- HEADLINES: China buys 5-6 cargoes of French wheat; Wet weather topples E Midwest corn; Ukraine corn too wet.
- Chicago futures are bouncing with wheat in the lead on rumours of Chinese buying of French wheat. Corn/soybeans have traded positive and negative with momentum funds selling rallies with 50% of the US corn/soybean harvest left to complete and pre-weekend hedge pressure expected on Friday. The charts are pointed down, but the short-term momentum funds had become too bearish and were covering recent sales. We see strong support below $12.00 in November soybeans, $5.00 in December corn and under $7.20 in December KC wheat. A higher Chicago close is expected with talk of harvest lows being offered.
- FAS will release their export sales estimates on Friday due to Monday’s Columbus Day holiday. FAS announced the sale of another 130,000 mt of US soybeans to an unknown buyer this morning. The cargo size points the finger at China as the buyer with estimated US soybean purchases totalling over 1.0 million mt this week. The USDA should release strong export sales totals on Friday morning with US corn and soybean sales ranging from 1.1-1.5 million mt (each) and wheat sales of 325-400,000 mt. US cumulative corn sales are the second largest on record and project that the USDA is understating 2021/22 US corn exports.
- China is rumoured to be booking French wheat with as many as 5-6 cargoes selling according to EU export sources. Asian watchers argue that China is using TRQ’s to make the purchase. What is unknown is whether China is using old or new TRQ’s. A year ago, China issued TRQ’s in October for wheat and corn purchases. The TRQ’s licenses are good for 1 year. China may be cleaning up old TRQ’s before issuing the next batch for 9.4 million mt of wheat and 7.2 million mt of corn. The US’s win against China in April of 2018 makes it costly for China should they not purchase WTO pledged amounts. Paris wheat futures rallied and closed strongly on the China wheat rumours.
- US ethanol production was record large last week at 303 million gallons. This was up 10% from the week prior and shows that near record large US ethanol margins are pushing plants to produce to capacity. We look for ethanol output to hold above the 2019 level well into early 2022. US ethanol stocks fell 1% to 834 million gallons amid strong demand. The fall in US ethanol stocks was the bullish surprise of the report. The rising price of gasoline makes US ethanol look cheap at $2.21/gallon. Corn ethanol plants are raising cash corn bids to secure supply. We calculate that ethanol plants are making $1.14/bu of corn that is processed.
- The Ukraine corn harvest is making slow progress amid wet fields and seed that just won’t naturally dry down very fast. Amid the soaring cost of EU natgas, we calculate that it takes more than $1.00/bu to dry 25% corn down to 12-14%. Farmers facing this big cost would rather just leave the crop in the field. This is causing Ukraine exporters huge problems as demurrage costs rise on vessels waiting to load. Demand could be shifted back to the US Gulf.
- A slow-moving front will push east across the Eastern US into the weekend. Rain totals are estimated in a range of 0.25-1.25” with locally heavier amounts. Following that rain, a 7-9 day period of dry/mild weather follows. The E Midwest is so wet, that it will take 4-5 days of dry weather before harvest resumes.
- US export sales are increasing while China is securing milling wheat in France. The world wheat market cannot accept much fresh demand without posting new highs with Paris December futures targeting €280.00/mt. E Midwest farmers report that the wet weather has toppled corn with harvest to be slow/difficult from here forward. Yield losses are unavoidable in downed fields, how/whether that will impact yield and final output remains to be seen.