- Chicago mixed at midday; Wheat gains on row crops; Crude adds risk premium; S American weather unchanged, favourable.
- Chicago ag markets are mixed ahead of USDA’s WASDE, with wheat higher on expanding geopolitical risk, following yet another Russian missile strike on a grain-carrying vessel in Ukraine, and lingering dryness in S Russia, while row crops trade slightly weaker. Export sales in the week ending Oct 4 were solid but have failed to spark real bullish enthusiasm. Improving S American weather and probable hike in US corn yield in Friday’s report are cited. Spot WTI crude at midday is up $2.10 at $75.40 on renewed fears of disruptions to Mid-East production and exports. We see crude at $75-77 as being the upper end of fair value but acknowledges war-based risk does exist. Israeli retaliation prior to November feels unlikely but can’t be ruled out.
- Financial markets are flat. US CPI in September featured growth in price of 2.4%, slightly above expectations and underscores the sticky nature of the labour and energy markets. Most important is that the US dollar was unable to score new lows late September. Debate over future rate cut frequency and intensity resumes.
- US export sales in the week ending Oct 3 included 48 million bu of corn, vs. 66 million the prior week and vs. 36 million in the same week a year ago. US wheat sales were 15.9 million bu, vs. 16.3 million the previous week. Soybean export sales totalled 46 million bu, vs. 53 million the previous week and 36 million the same week in 2023. Demand has been funnelled to the US, but very close attention must be paid to forward Brazilian soy fob premiums, as rain becomes more widespread there and exporters become more comfortable offering soy in the world market for February arrival.
- For their respective marketing years to date, US exporters have sold 695 million bu of corn, up 15% year on year, 443 million bu of wheat, up 19%, and 740 million bu of soybeans, up 4%. We note weekly corn sales must average only 33 million bu/week to hit USDA’s forecast, and wheat sales must average only 11 million. But only wheat exports have the potential to be increased in USDA’s Oct WASDE. It is just too early in the crop year to adjust annual corn forecasts.
- Meal export commitments at the first week of the crop year sit at 4.9 million mt, up 7%. Soy oil commitments total 175 million lbs, quadruple that of a year ago.
- Hurricane Milton has exited Florida, and the midday GFS weather forecast hints at only light rain across portions of the W Midwest over the next 10-12 days. Harvest continues smoothly, but drought/abnormal dryness is now spread across much of the Central US. It is of course not an issue today, but some measure of moisture replenishment is desired across the S and C Plains. Yet more Gulf tropical activity is advertised Oct 20-22. This is much far too out to place much confidence in, but model guidance indicates tropical storm season isn’t yet over.
- The midday GFS weather forecast in S America is nearly exactly unchanged from the morning solution. Showers in Mato Grosso, Goias, and Mato Grosso do Sul will be scattered in nature for another 4-5 days before daily rainfall becomes more common. Precipitation accumulation of 0.75-2.00” blankets most of Brazil in the 6-10-day period. Regionally heavy showers also benefit key areas Cordoba and Buenos Aires next Mon-Wed. S America’s climate pattern is improving. Most notable is that Arg and S Brazil will avoid drought in October despite a cooling equatorial Pacific.
- It remains imperative to use seasonal strength in corn and soy to move along cash sales. Rising Ukrainian corn fob premiums do keep US corn’s export potential bright through winter, but our concern is one of rather weak S American cash markets thereafter. The soy market becomes oversupplied without S American weather issues in Dec-Jan. Wheat still has the best fundamental story as Black Sea geopolitical risk collides with the need for heavy rain in Russia in late Oct/Nov.