Perspective: Mid-Day Commentary for November 8

By: Arlan Suderman, Chief Commodities Economist

Mon, 08 Nov 2021, 16:47

Perspective: Midday Commentary

Arlan Suderman

Chief Commodities Economist

November 8 - Optimism continues to reign on Wall Street to start the week, with the Dow Jones Industrial Average pushing to new highs. The VIX continues to trade near 17, while the dollar index trades near 94.0. Yields on 10-year Treasuries are trading near 1.49%. Crude oil prices recovered from this morning's scare to trade near 1% higher, while the Ags continue to position for tomorrow's big USDA WASDE crop report. That report is expected to show both corn and soybean yields moving modestly higher, while soybeans took a bigger hit due to fears that global corn producers will shift more acres toward soybeans in 2022. Tomorrow's report is expected to confirm generally tight supplies of global quality milling wheat supplies.

High input costs for 2022 continue to provide underlying support beneath the corn market, despite today's weakness going into tomorrow's USDA crop report. That doesn't mean that corn prices are immune to weakness, but fear that we'll see a global decline in corn production next year has traders wary of building large short positions. Natural gas prices are again on the rise in Europe, keeping a significant portion of its fertilizer production offline, or at reduced capacity, while China, Russia and Egypt have all implemented varying levels of export limitations. Glyphosate prices are also surging, with cash sources reporting prices anywhere from double to triple their levels posted a year ago. Yet, I continue to see little evidence of significant acreage shifts for the core of the Midwest. Most of the talk of acreage shifts is coming from the periphery of the Midwest, which I why I still maintain that we're not looking at more than 1.5 to 2 million acres of shifts yet at this point. That may very well change in the months ahead, but that's the current snapshot.

USDA inspected 97.3 million bushels of soybeans in the week ending November 4, along with 22.2 million bushels of corn, 8.5 million bushels of wheat and 0.3 million bushels of grain sorghum. Of the above, shipments to China included 66.4 million bushels of soybeans, but just 0.06 million bushels of corn and no wheat or grain sorghum during the week. The soybean shipments were significant, because the past two weeks finally pushed weekly soybean shipments to China to a level to match its current slow crush pace. The problem is, its crush pace remains very weak due to poor hog feeding margins, and China has not been making significant purchases for shipments in December and January, with Brazil new-crop soybeans expected to be available starting in January.

The graphic below shows weekly soybean shipments to all destinations. Marketing year to date soybean shipments still fall short of the seasonal pace needed to hit USDA's target by 67 million bushels, down from 87 million the previous week. But I'm concerned about the shipment pace as we head into December and January, that could leave us short of our pace needed to hit USDA's target for the year. Marketing year corn export shipments to data fall short of the seasonal pace needed to hit USDA's target by 132 million bushels, versus being short by 122 million the previous week. I'm concerned that both the corn and soybean export targets may be 100+ million bushels too high, but I do not expect USDA to address that in this report, because of the strong current soybean shipment pace, and due to expectations that corn shipments will strengthen later in the year.

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