What We're Watching This Week - Nov. 7, 2016

Soybean Yields Expected to Head Higher on Wednesday:

COMMODITIES

The US Department of Agriculture (USDA) is scheduled to release the November WASDE report at noon EST on Wednesday. Reuters’ market survey has the trade calling for the USDA to peg final US corn yield potential at 173.2 bushels per acre, down from October’s estimate of 173.4 bushels per acre and closer to Gro Intelligence’s forecast of 170.4 bushels per acre. Regarding soybeans, the market anticipates that the USDA will lift its US yield forecast by 0.6 bushels to 52.0 bushels per acre. The trade is penciling in corn, wheat, and soybean ending stocks of 2.30 billion bushels, 1.14 billion bushels, and 420 million bushels, respectively. Also of interest, the USDA’s forecast for India’s wheat imports in the 2016-17 marketing year is likely to be lifted after the USDA-FAS attaché trimmed the outlook for the country’s wheat production by 3mmt and the Indian government announced a reduction in the country's import tax to 10% from 25% through February 2017.

US Corn Balance Sheet

New Malaysian Biodiesel Targets Could Counter Weak Exports:

POLICY

While traders will be focused on Malaysia’s Thursday monthly palm oil stocks report, we will also be keeping an eye on whether the country increases domestic biodiesel targets to offset weak export demand. According to a Reuters survey, market participants are forecasting a 8.8% increase in the country’s palm oil inventories in October, as Chinese demand has remained particularly weak. To counter sluggish export demand, the Malaysian government could lift the country’s B7 biodiesel target to 10% from 7% and also institute a B7 blend target for the industrial sector for the first time. This action, which the Malaysian Biodiesel Association (MBA) believes will occur on December 1st, could increase palm oil demand by several hundred thousand tons per annum based on initial estimates from traders in the region.

Palm Kernels in Indonesia and Malaysia

Planting Progress in Argentina Remains a Focal Point:

FARMING

In light of recent weather concerns in Argentina, we will be watching reports of planting progress this week. Despite concern that heavy rainfall would lead to delays, farmers have completed 39% of projected plantings versus 36% at the same time a year ago. Argentina is expected to expand corn planting by about 1 million hectares from the prior season, with corn yields relatively unchanged. Given that the USDA projects that Argentina’s corn production will account for roughly a quarter of incremental global exports in the 2016-17 marketing season, weather developments in Argentina during the coming weeks could impact how aggressive US corn marketers will need to be. In the soybean market, the Association of Soybean Growers of Argentina is reporting that planting progress is only at half the pace of year ago levels, as floods in the three largest producing regions (Buenos Aires, south of Santa Fe, and south of Córdoba), have held farmers back. At the same time, traders increased their net long positions in soybean futures last week. Another possible reason for this: US soybean export sales are trending ahead of the 5-year average.

Corn in Argentina