October 30 - Stocks firmed into positive territory today on data showing that consumer spending remains strong, including consumer goods and housing. The VIX continues to trade either side of 20 today, while the dollar index is trading weaker near 104.0. Yields on 10-year Treasuries are trading near 4.25%, while yields on 2-year Treasuries are trading near 4.14%. Crude oil prices are 2% higher on chatter that OPEC+ may delay scheduled December production increases, while the grain and oilseed sector is quietly mixed to higher. Soybeans led the way higher today after Tuesday's sell off dropped prices closer to August lows, encouraging fresh demand buying. Rumors continue to circulate regarding Chinese officials slow-walking ship offloading, but buying interest continues to be present in the market. Corn prices continue to swing in an ever tightening trading range, while wheat traders focus on anticipated Russian export limits. Sovecon cut its Russian wheat export forecast by another 1.7 million metric tons today.
The pending home sales index produced by the National Association of Realtors surged 7.4% in September to 75.8 as the Federal Reserve cut its benchmark interest rate by 50 basis points, with the market pricing in much bigger cuts to come. That compares to an 0.6% increase in August, and to analyst expectations of a 1.0% increase in the index. In fact, the September increase was three times the highest trade guess. The index is an indication of buyer activity regarding pending contracts. Sales climbed in all four major U.S. regions, led by the West, although contract signings were roughly unchanged with year ago levels in the Midwest and the South, with longer-term growth the strongest in the Northeast and the West. Even though the pending home sales index was stagnant year-on-year in the South, that is the region where it is already the strongest at 89.0.
U.S. commercial crude oil stocks (excluding the Strategic Petroleum Reserve) dropped by 0.5 million to 425.5 million barrels in the week ending October 25, leaving stocks 4% below the five-year average for late October. Gasoline stocks fell by 2.7 million barrels during the week, putting them 3% below seasonal levels. Distillate stocks decreased by 1.0 million barrels, pushing them 9% below levels typically seen in late October. Ethanol stocks slipped to 21.8 million barrels in the week ending October 25, down from 22.2 million the previous week, but up from 21.0 million barrels the previous year. The bottom line is that ethanol stocks are not a problem. The production of ethanol utilized an estimated 107.5 million bushels of corn in the week ending October 25, up from 107.4 million the previous week, and up from 105.6 million bushels in the same week last year. Marketing year to date corn use for ethanol hit an estimated 817 million bushels last week, down 13 million or 1.6% from the previous year's pace, but that still exceeds the seasonal pace needed to hit USDA's target for the year.
Rumors continue to swirl within China regarding soybean unloading at the ports. My morning commentary earlier today outlined some of the confusion currently surrounding soybean imports and crush. There are fresh rumors out today that customs clearance now requires contracts that meet specific requirements when declaring to customs, such that the signing date must match the inspection permit issuance time, or it will require further explanation to slow off-loading. There are also reports of GMO certification being slowed on inspections. Some sources indicate that COFCO has already halted crushing and that Louis Dreyfus has limited soybean supplies for crushing that could curtail its operations for an extended period amid a shortage of soybeans being off-loaded from ships. But that is contrary to what we're seeing in soymeal futures in China. You would expect to see a reduction in crush result in tight soymeal supplies, leading to a surge in futures for meal, but the "smart" money within China apparently doesn't believe the rumors. We do know that USDA announced another flash sales of 4.9 million bushels of U.S. soybeans to China this morning, with a similar amount sold to "unknown destinations" that often times is also Chinese buyers. The bottom line is that you have to be very careful with rumors coming out of China.
