Strong South American Exports Pressure U.S. Grain Prices

Published on: 05:49AM Nov 27, 2019

Good Morning from Allendale, Inc. with the early morning commentary for November 27, 2019.

Grain markets are mixed after soybean futures pressured on a mix of technical selling and export competition from South America.  Corn and wheat futures also declined after rallying a day earlier.  Traders will continue to monitor headlines regarding potential progress in trade talks between the U.S. and China.

U.S. and China are close to agreement on the first phase of a trade deal, President Trump said after top negotiators from the two countries spoke by telephone and agreed to keep working on remaining issues.  "We're in the final throes of a very important deal, I guess you could say one of the most important deals in trade ever. It's going very well but at the same time we want to see it go well in Hong Kong," Trump told reporters.

OPEC countries, which will meet next week to discuss their level of oil output, should make the right decision for the global economy, which remains "very fragile", the head of the International Energy Agency, Fatih Birol told Reuters.  "It is up to OPEC countries to decide, but what I see is that the pressure is strong on the OPEC plus Russia, as a result of the strong growth coming from the non-OPEC countries – the U.S., Brazil, Norway, Guyana and others," he said.

South Korea's MFG purchased about 60,000 tonnes of corn to be sourced from optional worldwide origins in a private deal late yesterday without issuing an international tender, European traders said.  The seller was believed to be trading house Pan Ocean, they said.

Brazilian corn exports are forecast to reach a record of 41 million tonnes in 2019, according to grain exporter group, Anec. These figures were bolstered by a weaker South American currency and favorable U.S. prices after bad weather affected the North American crop.  If confirmed, Brazilian exports will have grown by 80% from last year's level of 22.8 million tonnes, according to Anec data.

South Africa's maize crop is expected to be slightly higher than previous estimates, boosted by higher yellow maize yields in the Free State and Mpumalanga provinces, the Crop Estimates Committee (CEC) said.  The CEC, which gave its tenth and final estimate for the season, estimated maize production at 11.258 million tonnes compared with the October estimate of 11.186 million tonnes.

Brazil mills increased ethanol production and cut sugar output in the first half of November as their season draws to an early close, industry group Unica said.  Cumulative data for the season shows mills are heading toward a new record-low allocation of cane to sugar production, below the 35% level (as seen last season).

Average cash cattle trade (last week) was $115.88. This was approximately $1 over the previous week prices.  Allendale still suggests the February trade will see $124 at a minimum.

Iowa/Minnesota cash hog prices were at $41.25 yesterday, which was the lowest price of the year so far.  It is also the lowest value since September 6, 2018.  Cash hog prices are still resisting the seasonal trends which suggests a bottom on November 15.

Dressed beef values were mixed with choice down 1.40 and select up 0.38.  The CME feeder index is 144.79.  Pork cut-out values were down 1.75.