Brooks Schaffer Market Report for Tuesday November 7

This week will be mostly about watching the weather in South America and positioning ahead of USDA’s latest supply and demand report coming out Thursday November 9th. The soybean market is starting to become concerned about Brazilian production as the market pushed to levels we have not seen since early September on Monday. It has been too dry in the Northern Brazil growing areas and too wet in the southern growing regions. The northern regions saw decent weekend rain totals but there may need to be a significant amount of replanting of acres that have been waiting for too long for that rain. Overall Brazil planting progress remains behind average and if there is replant needed, that could put it further behind. Argentina is also well behind average planting but they picked up some good rains over the weekend and so should be starting to make up some ground over the upcoming week. 

USDA estimated harvest progress at 81% for corn this week. That compares to 71% last week, 85% last year and 77% for the five year average. On soybeans, USDA estimated harvest at 91% complete compared to last week at 85%, last year at 93% and the five year average of 86%. 

Outside markets have been supportive with a big selloff in the US dollar last week and strength in the oil market this week supporting commodities. Oil was strong on comments by OPEC that they are going to hold production cuts in place until at least the end of the year. Export inspections Monday morning were within expectations for soybeans and corn. Corn sales were modest and soybean exports were at the upper end of the range. Wheat was disappointing again. 

There will be a lot of positioning ahead of USDA’s latest update that will be coming out this Thursday at noon. Based on anecdotal evidence from harvest, many are expecting modest cuts to soybean production and maybe a very slight increase to corn production. We have made it far enough through harvest that I do not expect any big surprises. The market should have a good idea of what we have now. Basis across the country has held on very well through harvest despite the logistic issues in certain markets. Now that we are over the hump in harvest, it should start to firm up now since we have robust demand for corn and soybeans. USDA will be making adjustments to the demand side of the balance sheet so the carryout estimates will be just as important on this report as the yield number. Soybeans are still projected to be razor thin. We are forecasting 20 days supply to finish the marketing year when 30 days supply is generally considered pipeline supplies. Tightness in the bean balance sheet is why soybeans have reacted so swiftly to the weather in South America. Globally oilseeds are much tighter than feed grain. Check the markets after noon on Thursday to see the reaction and i will have some thoughts on the numbers for you Friday.