- Chicago corn/soybean futures have rallied to sharp morning gains. November soybeans pushed above $8.75 resistance and triggered a new round of fund short covering. December corn futures keeps pushing to a short-term target of $3.80- 3.85 while the wheat market is languishing in its recent trading range. Dec KC wheat needs to close above $5.32 to confirm a new rally effort. Wheat charts are sideways as wheat/corn and wheat/soybean spreads are being liquidated. Our view is that we are heading for a higher close in the summer row crops, and that a short-term peak in the soybean market to be forged on Tuesday. The Midwest harvest restarts late week and cash soybean availability will be uncovered by Friday.
- US soybean harvest progress has been slow via persistent wet Midwest weather amid variable temperatures. Quality concern is noted amid damaged or sprouted soybeans. Interior elevators have been reporting quality issues in the Delta, and those concerns are now spreading north. Quality discounts exist on damaged soybeans above 8%. Historically, quality reductions are not bullish as it causes reduced margins for crushers and exporters. The USDA weekly export inspections report for the week ending October 11 were; 39.2 million bu of corn, 42.5 million bu of soybeans, and 16.6 million bu of wheat. All combined, weekly exports of the three principle crops were 98.3 million bu vs 92.7 million last week and 90.6 million bu last year. For their respective crop years to date, the US has shipped out 269 million bu of corn (up 115 million or 75%), 173.5 million bu of soybeans (down 93 million or 35%) with wheat at 287.2 million bu (down 104 million or 27%). The wheat and soybean export pace are disappointing. NOPA reported a record Sept soybean crush rate of 160.8 million bu compared to 136.4 million bu last year and the prior record set back in 2007 at 139.8 million. The crush was better than expected, but it is too early yet for USDA to raise their annual forecast. One reason why the Chicago soybean market has not declined more sharply is based on extremely strong crush margins and willingness of crushers to secure any cash related decline. NOPA soyoil stocks were 1,531 million pounds. This compared to 1,302 million pounds last year and 1,623 million pounds in August.
- The midday central US weather pattern shows that a ridge/trough pattern will hold across N America over the next two weeks with some eastward progression next week. The pattern will allow for improving harvest conditions as soils firm. We note that very cold air evident will moderate on the weekend and next week. Instead of temperatures being 15-20 degrees below normal this week, the warming will take readings to 3-8 degrees below normal. Some rains push back into the W Midwest during the closing days of October, but there is no evidence of a return of near to above normal rainfall. The weather pattern has improved for the Central US harvest during the next two weeks.
- Funds have been huge buyers of soybeans/meal this morning which has pushed spot futures near $8.90 basis November. Our upside price targets are being reached. We see spot Chicago soybeans as caught in a $8-9.00 trading range. Corn and wheat are following soybeans, but it will be tough for March corn to rise above $4.00. The bullish stalwart is wheat when Russian wheat exports slow. We are preparing to turn bearish soybeans as November pushes above $8.90.