We kickred off the day with MBA 30-Year Mortgage Rate, MBA Mortgage Applications, MBA Mortgage Market Index, MBA Mortgage Refinance Index, and MBA Mortgage Purchase Index at 6:00 A.M., Export Prices MoM & YoY and Import Prices MoM & YoY at 7:30 A.M., 17-Week Bill Auction at 10:30 A.m., and API Energy Stocks at 3:30 P.M.

The New York Feds Empire State Manufacturing Index fell to -11.9 in October, down from +11.5 in September. This was well below consensus estimate of 3.8 and the largest decline in 4 months. The New Orders Index fell 20 points to -10.2, and the Shipments Index fell 21 points to -2.7. The Inventories Index was down 8 points at -7.5 as supply availability worsened. However, manufacturers had a more positive outlook for the future, with the Index for Future Business Activity gaining 8 points to a multi-year high 38.7.

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South American Weather Pattern Discussion

Rain Impacts Goias in C Brazil; Forecast Wet in N Argentina/Brazil:

The South American remains favorable as Brazilian rainfall expands and dryness in Argentina will be eased further over the next 7 days. Actual rainfall recorded between Oct 10 & Oct 14 in major crop areas receiving a boost in soil moisture. Additional rain is needed in Mato Grosso/Mato Grosso do Sul, bit an intense acceleration of soybean seeding lies ahead for E Mato Grosso, Goais, and Minas Gerias. Notice also that rainfall of 1.6-3.1” has been recorded across the core of Argentina’s Corn Belt in the last four days.

The forecasting models agree that the northern third – driest  – of Brazil’s Soybean Belt gets soaked Thurs-Sun. Accumulation of 2.4” will blanket Mato Grosso, Goias, Minas Gerais, as well as fringe producing areas farther north.  Similar totals are advertised across northern Argentina Thurs-Fri. The nearby South American forecast is wet and favorable for the timely seeding of spring crops. The South American recent/upcoming dramatic nature of the weather pattern shift in N Brazil. Near zero rainfall was recorded in Mato Grosso between early May and early Oct, but moisture deficits will be in rapid retreat as a pattern of above-normal rainfall is established there during the second half of October. Assuming the EU ensemble model’s 10-day forecast verifies, rain across Mato Grosso’s principal Ag Belt Oct 1-24 will total 4.4”. This compares to an October average of 4.7” and October precipitation a year ago of just 1.10”. A year ago N Brazilian soybean production was plagued by abnormal Oct-Nov dryness. This year drought will be avoided and so the only threat will be one of modestly delayed harvesting and potentially too much rain during the late January or February harvest. A record ’25 Brazilian soybean crop stays probable.

Dec CBOT Corn Test $4.00; US Harvest Surges Ahead; China Absence a Worry:

 Nearby basis levels continue to struggle, and the arrival of the new US supply has collided with improving South American weather. Producers and fund managers are both corn sellers with end user demand noted below $3.90 Dec. The US harvest was 47% complete as of Sunday-a massive 17% of the crop was gathered last week-and should reach 62-64% completed through Sunday. ARC expects supply pressure to be digested next week and cautions against being overly bearish of spot CBOT futures below $3.90. An open chart gap rests at #3.95, the first corn downside price target.

The grain markets are trying to find a price that rekindles world import demand. Worries persist regarding the US election and potential tariffs/trade wars in 2025. Food would be part of the battle with China, which is why high level Chinese/Brazilian gov’t representatives will meet next week. Look to sell corn rallies.

Ethanol & Renewable Fuels Update:

Last month, the EIA reported that renewable diesel and other fuels capacity in July had decreased by 299,000 Gal/year from June and were 894,000 Mil/Gal larger than a year ago at 4,598 Mil Gal/year . B100 capacity declined by 58,000 Gal/year from 2023 to 2,022 Mil Gal/year. The expansion rate in renewable fuels industry has slowed somewhat from previous years, but the July figure was still a 14% annualized increase. Beef tallow and used cooking oil have seen significant usage increases in the last year, but soybean oil’s price premium has collapsed in the last 6-8 months. This is likely to increase soybean oil use in the year ahead. NOPA soybean oil disappearance, implied per day, was up 1% from August and 3% greater than a year ago, and a record large for September. This also marked the 5^th consecutive month per day use above 72 Mil Lbs. Despite the surge in soybean oil production, stocks declined for the 6^th consecutive month, were 4% less than a year ago, and the lowest since 2014.

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