- HEADLINES: Massive fund selling sends ag markets lower; Markets shift focus to demand following October yield update.
- World ag futures, except for rapeseed/canola, are sharply lower at midday. International corn markets are fully digesting Tuesday’s slightly bearish USDA data, while it is difficult to find a catalyst for today’s plunge in wheat contacts. Paris milling wheat futures as of Tuesday evening were heavily overbought, and the market there could lose another €5-7 €uro per ton and still be in a clear longer-term bullish trend. Global crude oil futures steady to slightly lower. The Dow is down 170 points as US inflation is maintained and as elevated food/energy prices will stay intact until supply issues are resolved by increased production. US crude stocks as of Oct 8, to be released Thursday, are expected to stay 60-65 million barrels (14%) below last year.
- The US CPI in September was up 5.4% year-over-year, slightly above expectations, with food and beverage inflation rising 4.5%. We have highlighted the difficulty in finding raw material inflation amid sizeable growth in global per-capita incomes in 2021 and 2022. Recall GDP growth in both emerging and developed markets will likely exceed pre-Covid levels in calendar year 2022. There remains an investable story for US/world ag into spring.
- FAS’s daily reporting system featured US soybean export sales of 528,000 to China and unknown destinations. Exporters also sold 162,000 tons of corn to unknown destinations. Key to a lasting price recovery in the near term is an acceleration in export demand following bearish USDA data, and focus moving forward shifts from debating yield to measuring the pace consumption. Daily/weekly export sales must be monitored closely. A boost in sales is needed to offset demand damage caused by the Gulf’s closure in early September. End user response to current prices amid very profitable margins is critical over the next 30 days.
- Newswires report that Iranian wheat imports may reach 8 million mt in 2021/22 following this year’s crop failure. Sources suggest Mid-East wheat production has been dramatically understated all season, and active buying from the region has contributed to record global wheat trade through early October. USDA in its October Report pegs 2021/22 Iranian wheat imports at just 4.5 million mt. Imports of 8 million, if realised, would be the largest since 2008/09.
- Wheat’s issues remain numerous. The Argentine government issued a statement indicating GMO wheat there can only be used for seed, and in reality, producers are expected to destroy all GMO varieties. Measures will be taken to prevent GMO wheat from finding the marketplace. There will not be certainty over Argentine wheat trade flow for some time, but there is no tolerance for additional world wheat supply dislocation.
- The midday GFS weather forecast is consistent with the overnight run in that a slow-moving front continues to push eastward across the Central US. The best rains are forecast to fall across the E Midwest in the next few days. Rainfall totals are estimated in a range of 0.25-1.25” with locally heavier amounts. Following that rain, an extended period of dry and mild weather is forecast. The arid conditions will allow for the harvest to be completed and for the winter wheat seeding pace to push ahead. Central US weather leans favourable for Midwest crops into late October.
- Massive fund selling is pummelling corn, soybean, and wheat futures. The selling in the summer row crops is the leftover bearishness from Tuesday’s USDA crop report. China is said to have purchased another 4-6 cargoes of US soybeans on the morning break. China is picking up its soybean purchase pace. The next downside support rests at $5.00 December corn and $11.70 November soybeans. The break in wheat makes no sense with world fob prices rising.