Grains Dipped Lower in the Overnight

Crude Oil Rallies into the mid-$54 Mark

October 2, 2020

Grains dipped lower overnight as the prospect of a big South American harvest looms over the complex. In outside markets, crude oil rallied into the mid-$54 mark ahead of fresh data from EIA on crude stocks.

Yesterday after the market close Agroconsult pegged the Brazil soybean harvest at 107.8 MMT vs its previous forecast of 105.3 MMT and above the latest USDA figure of 104. Likewise, the boosted corn output to 93 MMT well above USDA at 86.5 MMT.

This morning USDA’s Ag Outlook Forum kicked off with USDA forecasting US corn plantings at 90 million acres in 2017 vs 94.0 planted last year. For soybeans, USDA penciled in a 4.6 million acre increase to 88 million while wheat acres are expected to fall to 46.0 vs 50.2 last year. These estimates are not based on surveys but instead on analyst forecasts.

Delays in corn shipments from the US appear to be giving China an opportunity to deal corn to Japan and South Korea. One deal is close and talks have begun on two more, sources said, with China benefiting from its close proximity to big Asian customers and bulging stockpiles left over from a now-abandoned farmer support scheme. Although the volumes are small, it still is a bearish development at a time of huge US stockpiles and strong export demand in the past 6 months from the US.

EIA crude stocks are expected to grow 3.5 million barrels according to an average of industry analysts. Last week’s inventory was up 9.5 million barrels and 6 weeks in a row stock levels have come in higher than industry expectations.

Over the last week US export competitiveness has generally improved. The ongoing strength in the Brazilian Real continues to help the US competitive position in corn and soybeans against Brazil.

WORLD EXPORT PRICE SPREADS RELATIVE TO US