Afternoon Soybeans: Big agenda for tomorrow's session.
The soybean market hung on for a higher close but struggled for most of the session to defend early gains that took us into new highs for the fall rally. Technically, soybeans and canola completed upside objectives and either struggled as in the case of beans or fully reversed in canola.. Early excitement and rally power in beans was driven by rumor of a Chinese offer to buy another 10 mmt of US beans in exchange for tariff relief and a limited trade deal. Skepticism of the US agreeing to this limited deal and giving up leverage for a larger all-encompassing deal eventually ruled out. As trade optimism fades (or reality wins out, whatever your preference) it leaves weather and the USDA crop report tomorrow as the primary supportive inputs at the moment.
We have a big agenda for tomorrow with lots of new fundamental inputs to digest starting with CONAB Brazilian crop production forecast, the Malaysian Palm Oil Board crop report, from weekly export sales, the USDA crop report and of course high-level trade talks resuming in Washington.
This will be CONAB's first take on new crop production for corn and soybeans. The USDA last month estimated bean production potential at 123 mmt vs. 117 mmt for last year's crop and 101 mmt for corn, unchanged from last year.
The palm oil market gapped higher leaving a potential island bottom, if confirmed. For the palm report tomorrow, here are the range and avg. estimates:
Weekly export sales estimates for corn range from 500-800 tmt, wheat 300-600 tmt, beans 1.3-1.8 mmt (there were 900 tmt reported in the daily system that should hit this week), meal 100-400 tmt, and oil 5-35 tmt.
USDA crop report on Thursday at 11:00. The market is anticipating a friendly report with cuts made to corn and soybean beginning stocks, harvested acres, yields, production and carryouts.
High level trade talks between the US and China are scheduled in Washington tomorrow through Friday. While you never say never, our view remains that a deal is highly unlikely and anticipate tariffs on China going up next week. Both sides are entrenched in their positions and more pain (10% on remaining $300 billion of Chinese exports) is necessary to force a change unfortunately with another increase scheduled for December. A breakthrough this week would be considered a major surprise.
Crop threatening weather moves into the N Plains overnight with rain, then colder temps with snow and high winds. The frost and freeze threats expand to surrounding states through the weekend and early next week. There is real risk to yield and quality for immature crops and mature yet unharvested crops too.
In the spreads, board crush margins firmed to 84 cents/bushel. Oil share broke sharply to 32.4%. Bull spreads were firm up front shaking off day 3 of the Goldman index fund roll in beans.
Barge basis at the Gulf up 2 to +30. Interior processor bids are mostly steady. Brazilian soybean fob offers steady +95.