5.8856 in May! Traders were concerned after a minor push back up to 5.7790 was seen in October. Positive news, values are back to levels not seen since July.

December grain deliveries have so far been slow with 100 contracts for Chicago wheat, 6 for KC wheat and 240 for oats.

Wholesale beef slipped 28 cents on Tuesday. It has posted lower closes in two of the past three sessions. Many suggest the current 5% over last year premium is overvalued.

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