Perspective: Mid-Day Commentary for November 25

By: Arlan Suderman, Chief Commodities Economist

Mon, 25 Nov 2024, 18:20

Perspective: Mid-Day Commentary

Arlan Suderman

Chief Commodities Economist

November 25 - Both the Dow & S&P 500 stock indices hit new record highs this morning as Wall Street reacted to the incoming Trump Administration's pick for Treasury secretary. That nomination also resulted in a sharply weaker dollar as it followed Treasury yields lower. The VIX is trading near 15 at midday, while the dollar index is trading near 107.0 as it starts to stabilize again. Yields on 10-year Treasuries continue to fall - currently trading near 4.28% - while yields on 2-year Treasuries are trading near 4.29%, indicating a small inverse once again. Crude oil prices are more than 3% lower on talk of an imminent ceasefire agreement between Israel and Hezbollah in the Middle East, while the grain and oilseed markets are mixed to weaker. Strong soymeal futures provided support for soybean prices, but the strength in meal was largely due to unwinding crush spreads as soyoil prices plummet on weak fundamentals. Soyoil prices are falling on expectations that it may be months before we see new 45Z guidelines for subsidies for the green diesel fuels, resulting in the producers of those fuels shutting down.

USDA inspected 77.2 million bushels of soybeans for export shipment in the week ending November 21, along with 35.6 million bushels of corn, 13.2 million bushels of wheat, and 4.7 million bushels of grain sorghum. The portion of the above that was inspected specifically for shipment to China included 45.2 million bushels of soybeans and 4.6 million bushels of grain sorghum. Export commitments for grain sorghum remain quite slow - lagging the seasonal pace needed to hit USDA's target by 43 million bushels. But ironically, inspections for actual shipment continue to track fairly close to the seasonal pace needed to hit USDA's target. Marketing year wheat export inspections are tracking about 10 million bushels ahead of the seasonal pace needed to hit USDA's target. Marketing year to date corn export inspections exceed the seasonal pace needed to hit USDA's target by 39 million bushels.

One of the more intriguing markets has been soybeans. USDA marketing year to date inspections of U.S. soybeans for shipment to all destinations total 723 million bushels, up 77 million bushels or 12% from the previous year's shipping pace. The assumption, considering all of the flash sales we've seen this fall to China, would be that stronger demand from China is behind the stronger-than-expected overall demand. But that's not the case. The graphic below shows that export inspections for shipment to China total 384 million bushels for the marketing year to date, down from 412 million bushels at this point last year, and the slowest pace since 2019 when we were in the middle of a trade war with China, and when China's hog herd was decimated by African Swine Fever. As such, our stronger shipment pace this year is largely due to non-China customers. Shipments to Egypt are up by 10 million bushels, while shipments to Germany are up by 17 million bushels, Vietnam by 12 million bushels, and Indonesia, Italy & Taiwan each by 5 million bushels. The question is, are these demand streams sustainable once Brazil harvests its next crop in 60 days, which due to its cheaper currency, which will in many cases make their soybeans more economical?

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