Grain Markets Look for a Turning Point as Election Day Arrives

The relentless collapse in bean prices continued into November as beans fell for the 16^th day of the last 20 trading days on renewed fund selling from their still massive 950 MBU net long position. The grains fared better, but were still unable to hold larger early rallies, to finish mixed. Although a large daily flash sales of corn to Mexico and decent bean purchase to China were announced, the fund volume swamped an end user buying. The best news in the market today was sharply lower crude and diesel prices on renewed peace talk hopes between the US and Iran. Tuesday’s US mid-term elections will be closely watched around the world and will have ripple effects through all markets.

News and Notes:

• There is no bullish market moving weather story in either the US or SA as Brazil’s bean crop is nearly 60% complete with US harvest expected to push over 80% and 65% in Monday’s update. Please do not attach your marketing plan to a weather problem in SA.
• The daily December diesel chart is on Page 2 and shows today’s 25-cent +/- loss on hopes of renewed peace talks. Qatar (Iran’s neighbor) is trying to help the negotiations and hold off the threat of post-Election escalation by the US against Iran. At today’s lows, the daily loss was nearly 30-cents, which would have been the largest daily loss since the US/Iran war started. High crude prices are certainly part of the rise in diesel prices, but the biggest factor is that roughly 50% of Russia’s diesel refining capacity has been destroyed. Russia is the world’s largest diesel exporter which makes world peace and infrastructure rebuild the major factors in significantly lowering diesel prices.
• With the sharp drop in diesel today, futures prices are down over 40-cents a gallon since last Monday’s new contract high. Call your supplier to stay on top of their price offerings because Russia/Ukraine actively bombed each other’s infrastructure over the weekend and after the US election, President Trump will want to move the news coverage away from any Democrat success.
• China was mentioned in today’s daily sales report as a buyer of 5 MBU of beans while Mexico was back after a noticeable absence to buy 45 MBU of corn for delivery in this marketing year with 25 MBU for the 27/28 marketing year. Rough estimates are that China has purchased just under half of their additional $17 billion trade promise from the August meeting. If they meet their year-end pledge, there will be significant non-bean purchases in the next 8-weeks. China weekly bean purchases from the US need to be around 32 MBU per week to meet their 25 MMT trade agreement from May. With bean prices plunging, China is not buying those beans in the futures markets.
• Tomorrow’s US election will have significant impact on who will be in charge of the Senate and House Ag Committee’s. It looks certain that Rep Angie Craig (D-MN) would be the front-runner to be the House Ag Committee while Sen Amy Klobucher (D-MN) would seem the obvious choice in the Senate. Regardless of your political affiliation, this could be potentially great for the farmers as both are supportive of expanding bio-fuel and could both be willing allies to the farm community to finally get a new Farm Bill. The wild card is if there can be any bi-partisan cooperation on anything.
• The final October average insurance revenue prices are $4.76 for corn and $12.64 for beans. The February revenue insurance averages were $4.62 and $11.09 which means any insurance payment based on revenue loss will favor beans unless there was significant yield loss. Please check with your insurance agent to see if your coverage will payout out this year.

The bulls have been desperately searching for anything for the last two months but have been unsuccessful on every attempt. Although seasonal tendencies lean bullish once US harvest moves past 50% complete, a modest bounce is not what the markets or farm economy need. Depending on how you distribute the “blame” for the tough last 2-months, a large culprit is the enormous amount of speculative fund money that was counting on falling US yields and super El Nino having a more negative effect on world yields. They have been dead wrong so far. With the funds now flat corn, short wheat, and still long beans, stopping the current selloff must see the funds stop their rush to the exits.