- HEADLINES: Funds add to bearish soybean bet ahead of USDA report; Corn firmer on soybean/corn ratio spread unwind; S American weather to gain into late October.
- Chicago futures are mixed at midday with corn higher while the soybean market sags to test $12.50 while wheat prices drop along with Paris futures. Fund managers are adding to their net short soybean position via the charts while cash rumours abound that China is back asking for US SRW Gulf wheat offers. China appears to be on a mission importing record amounts of feedgrain as their corn harvest is nearing the 50% completion mark. The Chinese demand for Brazilian corn and world wheat has some wondering if China’s corn crop is smaller than advertised or their feed demand is larger. Unfortunately, we will never know by the Brazilian purchases and exports of corn are rapidly growing and China imported a record amount of corn in September.
- Bearish bets are being made on soybeans/wheat ahead of the USDA report. In soybeans, traders are raising their US soy yield estimates based on the nearby trend of improving farmer reported yields while the US wheat balance sheet will reflect the finding of additional crop and feed/residual use. US 2023/24 wheat end stocks are expected to rise due to the 73 million bu of additional supply, with feed/residual adjusted upwards by 25-40 million bu. Midwest corn ethanol producers are buying futures as cash corn is tough to secure with rain looking to slow the harvest across the Northern Midwest for 4-6 days.
- Chicago brokers report that managed money has sold 3,100 contracts of Chicago wheat, 900 contracts of corn, and 5,400 contracts of soybeans. In the products, funds have sold 2,100 contracts of soymeal and are flat in soyoil. Funds sold soyoil early and are trying to cover all their sales at midday.
- The USDA reported that China booked 121,000 mt of US soybeans for the 2023/24 crop year. We hear that China has booked an additional 2-3 cargoes of US soybeans off the PNW this morning. Chinese crush margins have been dropping sharply amid the sharp drop in soymeal futures following their weeklong holiday. The Chinese pork industry is struggling with over supply.
- We understand that farmers in Mato Grosso have halted soybean seeding awaiting a germinating rain. High temperatures are staying in the 90’s/lower 100’s and aggravating soil moisture shortages. The big question is when will the normal Monsoonal flow begin from the Amazon. Today, it is too early to be overly concerned, but by month end the rain needs to drop to avert replanting or pushing back the seeding of winter corn to early to mid-March. S American weather will gain in Chicago market importance following the USDA October Crop report. The October USDA report will determine US corn/soybean crop size for 2023. It is S American weather that will direct world grain and oilseed values into yearend. We believe this is because Brazil’s soybean crop at 160 million mt implies that a 5% yield loss equals 8 million mt. The importance of S American crops has never been higher amid its importance on future US corn/soybean export demand.
- The midday GFS weather forecast is slightly drier for the NE Midwest with the rain that starts today and continues into the weekend. The rain falls across the northern half of Nebraska and eastward into N Illinois/Michigan. Rain totals range from 0.5-2.00” with locally heavier amounts. The remainder of the southern US stays arid with warming temperatures starting mid next week. The C Plains will hold in a below normal rain pattern. HRW wheat seeds will need rain for proper establishment before the onset of colder temperatures in November. We will change to updating S American weather as the US corn/soybean harvest nears/surpasses 50%.
- Is the glass half empty or half full? The trade is clustered around a 173-174 bushels/acre US corn yield and a soybean yield of 50 bushels/acre. NASS pulled and dried down ears in September and any corn yield deviation should not be large. The more difficult question centres around September Central US weather and whether heat/dryness had any impact on US soy yields. We look to 49.5 bushels/acre in October and a final US soy yield of 49.0 bushels/acre. However, it is US export demand or adverse S American weather that is needed to sustain a post report price trend. Fund managers are going net short soybeans.