South American weather, it's the name of the game.
Dec 01, 2020
The name of the game right now is South American weather. For whatever part of this rally hasn’t been driven by China buying, it was driven by South America being the driest they have been in the past 40 years. This past weekend, Brazil received some nice 2-3 inch rains.
That doesn’t mean that South America now has a crop because still, they’ve only received 35-65% of their average rainfall depending on the growing region, however, the rain developing in the seven day forecast, sure starts to look more conducive to a solid bean crop in Brazil. In addition to a positive forecast, their February export price has been dropping over the past month. This lowering export price means that traders are anticipating them having a crop in February, which is the start of their new crop. For a while, the U.S. had been more competitive for the month of February and now with Brazil being cheaper, it implies that China might be close to done buying beans from us.
On the corn side, the ethanol market has been struggling. Ethanol margins had been around breakeven two weeks ago but last week, ethanol margins dropped $.10 a gallon. Take this with a grain of salt because I can’t remember a time when ethanol wasn’t running at negative margins, but we’re quickly approaching margin levels where we should see some slowdowns. Pair these negative margins with the recent rise in coronavirus cases, and the demand for ethanol isn’t looking good. So this is definitely worth watching in the coming weeks and months.
Don’t forget about these important dates:
That doesn’t mean that South America now has a crop because still, they’ve only received 35-65% of their average rainfall depending on the growing region, however, the rain developing in the seven day forecast, sure starts to look more conducive to a solid bean crop in Brazil. In addition to a positive forecast, their February export price has been dropping over the past month. This lowering export price means that traders are anticipating them having a crop in February, which is the start of their new crop. For a while, the U.S. had been more competitive for the month of February and now with Brazil being cheaper, it implies that China might be close to done buying beans from us.
On the corn side, the ethanol market has been struggling. Ethanol margins had been around breakeven two weeks ago but last week, ethanol margins dropped $.10 a gallon. Take this with a grain of salt because I can’t remember a time when ethanol wasn’t running at negative margins, but we’re quickly approaching margin levels where we should see some slowdowns. Pair these negative margins with the recent rise in coronavirus cases, and the demand for ethanol isn’t looking good. So this is definitely worth watching in the coming weeks and months.
Don’t forget about these important dates:
- December 10th: Monthly USDA Report
- January 12th: Monthly USDA Report, last one for this past year’s harvest (final yield, acres, usage, etc)
- February: Brazil’s bean crop gets harvested (we’ll know yield on their 6% expanded acres)
- March 29th: First prospective plantings report for next year’s crop (expected 6 million acres switched from corn to beans)