- Corn, soybean and wheat futures are higher in mid-session trade with selling absent ahead of Thursday’s USDA Sept Crop Report. The volume of trade has been light to moderate with short covering featured amid a lack of aggressive selling.
- Research argues that seasonal lows are being formed. We note that the 2018 USDA September Crop Report was bearish, but that a seasonal bottom was forged just three days after, which ended up being the seasonal/annual low.
- We see no reason why 2019 corn, soybeans and wheat cannot forge their seasonal lows either right before (Monday) or right after the USDA September report. Once farmers start their harvest, we would expect that cash sales will be modest, and that there will be a basis pull to get grain away from the farmer.
- And the US 2019 harvest is going be a long drawn out affair with wide swings in crop quality amid the latent spring seeding dates. We doubt that December corn will fall much below $3.50 or November soybeans too far below $8.40. In the case of wheat, spot KC futures at $3.62 should have forged the bottom.
- Chicago brokers estimate that funds have bought 3,500 contracts of corn, 2,300 contracts of wheat, and 4,500 contracts of soybeans. In soy products, funds have bought 2,400 contracts of soymeal and are flat of soyoil.
- Further research argues that the NASS soybean yield estimate could hold a bullish surprise on Thursday. For the 10 million acres that were not podding as of September 1 (6.1 million acres still not podding as of September 8), NASS is likely to use a low-ball yield to reflect the high risk of a sharp drop in yield before the end of the growing season. It takes 54-60 days to go from pod to a soybean seed for harvest, that puts these non-podded Midwest soybeans into late October or early November. The chance that non podded soybeans will produce more than 5-12 bushels/acre of soybeans is rather low.
- There are suggestions that Brazilian dryness could persist into at least mid-October. The drying trend could persist longer, but amid the cool ocean waters off each side of Brazil and the Lack of El Niño, the weather risk for Brazilian crops is elevated. on Sept 10 it is premature to become overly worried, but it is a weather trend worth highlighting with early Brazilian soy seeding needed to fulfill China demand in January/February, and for the timely planting of the winter corn crop.
- There are reports that China is expected to agree to secure more US ag goods in the hope of a better trade deal with the US. The headline rallied Chicago. The headline argues that China is expected to secure US soybeans and meat products. US pork/beef are the products that China needs most. CME Livestock futures have rallied strongly on the news with rumours that China is back checking prices and making some initial purchases.
- The midday GFS weather forecast is slightly wetter than the overnight run, but the forecast is basically consistent with the overall pattern; high-pressure ridge across the Central US with a zonally flowing jet stream produces warm temperatures and wet weather conditions across the N Plains and the Upper Midwest. There is no evidence of any frost/freeze into Sept 26. A hurricane is forecast to track across the far W Atlantic. This storm shifts the ridge west to the Rockies and draws cooler temperatures south. The temperatures are not cool enough for a freeze.
- Growing concern about premature death of the US corn crop due to disease/lack of nitrogen, along with the potential for progress in US/China trade is producing a Chicago seasonal low. The USDA report looms, but even if the report is bearish, we doubt that any break will be sustained.