- Chicago soybean futures eased on Friday on pre weekend harvest hedge selling. Soybeans rallied a sharp $.40/bu following the USDA September crop report on end user pricing and short covering. November soybeans failed to exceed resistance at $9.80, but the market did forge a (bullish) weekly upside reversal. This will be noted by fund managers early next week. Traders/fund managers are not believing the USDA’s September soybean yield of 49.9 bushels/acre amid record soybean pod weights. They argue that unlike recent years, the acute Midwest dryness limited top pod formation/fill. Managed money is net short 4,408 contracts of soybeans, net short 32,000 contracts of soymeal and long a record 100,000 contracts of soybean oil. The huge fund soybean oil length is a market risk, but cash soybean oil basis continues to improve on sliding US stocks and strong demand from biodiesel producers. A modest correction could occur, but we doubt that December soybean oil can drop below $.335. Soybeans closed higher for the fourth week in a row and forged a bullish reversal. Midwest soybean yield data and S American weather will drive Chicago price action into early October.
- Corn traded in just a 3 cent range, with again limited news and outside influences noted. Crude ended mixed, but similarly uneventful, and amid warming temperatures harvest will expand northward rather quickly in the next several weeks. Combine yield data will drive short term direction. Managed funds through the week ending Tuesday were short 119,412 contracts in Chicago, up some 10,000 from the previous week, which is the second largest net short as of mid-September since record keeping began in 2006. Funds’ net position this evening is pegged between 115-120,000, the point being new bearish info has to emerge to attract new selling. Longer term, our view is that trend/above yields must be confirmed in S America for spot futures to trade below $3.40. It is far too early to say much about S American potential, but do highlight a rapidly building La Niña, and La Niña events in 2008 and 2011 pulled Argentine corn yield 14% below trend, it is certainly something to watch. Nearby, choppy trading and narrow ranges are expected.
- Larger than expected N Hemisphere (Russia namely) wheat crop size has been digested, and the market’s focus is shifting quickly to S Hemisphere prospects. Australia will stay nearly completely dry into late month, and yet more frost scares are possible in NSW this weekend. Freezing/near freezing lows will be widespread. Aussie and Argentine crops are being downgraded, but there is just too much wheat in exportable positions currently, and until late 2017/early 2018, Russia will stay aggressive. Russian interior prices fell again this week, posting new three year lows. S Russia replacement costs are pegged at $155/mt, which is likely to keep Russian fob offers into October stable at $182-187/mt, basis spot. As such, for the US to stay competitive, Chicago and Kansas futures must trade in a range of $4.30-4.60, basis December. Managed funds are short a net 83,745 contracts in Chicago, broadly unchanged on the week, and lofty European prices will push demand to the US beyond autumn