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Soybeans surge on South American weather concerns

Soybeans were higher on speculative and technical buying, in addition to the strength in the broader market. Most forecasts have warm, dry weather in parts of South America, slowing down planting again and potentially stressing the crop. Planting was already delayed by a couple of week and this all but ensures the U.S. should continue to be the world’s main source of soybeans until early 2021. Still, the USDA hasn’t announced a new sale of U.S. soybeans in the past few days, with the weekly numbers out Thursday morning. The trade is also watching U.S. harvest activity, expecting some states to wrap up by week’s end. The USDA’s attaché in China estimates 2020/21 soybean imports at 95 million tons because of lower demand following 2019/20’s record purchases of 98.5 million tons. Production is expected to be 18 million tons, up about a million on the year. Soybean meal and oil were sharply higher on demand expectations.

Corn was higher on speculative and technical buying. Corn is also watching conditions in South America, along with U.S. harvest activity. U.S. harvest activity is ahead of average, with generally good conditions expected this week in many key growing areas. For Argentina and Brazil, another round of warm, dry weather would push corn planting back, especially for Brazil’s critical second crop, the source of most of their exports. Between those delays in South America and a smaller crop in Ukraine, the U.S. continues to have a price advantage on the export market, with new supply and demand numbers out next week. Livestock producers in Ukraine are reportedly asking Kyiv to set a cap on 2020/21 corn exports to limit feed cost inflation. The USDA’s attaché for the European Union projects 2020/21 corn production at 64.2 million tons, compared to 66.7 million in 2019/20. The office in South Africa expects an increase in corn planted area, citing weather, export demand, and domestic prices, with potential exports of 2 million tons, compared to 2.5 million in 2019/20. The attaché for South Korea sees 2020/21 corn imports at 12 million tons, compared to 11.882 million for 2019/20. Imports from the U.S. this marketing year are seen at 4 million tons, compared to 2.604 million last marketing year. Ethanol futures were steady to modestly lower. The U.S. Energy Information Administration says ethanol production averaged 961,000 barrels a day last week, the highest average since widespread COVID-19 lockdowns started, up 20,000 from the previous week, but down 53,000 from last year, with stocks of 19.675 million barrels, an increase of 74,000 on the week and a decrease of 2.199 million on the year. The Renewable Fuels Association says September ethanol exports were 77.2 million gallons, a drop of 23% from August and 20% from September 2019, while DDGS exports were 1.16 million tons, the highest monthly volume in 5 years.

The wheat complex was mixed, with Chicago mostly firm and Kansas City and Minneapolis up modestly. The world supply fundamentals are neutral to bearish, but solid global demand provided support, helping most contracts, the exceptions were December and March Chicago, rally from the early losses. Most forecasts have more dry conditions in Russia and for the southern U.S. Plains, further lowering quality and yield potential. Still, those losses could be largely offset by production gains in other exporting nations, including Australia. A lower move in the dollar and general strength in the outside markets also contributed to the day’s gains. The USDA’s attaché for South Korea estimates 2020/21 wheat imports at 4 million tons, including 1.3 million from the U.S., compared to 3.94 million and 1.347 million tons, respectively, in 2019/20. According to reports, French soft wheat exports to non-European Union countries during October were 703,000 tons, the highest since the start of the marketing year, which was attributed to strong demand from China.

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