Soybean Morning Update & Commentary: Fallout over EPA mandate proposal continues.
Overnight grain markets remained under pressure led to the downside by soybean oil where after a couple of sessions flirting with and failing in challenging its November highs to start the week, the oil market collapsed to a six-week low in a limit down performance yesterday and has followed that with a gap lower overnight. Bean oil is a heavily long market from a fund and spec position standpoint, and with the wrong piece of news in the headlines yesterday (disappointing EPA mandate volumes), it has triggered a mad rush for the exits. With soybean oil locked limit yesterday, exchange rules have the entire soy complex trading on expanded daily limits today with beans $1.50/bushel, meal $45/ton, and bean oil 7.0 cents/lb. January soybeans head into the break trading 1 ½ lower the deferred new crop November contract is 2 ½ cents higher. The soybean market appears to be handling the liquidating oil market better than yesterday, at least to start.
In the product trade, as oil continues to break the meal market remains bid on the other side of the oil share spread. Malaysian palm oil settled 3.0% lower early on while ICE rapeseed is trading .8% or $6.5 higher following the Stats Can production report showing the canola crop smaller than expected. The outside markets have flipped from positive to negative from a macro influence standpoint; crude oil market is no $.80 lower while the dollar has reversed from lower to .70 higher. Board crush margins are taking a beating down by 24 cents to $2.15/bushel basis January.
The EPA proposal to increase advanced biofuel mandates which covers biodiesel/renewable diesel and sustainable aviation fuel among other things for the years 2023-2025 was not as large as hoped for. Put another way, the renewable diesel industry expansion and growth plans were not fully represented by the mandated volumes and that triggered the selling yesterday in bean oil which has carried into today. The EPA's proposal will now be open for public comment and may potentially be revised before a final ruling which is scheduled for mid-June.
USDA census crush for October came in a 196.6 mb, just above the average trade estimate on crush is 195.9 mb. There was a sharp increase seasonally from the 167.6 mb crush in September fell just shy of the October 21 crush of 196.9 mb. Oil stocks were 2.093 bln lbs, very close to the average estimate of 2.107 bln lbs. Stocks built from 1.999 bln lbs in September but were well below the October 21 stocks of 2.386 bln lbs. Meal stocks were 352,206 short tons, an increase from September's 276,973 short tons which was a a 3+ year low.
There were no new bean oil deliveries, 13 meal deliveries put out and stopped by Marex.
In the news:
• Stats Canada Principal Field Crop Production shows canola output at 18.2 mmt vs. 19.2 mmt expected and down from 19.1 mmt seen last month. Soybean production was 6.5 mmt in line with expectations and unchanged from last month.
• Argentina's renewed 'soy dollar' program produced 416 tmt of new producer sales of soybeans on 12/1. Net sales since the program restarted have reached 1.571 mmt.
• The UN's FAO World Food Price Index for November was close to steady with the prior month, lower cereal prices by 1.3% were offset by veg oil prices rising by 2.3%.
• Brazil soybean production for 22/23 is forecast at 153.3 mmt by Datagro.
• The BAGE sees Argentina's soy planting at 29.6% complete, up 9.6% on the week but 17.2% behind last year's pace. Corn planting is 23.6% complete, up 1.6% on the week.
• China's National Grain Trade Center on Friday set Dec 9th as date to sell 500,000 mt of imported Soybeans from state reserves
• After the access road to Paranagua port was partially cleared for traffic, port officials Thursday say truck traffic is slowly rebounding, noting around 275 trucks have entered a staging area, with 155 trucks arriving at the port.
• On Thursday, Argentina grain industry group estimated October grain, oilseed and product exports totaled $1.2 billion during the month. The October value was 85% below September's and 49% lower than the year earlier month. The Argentine government back in September rolled out a special forex rate to encourage farmers to sell their crops abroad, but the special rate was not available in October.
• Brazil's government on Thursday posted November Soybean exports at 2.64 mln mt compared to the 2.59 mln mt in the year ago month
• Parana Brazil's DERAL on Thursday estimated the 22/23 soybean crop at 21.5 mln mt, little changed from their previous forecast
• Euronext Paris February rapeseed futures on Friday are trading -7.75 euros lower at 577.75 euros/mt
• Dalian January soybean futures fell -11 yuan ending at 5,575 yuan/mt, soymeal fell -2 yuan ending at 4,284 yuan/mt
• Dalian January vegoil futures fell sharply lower on Friday, soyoil lost -168 yuan ending at 9,322 yuan/mt, palm oil dropped -194 yuan ending at 8,350 yuan/mt
• Malaysian Jan/Feb/Mar cash offers for RBD palm oil and olein on Friday traded -$25.00/mt lower ending at $965.00/mt and $975.00/mt, respectively
• Malaysian February crude palm oil futures on Friday traded -120 ringgit lower finishing at 3,958 ringgit/mt
• CBOT Deliveries: December Soybean Meal 13, Oil 0
• Outside markets. Crude Oil +50c ; Gold -$2.70 ; Silver +6.9c ; US $ index -24 pts
World Weather Inc. Highlights:
• U.S. Delta and neighboring areas of the Tennessee River Basin and a small part of the lower Ohio River Basin are advertised to receive waves of rain next week that will expand the region of saturated soil
o The European models is suggesting 3.00 to 9.00 inches will fall from Monday of next week to Monday, Dec. 12
? This is likely overdone
o The GFS model suggests 1.00 to 3.00 inches and local totals to more than 5.00 inches during the same period (Monday through Dec. 12) with more rain of significance in the Dec. 12-17
o Rain is expected and the ground will remain excessively wet in a part of the described region, but it is still debatable over the predicted rainfall next week
• Improvements in water levels on the lower Mississippi River would result if the heavier rain falls as suggested in the next two weeks, but World Weather, Inc. looks for "some" change in the outlook that may reduce the volume of rain and its timing
• Argentina's forecast today is still dry biased through the first half of next week with a strong warming trend that will bring back 90- and 100-degree high temperatures later this weekend and into next week
• Argentina will see weak weather systems increase across the nation in the second week of the outlook increasing rain frequency, although initial amounts will be light
• Brazil will continue to receive routinely occurring rainfall that will support normal crop development in much of the nation during the next two weeks
o A boost in rainfall is still needed in portions of Mato Grosso and neighboring areas were soil moisture is low in pockets and there has not been much rain recently
o Some of the increase in rainfall will occur next week with a few showers this weekend; Mato Grosso do Sul will be wetter than southern Mato Grosso
• Below average precipitation will continue in far southern Brazil over the next ten days, although "some' rain is expected
o Rio Grande do Sul and Paraguay will continue to receive the lightest rain relative to normal
• Europe is still slated to be colder than usual in the North and Baltic Sea regions over the next two weeks while southern Europe is milder
• Central and southern Europe will experience a notable increase in rain and snowfall next week and into mid-month
• Russia's coldest weather will stay to the east of its key winter wheat production areas during the next ten days
o There is no threat of winterkill even though eastern Ukraine and Russia's Southern Region are largely snow free
• Southern India will be impacted by a tropical disturbance late next week and into the following weekend producing more heavy rainfall
• China's greatest precipitation will stay near and south of the Yangtze River during the next ten days
o Winter crops will remain in favorable condition
• Good harvest weather will continue in southern Australia
• Western cotton and sorghum areas of Queensland, Australia and some in northern New South Wales need rain
US Gulf off 12 to +128
Sioux City, IA steady +15f
Mankato, MN steady +30f
Decatur, IL steady +25f
Claypool, IN steady +35f
Columbus, OH steady -5f