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Soy rallies on easing Chinese COVID restrictions

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Morning report: Plus – E15 expansion gains momentum with a new bill proposed in the Senate. (Comments are updated by 7:30 a.m. Central Time.)

*Prices as of 7:20 am CST.

Corn

The dollar weakened this morning as optimism for easing COVID policies in China persisted overnight. Indeed, China’s southern city of Guangzhou scaled back some restrictions after protests earlier this week. But I remain cautious about the pace with which China is willing to reduce its COVID restrictions and the corn market reflects a similar hesitation this morning.

Corn prices rose this morning, but only by a $0.01-$0.02/bushel margin. Nearby futures prices range between $6.65-$6.71/bushel as end user demand remains robust. Gains are also limited by favorable weather in Brazil, which is boosting hopes for a bumper corn crop in the coming months.

Yesterday afternoon, a group of U.S. senators introduced a bill to increase E15 gasoline sales around the country – not just in certain states. The bill is backed not only by U.S. ag and renewable energy trade groups, but also by the oil industry as well.

“U.S. Environmental Protection Agency (EPA) anti-smog regulations currently restrict summertime sales of E15, even though research has shown the higher percentage blend may not increase smog relative to the 10% blend called E10 that is now sold year-round,” Stephanie Kelly explains in a recent Reuters report.

While it is not clear if the bill will pass both houses of Congress just yet, it is widely considered a win for the food and fuel industries. A similar measure enacted in select states this past summer helped boost ethanol production, though it created difficulties for oil companies in managing and distributing fuel inventories.

The proposed bill would keep fuel regulations consistent between states, which is favored by Big Oil.

"We have good support," Nebraska Senator Deb Fischer told Reuters. "When you look at the impact it'll have, especially on the central part of the United States, the Midwest and part of the south, I think that's extremely important."

Mexico responded to threats from U.S. Secretary of Agriculture Tom Vilsack yesterday regarding legal action against Mexico’s proposed ban on GMO corn imports, expected to go into effect in 2024. Mexican President Andres Manuel Lopez Obrador insisted that Mexico remains engaged in talks with the U.S. to “reach a deal” to ensure trade corridors between the two countries remain unhindered.

Lopez Obrador wants “health panels in both countries to assess the issue,” and reaffirmed Mexico’s stance that GMO corn would not be imported for human consumption. But please note – no comments were made about livestock consumption of GMO corn, which is typically a larger corn consumer than humans.

The comments from Lopez Obrador were likely neutral to the broader corn pricing situation. While the insistence for diplomatic relations was maintained (“Our position is not closed off,” said Lopez Obrador), Mexico also did not relent from its plans to implement the GMO corn import ban and also did not appear to be deterred by Vilsack’s comments about legal action regarding the ban issued on Monday.

Lopez Obrador reaffirmed Mexico’s stance, noting that “if no deal is reached, there are dispute panels.” Mexico is one of the U.S.’s top international buyers of corn.

Soybeans

Soybean prices rose $0.06-$0.15/bushel this morning as nearby futures ranged between $14.75-$14.92/bushel. Easing Chinese COVID restrictions in Guangzhou were profoundly bullish for the soybean market this morning. Dry weather is expected in Argentina over the next week and is raising concerns about crop production in the world’s largest soymeal exporter.

Corn and soybean export paces out of Brazil slowed during November, according to Brazil’s Anec trade group. Those volumes could continue slightly lower in December after recent rains caused a landslide that has blocked rail and roadways to Brazil’s second largest grains export terminal.

The landslide occurred just outside of Brazil’s Paranagua port, which is located in Brazil’s southern state of Parana. Brazil’s southern states are traditionally large corn and soybean producers, trailing Mato Grosso’s behemoth volumes.

The wreckage is likely to be cleared ahead of Brazil’s peak export season in early 2023. But it could give a slight boost to U.S. soybean exports over the next month, especially if issues on the Mississippi River continue to clear up.

Wheat

Chicago and Kansas City wheat prices rose $0.01-$0.06/bushel this morning. Winter wheat crop conditions improved this week, according to yesterday’s Crop Progress report, but still remain the worst ratings for the winter wheat crop in over a decade. Minneapolis futures edged a penny lower.

USDA released its last national Crop Progress report of the 2022 growing season yesterday. Winter wheat conditions were reported at 34% good to excellent across the country – an uptick that slightly surprised market watchers.

Pre-report trade estimates had only expected USDA to increase condition ratings from last week by 1%. But soaking rains in the Southern Plains over the past week helped to revive struggling crop conditions – if only by a slight margin. As a result, USDA lifted winter wheat ratings by 2% in yesterday’s report.

While USDA’s national Crop Progress report will cease until next April, many state USDA agencies publish periodic crop reports during the off-season. We will continue to report on those condition updates in the coming months as they are released.

Weather

The cross-country snow system that has hovered over the Heartland for the past couple days will shift onto the East Coast today, according to NOAA’s short-term forecasts. Snow showers will continue to hover over Michigan and parts of Northern Ohio for the next 24 hours, but mostly clear skies will prevail over the remainder of the Heartland during that time.

NOAA’s 6-10-day forecasts are trending cooler than usual for the Upper Midwest, Northern Plains, and Central Plains through early next week. During that time, the Southeast and Southern Plains will likely see warmer than average temperatures. Luckily, the precipitation forecasts are calling for above average chances for precipitation in the Pacific Northwest and Eastern Corn Belt during that time.

The temperature trends in the 8-10-day outlook will remain cooler than average for the Northern half of the continental U.S. Chances for moisture are likely to remain near normal for most of the country late next week, with drier than average chances for the Great Lakes region during that time.

Financials

Federal Reserve chairman Jerome Powell will issue updated comments today regarding the economy’s current outlook and whether or not the Fed will continue to implement aggressive rate hikes in the 2023 calendar year.

Markets are hoping for less aggressive rate hikes this morning, despite some Fed governor opinions to the contrary. S&P 500 futures rose 0.23% overnight to $3,971.25 at last glance on the optimism. Gains are likely capped by civil unrest and economic uncertainty in China.

The Chinese government is prepared to crack down on protestors who have taken to public displays of resistance against China’s latest restrictions to control surging COVID-19 cases. The latest round of restrictions is likely to keep China’s economic growth prospects for 2022 weaker than when the pandemic began in 2020 as the country struggles to adapt to increasingly contagious strains of the virus.

What else I’m reading this morning on our website, FarmFutures.com:

  • A Rabobank research report finds that fertilizer prices in 2023 may finally start to show some signs of easing.
  • Since 1980, over $1 trillion has been lost to weather damages in the U.S. Senior editor Ben Potter examines if anything can be done to minimize weather losses going forward.
  • Advance Trading’s Eric Meyer explains how to take control of your farm’s marketing destiny amid unpredictable prices.
  • The latest details on union objections to governmental actions regarding a potential rail strike.
  • It’s time to start planning 2023 goals. Let our Farm Futures Business Summit help you succeed in 2023!
Morning Ag Commodity Prices - 11/30/2022
Contract Units High Low Last Net Change % Change
DEC '22 CORN $ / BSH  6.67 6.63 6.65 -0.0075 -0.11%
MAR '23 CORN $ / BSH  6.725 6.68 6.7075 0.0125 0.19%
MAY '23 CORN $ / BSH  6.71 6.6625 6.6925 0.0125 0.19%
JUL '23 CORN $ / BSH  6.655 6.61 6.6375 0.01 0.15%
SEP '23 CORN $ / BSH  6.2425 6.2075 6.225 0.0025 0.04%
DEC '23 CORN $ / BSH  6.1375 6.1025 6.1175 0.0025 0.04%
AR2 '24 CORN $ / BSH  6.2025 6.1725 6.19 0.0075 0.12%
AY2 '24 CORN $ / BSH  6.23 #N/A 6.2125 0 0.00%
JUL '24 CORN $ / BSH  6.2225 6.1875 6.2225 0.025 0.40%
JAN '23 SOYBEANS $ / BSH  14.775 14.5725 14.735 0.14 0.96%
MAR '23 SOYBEANS $ / BSH  14.8325 14.6375 14.7925 0.1325 0.90%
MAY '23 SOYBEANS $ / BSH  14.9025 14.7175 14.8675 0.1275 0.86%
JUL '23 SOYBEANS $ / BSH  14.9425 14.7575 14.905 0.1225 0.83%
AUG '23 SOYBEANS $ / BSH  14.7325 14.6025 14.7 0.1075 0.74%
SEP '23 SOYBEANS $ / BSH  14.2625 14.1575 14.2475 0.0825 0.58%
NOV '23 SOYBEANS $ / BSH  14.03 13.935 14.005 0.045 0.32%
AN2 '24 SOYBEANS $ / BSH  14.0325 13.95 14.025 0.06 0.43%
AR2 '24 SOYBEANS $ / BSH  13.865 13.84 13.865 0.0075 0.05%
AY2 '24 SOYBEANS $ / BSH  13.875 13.875 13.875 0.0675 0.49%
UL2 '24 SOYBEANS $ / BSH  13.85 #N/A 13.805 0 0.00%
DEC '22 SOYBEAN OIL  $ / LB 77.17 75.5 77.17 0.63 0.82%
JAN '23 SOYBEAN OIL  $ / LB 73.9 72.68 73.78 0.8 1.10%
DEC '22 SOY MEAL $ / TON 413.6 408.7 413.1 4.6 1.13%
JAN '23 SOY MEAL $ / TON 412.6 407.4 412.1 4.5 1.10%
MAR '23 SOY MEAL $ / TON 410.5 406.2 410.1 3.7 0.91%
MAY '23 SOY MEAL $ / TON 408.3 404.4 407.9 3.2 0.79%
JUL '23 SOY MEAL $ / TON 407.2 403.9 406.8 2.6 0.64%
DEC '22 Chicago SRW $ / BSH  7.645 7.585 7.585 0.0075 0.10%
MAR '23 Chicago SRW $ / BSH  7.8975 7.815 7.845 0.03 0.38%
MAY '23 Chicago SRW $ / BSH  8 7.925 7.9525 0.0275 0.35%
JUL '23 Chicago SRW $ / BSH  8.03 7.965 7.9975 0.0275 0.35%
SEP '23 Chicago SRW $ / BSH  8.0925 8.0375 8.065 0.02 0.25%
DEC '23 Chicago SRW $ / BSH  8.1975 8.145 8.1575 0.01 0.12%
AR2 '24 Chicago SRW $ / BSH  8.23 8.205 8.22 0.0325 0.40%
DEC '22 Kansas City HRW $ / BSH  9.0825 9.03 9.06 0.05 0.55%
MAR '23 Kansas City HRW $ / BSH  8.9575 8.8825 8.9175 0.0475 0.54%
MAY '23 Kansas City HRW $ / BSH  8.88 8.815 8.8575 0.055 0.62%
JUL '23 Kansas City HRW $ / BSH  8.795 8.735 8.7625 0.045 0.52%
SEP '23 Kansas City HRW $ / BSH  8.7475 8.7375 8.7425 0.0325 0.37%
DEC '23 Kansas City HRW $ / BSH  8.7775 8.7725 8.7725 0.0325 0.37%
AR2 '24 Kansas City HRW $ / BSH  0 #N/A 8.6875 0 0.00%
DEC '22 MLPS Spring Wheat $ / BSH  9.405 9.3975 9.3975 -0.005 -0.05%
MAR '23 MLPS Spring Wheat $ / BSH  9.3725 9.33 9.345 0 0.00%
MAY '23 MLPS Spring Wheat $ / BSH  9.355 9.305 9.3175 -0.0075 -0.08%
JUL '23 MLPS Spring Wheat $ / BSH  9.305 9.2825 9.3 0 0.00%
SEP '23 MLPS Spring Wheat $ / BSH  9.0775 9.07 9.0775 0.0075 0.08%
DEC '23 MLPS Spring Wheat $ / BSH  9.11 9.1075 9.11 -0.0075 -0.08%
AR2 '24 MLPS Spring Wheat $ / BSH  0 #N/A 9.08 0 0.00%
DEC '21 ICE Dollar Index $ 106.705 106.3 106.43 -0.338 -0.32%
 JA '21 Light Crude $ / BBL  80.72 78.4 80.45 2.25 2.88%
 FE '21 Light Crude $ / BBL  80.75 78.48 80.47 2.19 2.80%
DEC '22 ULS Diesel $ /U GAL 3.3989 3.3037 3.3989 0.103 3.13%
JAN '23 ULS Diesel $ /U GAL 3.3504 3.245 3.3367 0.0928 2.86%
DEC '22 Gasoline $ /U GAL 2.4 2.332 2.4 0.0679 2.91%
JAN '23 Gasoline $ /U GAL 2.3628 2.2874 2.3486 0.0608 2.66%
JAN '23 Feeder Cattle $ / CWT 0 #N/A 178 0 0.00%
MAR '23 Feeder Cattle $ / CWT 0 #N/A 181.175 0 0.00%
 DE '21 Live Cattle $ / CWT 0 #N/A 152.675 0 0.00%
 FE '21 Live Cattle $ / CWT 0 #N/A 154.8 0 0.00%
DEC '22 Live Hogs $ / CWT 0 #N/A 81.075 0 0.00%
FEB '23 Live Hogs $ / CWT 0 #N/A 84.15 0 0.00%
DEC '22 Class III Milk $ / CWT 19.92 19.9 19.92 0.07 0.35%
JAN '23 Class III Milk $ / CWT 19.55 19.51 19.55 -0.06 -0.31%
FEB '23 Class III Milk $ / CWT 19.51 19.51 19.51 -0.13 -0.66%

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