- HEADLINES: Chicago soyoil/wheat values post strong gains at midday; Funds show new interest in Chicago grain; GFS weather forecast wetter beyond September 19.
- Chicago futures are mixed at midday with soyoil/wheat the upside price leaders with soybean/soymeal futures sagging on oil share spreading. The volume of trade is in recovery with brokers indicating that new investment funds are back looking at the grain markets as the gyrations of the summer weather market have passed. The multi-year low price of corn/wheat are seen as enticing to fund managers with a potential top in the US dollar forming, and S American farmers preparing to seed their next crop under production margin duress. Commodities are seen as an asset class to invest in now that the US Central Bank is nearing an end of rate hike cycle.
- The USDA defined US 2023 corn, soybean, and the sorghum crop sizes in their September report. The next important set of USDA reports will be released on September 30, final US 2022/23 corn, soybean, and sorghum stocks and the 2023 Final Small Grain Report. Based on the March and June Stocks reports, we forecast that NASS will find larger feed/residual use of corn and a smaller 2022 US soybean harvest (captured in the residual). WASDE awaits September stocks totals before making final adjustments to the 2022/23 US corn and soybean balance sheets. Based on the sheer strength of the Midwest cash markets, we forecast that 2022/23 US corn/soy end stocks were curtailed.
- The US Labor Department indicated that US August inflation was 3.7%, right at industry estimates. The increase was due to a spike in US gasoline/diesel prices with the US Central Bank likely to see the rise as transitory as US refinery capacity is switched to producing heating oil for the coming cold weather season. US food prices were up 4.3% year on year with food away from home up 6.5%. Frozen vegetable prices were up 14.7% while uncooked beef gained 10.7% and set a record retail monthly price.
- Chicago brokers report that managed money has bought 5,400 contracts of soyoil and 4,600 contracts of Chicago wheat and a net 3,900 contracts of corn. Managed money has sold 4,300 contracts of soymeal and 4,700 contracts of soybeans.
- Hungary has joined Poland in signaling a national ban on Ukraine Grain imports starting September 15 to prevent their local cash markets from being swamped with supply. In fact, the EU ag minister is pushing to extend the ban on Ukraine grain and only allow transit of Ukraine grain to African or SE Asian markets through sealed cargoes. Ukraine corn is offered at the EU border today at $2.80/bu. Of course, this does not allow transit cost to the port of Varna or Constanza, or even a Baltic port. Although it is sketchy to work the sale price back to a Ukraine farmer, we calculate that the bid for interior Ukraine new crop corn is below $2.00/bu, which causes massive financial hardship for farmers. Based on this extremely low price, we have concern that Ukraine farmers will just leave their corn stand in the field awaiting a recovery in profitability. It makes little financial sense to harvest the corn!
- The Central US weather forecast is like the overnight run with limited rainfall across the Midwest over the next 5-6 days. Any rain will be confined to the Southern Plains. The Midwest/Delta harvest will be accelerating in the days ahead. High temperatures will be cooler than normal into the weekend and then warm next week back to the upper 70’s to the lower 90’s. No frost or freeze risk is evident.
- Improved rainfall will drop across the Plains and the W Midwest beyond September 18 with totals across Iowa/Missouri reaching 1.50-2.00”. This rain will help to increase the flow of the Mississippi River and barge traffic. The storm system should slowly pull through the E Midwest after September 24.
- Funds are short a near record amount of wheat when Paris and Chicago futures are combined, which adds to the upside risk should the Ukraine war spread to Russian grain loading ports. The non-Black Sea exporter stock/use wheat ratio is historically low. It is Russian wheat price aggression which pressed futures. US soyoil values are rising on record large domestic demand tied to renewable diesel. US diesel prices are rising on tightening stocks. Soyoil is outright bullish on demand!