- Chicago midday values are mixed with wheat lower, while soybeans/corn are slightly higher. Technical and fund buying has been evident in the summer row crops, while wheat sags on stable world wheat prices. French wheat futures are struggling against $197 €uro/mt while trade talk has Chinese crushers booking a few US soybean cargoes for November. Chicago has a firm undertone at midday, but increased farm selling is capping rallies. The market is likely to find harvest hedge pressure on Friday which will act to cap rallies. Research argues for a range in nearby corn of $3.40-3.90 with the 2020 US corn and FSA acreage data the last ingredients needed to formulate long term Chicago price direction.
- Chicago brokers estimate that funds have bought 10,000 contracts of corn and 1,700 contracts of soybeans while selling 3,400 contracts of Chicago wheat. In soy products, funds have bought 4,300 contracts of soymeal while selling 3,200 contracts of soymeal. The funds are adding to an already large net long position in soybeans/soyoil and trying to get longer of wheat and corn. We note that corn is scoring a weekly technical reversal on the charts.
- US crude oil futures have fallen $2.00/barrel which has pressured soyoil and corn futures at midday. We calculate that the 2-day corn rally is producing negative margins for US ethanol producers and blenders. US ethanol producers cannot withstand much higher corn prices are they will be forced to slow/close operations once again. The rise of corn and fall of oil along with 8% fewer miles driven is costing US ethanol producers.
- As reported on Tuesday, Argentina is temporarily planning to reduce export taxes by 3% to 30% until year end. The cuts are hoped to stimulate farm sales of stored soybeans to help raise Government revenue. Many Argentine farmers hoard soybeans as a hedge against currency and inflation. The Argentine Peso is sitting at record low of 76:1 US$ and forecast to fall farther by the ROFEX Exchange. Although some farmers will sell stored supply due to cash flow demands ahead of planting, the overall sales pace is not expected to change significantly.
- The August Crush report will be released this afternoon with traders looking for 175.7 million bu. This is the lowest crush rate in 6 months with soyoil stocks forecast at 1,950-2,020 Mil pounds. The report is not expected to be a big driver of price.
- Private estimates for 2020 US corn and soybean yields and production will start to come out early next week.
- The midday GFS forecast is wetter across the Central Midwest Oct 13-17 but is otherwise unchanged from prior estimates. Wetter weather in mid/late act would act to eliminate drought conditions across the SRW Belt, but confidence so far out is low.
- Complete dryness is forecast over the next 10 days. Any Gulf storm activity through the period will stay confined to the Caribbean. A speedy harvest is anticipated.
- World ag markets have been re-set in the last 45 days. US balance sheets have shifted from ultra-bearish to requiring favourable weather in S America over the next 100 days. NASS’s Oct yield data will be scrutinised but big picture market changes will hinge more upon whether S American surpluses rise or fall in early 2021. Wheat will be volatile as the trade is rightfully uncertain how to forecast 2021 Russian production. Our only nearby concern is that the speculative community has quickly digested changes in balance sheet by piling into sizeable long positions. We estimate that managed funds are net long 218,000 contracts of beans, the largest since 2012.