- The morning has been mostly red, and not just in ag markets. Crude is down $1.70/barrel at $73.30, basis spot WTI. Emerging market currencies are weaker. EU milling wheat futures look to settle down €.75-1.00/mt. Oilseed markets worldwide have found renewed selling interest ahead of Thursday’s USDA data, with EU and Canadian rapeseed contracts down $2-4/mt.
- USDA reports since July have been bearish relative to expectations. However, prices have bounced back rather quickly following the August report. Our point is that both the bulls and bears are wary of large new positions ahead of what is usually a major USDA release. Supply will be weighed against strong US corn demand, and as the US wheat market begins to find non-traditional export destinations.
- Other news this morning is lacking. No new daily export sales were reported. The US administration’s decision to allow year-round sales of E15 is being a bit more scrutinised. On the margin, this will boost US domestic corn consumption. However, this boost is estimated by the trade to range from 25- 200 million bu. It is our opinion that finding new export markets for US ethanol is more important than changes to domestic blend volumes. Hurricane Michael has made landfall in FL/GA as a Cat 4 system. The eye of the storm will impact the Southeast in the next several hours. Michael then moves quickly across the primary corn/soybean areas of GA, SD and NC. Only a small percentage of the US total crop is at risk, but grain flows across the Southeast (poultry operations) could be affected. Rainfall accumulation in the Southeast is estimated at 2-6” in the next 48 hours. Other world weather patterns are little changed at midday. Favourable rains will continue to fall across a majority of Brazil’s Ag Belt into late October. Little/no rain is offered to Central and Western Argentina, where developing dryness is being watched more closely. The Aussie forecast is wet across the driest areas of NSW in the East over the next 7-8 days, but this will only work to boost soil moisture ahead of spring planting there.
- The central US GFS weather forecast is little changed from the morning run, but importantly the model maintains a lasting patter of dryness beyond the next 24 hours. Outside of the S Plains and Southeast little/no meaningful precipitation is forecast into the final week of October. Temperatures stay cooler than normal, with freezing overnight lows to drop into NE, IA, and N IL periodically over the next 10 days.
- The fear of another big yield increase is still apparent, but we expect the market to digest any US production increases rather quickly. Ahead of Thursday’s release, we estimate that managed funds are short a net 70,000 contracts of corn, 60,000 contracts of beans and 20,000 contracts of Chicago wheat.