Election Fallout Gives Way to the Next Big Test for Grain Markets

The massive Democratic sweep of the House and Senate was the news headline of the day which pushed the equity markets to record daily gains and the energy markets to sharp losses but had limited impact on the grains as corn rebounded from early lows to post a solid close higher while wheat finished mostly unchanged. Beans were hurt by the sharply lower energy prices as bean oil fell to new 6-month lows on the concern of shrinking bio-fuel margins. With large private yield estimates ahead of next week’s USDA yield update, the trade does not have a bullish feel as harvest ends.

News and Notes:

• Welcome rain came across the Midwest this week to help replenish soil moisture for the winter wheat crop while unseasonably warm US weather has moved harvest along. SA weather leans bearish.
• The daily January bean chart is on Page 2 and shows the ongoing depressing trade as the funds unwind what was once a record net long position. As the yield estimates increase for the US crop and super El Nino has been far more beneficial than destructive, the speculative money crowd turned solid gains into significant losses over the last 2-months.
• StoneX yield estimates for the November USDA report were released late yesterday and saw them raise  their corn yield 1 BPA to 183.1 and also raised beans to 55. That would be a significant jump over the previous record national yield and that possibility has been a big part of the bean price collapse. Harvest reports continue to show inconsistent but solid corn yields and better-than-expected bean yields. StoneX was always considered a perma-bear on yields through the years, but their modeling has been closer to the USDA than many firms since Covid.
• Today saw a flash bean sale to Spain but nothing to China. Ethaol grind was above last week, and ethanol stocks fell, which should help the USDA move corn used for ethanol above 5.6 BBU. The demand is great but has been expected all year and Thursday’s export report is not expected to show any bullish surprises.

While the election news made an enormous impact on the equity and energy markets, the Democrat sweep will not make much if any difference in ag policy or the already promised diesel and tariff checks. Once the dust settles and the all the new members take office in January, they will sort out the committees and who the ranking Democrats are to be in charge of each one. The most noticeable impact will be seen in diesel and gas prices as the markets believe the war with Iran will end, but that help at the pump is too little and much too late for US harvest. More private yield estimates will be out this week heading into the Tuesday November 10^th USDA yield update, but after StoneX’s big numbers the yield estimate are still being seen as bearish considering the trade had prices in 176 and 53 just a month ago. It is too late to sell and too bearish to have hope that a quick recovery is around the corner.