Brooks Schaffer Market Report for Friday November 3

This is the Market Report with Brooks Schaffer of Palmetto Grain. Reach him at [email protected] or 843-540-4540.

Corn has drifted lower making new lows for the month of October. However, despite a very fast harvest pace, the national corn basis has held steady although locally in the southeast the big local crop pushed basis levels very low. Basis in the Southeast has already bounced off the harvest lows. Ethanol production this week came out well above expectations and at an 11 week high. This pace is at a level higher than we need to hit USDA’s estimate. Despite much bigger production, ethanol stocks declined to a 96-week low indicating robust demand. 

Soybeans have had a better week than corn managing to trade back over $13 as the November goes into delivery. There is over 22 cents carry from the November to the January contract so the processors and exporters all waited as long as possible before rolling their bids. Wednesday’s crush report showed bean crush up 4.3% above last year and set a new record high for the month. Even with this record crush, soybean oil stocks came out right at expectations indicating very strong demand. Soy oil stocks are at the lowest level in 9 years from increasing demand for renewable diesel. Soybeans found strength from weather uncertainty in South America. They have a long growing season but the current weather patterns are just starting to make the market nervous. Chinese officials are projecting bigger imports than most analysts are using but Brazil is getting the lion’s share of those. If the weather uncertainty gets bad enough to spook the Chinese buyers, we are going to see them quickly coming for US beans. 

Rains have fallen in the central US over the last few weeks slowing harvest and helping raise the water levels in the Mississippi river. This helps lower freight rates for the river but with the low water levels in the Panama canal is still limiting cargo. Bottlenecks at the Panama canal and a strong US dollar are still factors that are limiting exports. Corn, bean, wheat, and bean meal export sales this week were all at the very low end of expectations with corn actually at a 6 week low. 

Outside markets have not been friendly for the grains this week with further weakness in crude despite the prospect of increasing conflict in the Middle East. The US Federal Reserve elected to leave interest rates unchanged after their meeting this week. The US economy has remained very strong despite the turmoil in the rest of the world so the Fed left open the possibility of more future rate increases. They remain committed to the 2% inflation target. 

USDA’s latest supply and demand estimates come out November 9th, next Thursday at noon. Estimates from the research firms are starting to come out with most analysts only looking for very minor adjustments on yield. Markets will also be watching closely for any adjustments on the demand side of the balance sheet.