- It has been a mixed and much less eventful session in Chicago. Row crops are a bit stronger on follow-through short covering. It is estimated that managed funds on Monday morning were short a net 174,000 contracts of corn and 53,000 contracts of beans. Short covering followed NASS data Monday, with estimates that funds have bought/covered a net 55,000 contracts of corn, and 20,000 contracts of beans. Additional covering is likely into Wednesday.
- Wheat has turned lower amid bearish Jun-Aug feed consumption and as improved harvest weather is offered to ND and Southern Canada into late next week. HRS basis in ND has improved in the last 30 days, but bids there remain $0.75/Bu under Dec Minneapolis. We suspect that large HRS carryover will temper any lasting rally in spring wheat cash markets due to quality loss.
- No new export sales were reported by FAS this morning. This is despite talk that China secured sizeable tonnages of US beans on Monday and follows Chinese tariff waivers on 1.8 million tons of additional US soybeans over the weekend.
- US corn and soybean export commitments remain 50% and 35% below last year, respectively. Non-US cash corn and wheat prices are well below US Gulf origin into early 2020. Work also suggests that the USDA will add 1-2 million tons to the Black Sea corn crop in its Oct WASDE.
- Spot WTI crude oil is down another $0.45/barrel at $53.50, and has retraced the entirety of the rally triggered by temporary Saudi supply loss. Ethanol futures are down $0.07/gallon at midday. Futures-based ethanol margins have rallied sharply since mid-August, from $0.05/gallon to $0.60/gallon, but whether this encourages a needed ethanol production boost remains to be seen. Weekly US ethanol production is typically weak until early/mid-October. Delayed corn harvest will delay this seasonal boost 1-2 weeks.
- A pattern of below-normal rainfall will persist in key areas of Argentina as well as Goias and Minas Gerais in Central Brazil to Oct 15. Nearby rainfall of 0.50-2.00″ will allow seeding to accelerate in Mato Grosso, Mato Grosso do Sul and Parana (55% of total Brazilian soy area). But elsewhere replanting will be necessary if rains fail to materialise in the next two weeks. Climate work suggests below-normal rainfall continues into the latter part of the month.
- The pace of corn and soy planting in S America will gain attention in the weeks ahead. It is critical that widespread soaking rain develops across the whole of Central Brazil by early November.
- In the US, the midday GFS weather forecast is consistent with the morning run. Soaking rainfall of 1-3″ will challenge early harvesting across KS, NE, MO, IA and WI through the balance of the week. However, needed Midwest dryness is projected Oct 7-12. Rainfall thereafter will be mostly scattered in nature. Expansive high pressure ridging aloft the Southeast US will sustain above-normal temperatures across all but the N Plains into early next week.
- Corn and soybean balance sheets tightened via reduced carry-in stocks. Yet, the message is that nearby non-US supplies are large. Any real change to world major crop supply and demand will be a function of supply dislocation in S America. We look for the supply bulls to have slight leverage into NASS’s Oct report. We would anticipate any strong rallies in the next 2-3 weeks to be short lived as producer selling kicks in.