It has been consistent all week long that the market is working off very little fresh news. After Trump has stated that he will enact additional tariffs if an agreement isn’t signed by Dec 15, President Xi stated he is not afraid to take additional action against US. Xi also said China is moving toward a trade deal on the basis of “mutual respect and equality” and said, “we have been working actively not to have a trade war.” He added they didn’t start the trade war and it isn’t something they wanted. He also stated they hold a “positive attitude” on the talks. The CN railroad workers strike in Canada is causing propane shortages. There is talk the government may deem propane an essential product and require railroads to move it without interruption.
Corn harvest is at 76% complete. The 5 year average is 92%. Last year the harvest was at 89%. Ethanol saw its 8th straight week of increases with production up 3,000 bpd to 1,033,000 bpd. Inventories decreased by 500k barrels to 20.5 million barrels, the lowest inventory in 3 years. Also, net margins are back at 24 cents positive; so with better margins and strong demand, it would seem the ethanol industry has rebounded. This is helping to drive the strong basis levels in the east and supporting the west from the normal pressure that is seen when export sales are poor. There are still a lot of questions about the ramifications of the lower test weight, but the market will decide on how to work through this situation. Meeting deliverable quality could be tricky and expensive so we shouldn’t see any deliveries going into December delivery period. Export sales were the 2nd best of the year at 788,000 MT vs. estimates of 400k-900k MT, the bad thing is, we need to be averaging at least 800k MT to meet the current USDA pace. A little Thanksgiving history: in 8 out of the last 9 years, December corn has closed lower the day after Thanksgiving, including 6 out of the last 6 years; not really any good correlation for the day before Thanksgiving. Futures have closed lower the last 5/6 weeks, for this week: Dec 19 down 2 ½, March 20 down 2 ¼, May 20 down 2 ¾, July down 3 ¾, Sept 20 down 2 ½, Dec 20 at down 3 ¼
Soybean harvest is at 91% complete. The 5 year average is 95%. Last year the harvest was at 91%. From a technical perspective, beans broke the support levels so additional downside is possible. The next support is at $8.80. Whether or not it needs to dip there remains to be seen. We have continued uncertainty with a resolution with China, so a 20-cent dip is looking more likely. The weekly close in soybeans is following the same pattern as corn with futures closing lower 5/6 weeks, for this week: Jan 20 down 21 ¼, March 20 down 19 ½, May 20 down 17 ¼, July 20 down 15 ½, Aug 20 down 15, Nov 20 down 10 ¾
The IGC put global planted wheat acres at 539 million acres, up 1% y/y. They kept the global 19/20 wheat crop at 762 mmt. Argentina’s wheat crop is estimated to be lower at 18.5 MMT compared to 18.8 MMT in the updated estimate put out by BAGE. Despite the lower production estimate, Argentina’s share of Asian wheat imports is increasing as Australia suffers another drought. French soft wheat conditions for their recently planted crop is at 78% G/E this week, compared to 84% LW and 82% last year.
US winter wheat planting is at 95% complete. The 5 year average is 95%. Last year’s planting pace was at 92%. Winter wheat is rated 52% Good/ Excellent sliding 2% this week. The rating has dropped 5% in the last 2 weeks. Weekly export sales were 437,700 tonnes, within the estimates ranging from 200,000 to 500,000 tonnes.
African swine fever has been found in Poland. There is a lot of concern about the disease spreading to the German and Dutch hog production areas. Pork exports were really strong this week. Surprisingly it wasn’t due to a huge purchase from China. The USDA has caught up a lot of previously unreported sales as it continues to work with exporters to make sure reporting is correct. Boxed beef values fell off pretty sharply late in the week. Packers margins have “slipped” to a still extremely high level of $290/head. The cattle on feed report had placements at 110% versus expectations of 111.4%. It will be interesting to see if the market wants to trade a number a bit smaller than expectations or if it wants to trade a big increase in placements overall.
The Trump administration is considering opening up 6.5 million acres of Alaska’s North Slope to new oil and gas development. About 170,000 bpd of railed crude oil from Canada to the US has stalled amid a worker’s strike at Canadian National. Morgan Stanley suggests OPEC needs to deepen cuts in 2020 to balance the market. US motorists traveled 267.7 billion miles in September on all public roads, a 1.7% increase over a year earlier, the Department of Transportation showed. AAA is reporting the average price for a gallon of regular gasoline at $2.591 versus $2.648 a month ago. During the same period last year gasoline prices at the pump averaged $2.600.