- Chicago futures are mixed at midday following the overnight trends of firmer wheat/soybeans and weaker corn. The corn market lags the gains in soy/wheat on spread unwinding. There was not much weekend movement of US cash grain with harvest limited and everyone focused on the coming USDA report and international events. We look for a firmer close as funds cut a portion of their net short position. Traders have a bias of wanting to buy a bearish corn and soybean report on Wednesday. Chicago brokers estimate that funds have bought; 3-4,000 contracts of wheat, 2,400 contracts in soybeans, and 3,200 contracts of soymeal. Funds are flat in soyoil and corn. Funds were early sellers of 2,600 contracts of corn but have come back to repurchase much of that amount by midday.
- ABARES estimated the Australian wheat crop at 19.1 million mt, the barley crop at 8.3 million mt and the canola crop at 2.8 million mt. 2018/19 Aussie wheat production was down 10% from last year, with barley off 7%, and canola down 24%. USDA has the 2018/19 wheat crop at 22 million mt in August but is expected to reduce their crop estimate by at least 2 million on Wednesday. We note that September is the most important month for Australian rainfall and the ongoing arid climate is likely to cause a further production decline in the ABARES crop reports to come. We note that E Australian hay prices have rallied $200/ton in the past two weeks to $550/mt as feed supplies become extremely scarce, as rains are not making grass (normally occurs in spring). The shortfall of feed has rallied E Australian feed wheat prices to $42-440/mt delivered Darling Downs. Since Australia does not allow grain for any world origin (other than the UK) to be imported for feed, a sizeable amount of the W Australian wheat harvest will be imported into Brisbane and used to maintain their livestock breeding herd. Total 2018 Aussie grain production at 33.2 million mt is the lowest in a decade when production fell to 25.4 million mt. We see Aussie 2018/19 wheat exports abroad at 12 million mt, compared with the USDA forecast of 16.0 million.
- Russia has exported a record 11.4 million mt of wheat since July 1. Russia is exporting an average 1.25 million mt of wheat/week. It only takes another 11 weeks for the 25 million mt Russian Ag ministry threshold to be reached. Russian Deputy PM Gordeyev validated this morning that Russia will restrict its wheat exports once sales or shipments reach 25 million mt. Like 2014, an export tax is expected.
- US weekly export inspections for the week ending Sept 6 are; 30.0 million bu of corn, 34 million bu of soybeans, and 15.8 million bu of wheat.
- Argentine grain/soy markets are near comatose as farmers/traders debate new export taxes at a fixed currency rate. Most farmers will not sell old crop grain amid the tax, which is making commercial replacement difficult. Argentine meal sales are dramatically slowing which is offering a US export opportunity.
- The central US GFS weather forecast stalls Hurricane Florence farther to the east and produces inundating rains over coastal N Carolina and the Atlantic. Much of the Midwest holds in a warm/dry flow for ten days. This will help advance the harvest. Only MN/WI are subject to heavier rainfall into September 20.
- Talk that China may end its weekly auction of Government rape/soy is offering support amid a weekend frost event across Heilongjiang. This is China’s primary soy production area. Otherwise, Chicago focus is on Wednesday’s USDA report (corn/soy yields). We see wheat as forging a trading low.