- Chicago ag markets are mixed at midday with corn values slightly lower, while wheat futures push to fresh late summer highs. Soybean futures are trying to hold early gains. The volume in wheat has been heavy, but corn/soybean trade has sagged on the rally. The overnight summer row crop volume was active, but wheat volume in the day session has been huge on fund interest. We look for a mixed Chicago close.
- Chicago brokers estimate that funds have bought 8,400 contracts of corn, 7,600 contracts of wheat and 5,300 contracts of soybeans. In soybean products, funds have bought 3,200 contracts of meal while being flat in soyoil.
- FAS/USDA confirmed the sale of another 596,000 mt of US corn to China. The sale follows on top of China’s purchase of a like amount of corn yesterday. It is interesting that the volume totals of the past 2 days are the same, suggesting that this is Sinograin/COFCO demand rather than individual buyers.
- Exporters report that the US corn to China is being sold for February/March shipment out of the Gulf. Most exporters are estimating that China will import 20 million mt of corn from all sources in calendar year 2021. This could be broken down by best estimates to; 12 million from the US, 4 million from Ukraine and 4 million from Brazil. We hear that China has already secured 3-3.5 million mt of corn from the Ukraine, 4 million from Brazil and 12 million from the US with 10 million mt from the 2020/21 US corn crop year. This could raise the 2020/21 US corn export estimates to 2,275-2,300 million bu, from USDA’s 2,250 million bu August forecast.
- USDA also announced that 132,000 mt of US soybeans was sold to an unknown destination. The buyer is said to be the EU or Mexico. US exporters report that China has slowed its US soybean purchase pace this week, while they are picking up their soybean buying from Brazil for February/March.
- Rumours abound that China has booked a couple of cargoes of US HRW wheat late last week that could be witnessed in Thursday’s weekly export sales report. However, large scale buying of US wheat is not underway which leaves many to doubt that the current rally will be sustained. Wheat bulls argue if China is securing US corn, that wheat cannot be far behind.
- Macro flows into raw material markets have increased in the new month. There is no evidence of inflation, but fund managers are pointing to the big rally in US building supply commodities like lumber/copper for a renaissance for the US housing market as exurbanites flee the cities for suburban and rural areas.
- Finally, needed rain is dropping across IL and even IA at midday. The rain will stabilise the US soybean crop yield outlook. Amid the moisture, crop ratings are expected to hold more stable or even improve slightly next week. The midday run has added 1-1.50″ of rain for MO, IL and IN over the next 10 days. This rain would have helped crops more 10 days ago, but late seeded corn/soybean pod filling will be helped. The GFS forecast follows other models that are progressively wetter in the next 10 days. Short-changed in rain will be W IA/NE. The rest of the Midwest will see 0.75-3.00″ of rain into September 10.
- With rain to fall across much of the Midwest, a correction of the recent rally is ahead with the bulls likely to take profits on net long positions heading into the USDA Sept 11 crop report. History argues against a big drop in the US corn yield from August (in dry years) with high pod counts likely meaning the same for beans.