Evening Report | November 15, 2023

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NOPA crush sets all-time record in October... Members of the National Oilseed Processors Association (NOPA) crush 189.8 million bu. of soybeans in October, the highest total ever for any month. The crush pace increased 14.7% from September and was 2.9% above last year.

NOPA data implies a full October crush of 202 million bu., which would also be an all-time record.

Soyoil stocks totaled 1.099 billion lbs. at the end of October, down 8.6 million lbs. from September, despite the strong crush pace. Soyoil stocks fell for a sixth straight month as renewable diesel use continues to use more soyoil than expected.

Biodiesel production robust despite challenge... The boom in renewable diesel was expected to wipe out biodiesel producers, but they were more profitable than thought and biodiesel production has remained robust. A FarmDoc by University of Illinois Ag Economist Scott Irwin says, “The renewable diesel boom in the U.S. has raised a host of interesting questions about the biofuels sector.  A particularly important one is the impact of the boom on FAME biodiesel production and profits.  Previous analysis (farmdoc daily, May 10, 2023) indicates that competition from renewable diesel dramatically squeezed the profitability of biodiesel production starting in 2021.  However, despite the severity of the estimated losses, biodiesel production has not systematically declined during the renewable diesel boom and has been quite robust throughout 2023.  Since it is highly unlikely that the production data are in error, one is left with the conclusion that something was seriously amiss with the technical assumptions or price data used in the previous article to estimate profitability. The analysis in the present article shows that a single factor is in all likelihood responsible for the over-estimation of production losses.  Specifically, the behavior of biodiesel prices reported by the Agricultural Marketing Service (AMS) of the USDA changed dramatically relative to a well-known industry benchmark price from OPIS starting in August 2021... In sum, the revised profitability estimates show that FAME biodiesel producers in the U.S. have weathered the renewable diesel boom that started in 2021 much better than many expected.  The outlook is not entirely rosy, however.  Robust FAME production, in combination with surging renewable diesel production, may lead to more D4 RINs being generated than is needed for compliance with RFS mandates.  This could lead to D4 RIN prices going even further ‘off the cliff’ than they have in recent months.” Click here to view the full item.

Google DeepMind unveils AI weather model... Google DeepMind debuted an AI weather forecast model, GraphCast, it claims is more accurate and faster than the industry’s best weather systems. Google DeepMind says, “GraphCast is a state-of-the-art AI model able to make medium-range weather forecasts with unprecedented accuracy. GraphCast predicts weather conditions up to 10 days in advance more accurately and much faster than the industry gold-standard weather simulation system – the High Resolution Forecast (HRES), produced by the European Centre for Medium-Range Weather Forecasts (ECMWF). GraphCast can also offer earlier warnings of extreme weather events. It can predict the tracks of cyclones with great accuracy further into the future, identifies atmospheric rivers associated with flood risk, and predicts the onset of extreme temperatures.” Click here for more details.

Placements figure will be key in Cattle on Feed Report... Analysts polled by Reuters expect USDA’s Cattle on Feed Report Friday afternoon to show the Nov. 1 feedlot inventory up 1.8% from year-ago at 11.907 million head. The key figure will be placements after that category greatly exceeded expectations and topped year-ago by 6.1% in last month’s report. Analysts expect the number of cattle that moved into feedlots last month to have topped year-ago by 4.9%, while marketings are seen down 2.1%.

Producer price inflation eases... U.S. wholesale prices fell sharply last month as inflationary pressure continued to ease. The U.S. producer price index dropped 0.5% in October from September, biggest monthly decline since April 2020. On an annualized basis, producer prices fell to 1.3% above year-ago, the smallest gain since July. The primary driver of the decline was a substantial 15.3% drop in gasoline prices. Excluding food and energy costs, so-called core PPI was unchanged from September and rose 2.4% annually.

Retail sales decline... U.S. retail sales fell for the first time in seven months in October as motor vehicle purchases and spending on hobbies dropped, pointing to slowing demand at the start of the fourth quarter. Retail sales decreased 0.1% on a monthly basis and declined to 2.5% annually, the lowest reading since June. The retail sales data further strengthens expectations the Federal Reserve is done hiking interest rates.

Fed’s Daly warns against calling end of tightening cycle too soon... San Francisco Federal Reserve President Mary Daly warned against calling an end to the rate-rising cycle too soon, in an interview to Financial Times. Daly refused to rule out another interest rate increase, given uncertainty about whether the Fed has done enough to push consumer price growth back down to its 2% target. She indicated little concern about the recent sharp fall in U.S. government bond yields, which has loosened financial conditions.