- HEADLINES: NOPA crush grows, Soyoil stocks greater; Midwest corn yields disappoint; Funds back buying corn.
- Chicago futures are sharply higher at midday with corn/wheat leading the upward charge for the second day in a row. Friday’s high was exceeded in corn/wheat which spurred fresh chart buying with the soy complex able to shrug off bearish fundamental news of China/unknown destination soybean sales cancelation, and the shifting of that demand to Brazil amid their acute need for supply. We believe that China secured at least 8 cargoes of Brazilian soybeans for late September/October paying more than a $3.00/bu premium to Chicago. This shift of demand is likely due to the Gulf woes due to Ida, and China’s short bought position in the soybean market. Another 5-6 cargoes are in the works today which should get close to cleaning out Brazil of old crop exportable soybean supply. December corn futures are testing the 20 day moving average at $5.33 with the 50 day at $5.44 and the 100 day at $5.56.
- Surprisingly, US farm selling has not been very aggressive on the rally with Missouri showing an increase in cash corn movement while E Midwest farmers try to better understand early corn/soy yield trends before adding to their sales. On average, US farmers have sold at least 50% of their 2021 summer row crop production and on farm storage can hold the rest. We would doubt that the US farmer is going to make the same mistake as last year and sell at harvest.
- Chicago brokers estimate that funds have bought 3,100 contracts of wheat, 9,800 contracts of corn and 2,400 contracts of soybeans. In soy products, funds have bought 3,500 contracts of soyoil while selling 1,200 contracts of soymeal.
- Early corn harvest data continues to be disappointing with disease laden fields yielding 10-40 bushels/acre less that field surveys/farmer expectations. The disease pressure on corn increased dramatically during August/early September with E Midwest fields prematurely dying. Tar Spot, Anthracnose, Northern Leaf Blight, GLS and Southern Rust are the disease culprits. Stalk quality is exceptionally poor, and some corn plants are simply falling over. Any strong thunderstorm complex that produces gusty wind risks tangling corn fields and elevating harvest losses. We estimate that 7-8% of the US corn crop is cut, but that harvest must reach closer to 20% for a more accurate US yield trend.
- NOPA reported that their members crushed 158.8 million bu of soybeans during August, above the July crush rate of 155.1 million and trade estimates of 154-155 million bu. Last year the US crushed 165 million bu, so the lack of US soybeans maintained a lower US crush rate. We look for the US crush rate to expand with the new crop harvest in October. US soyoil supplies were larger than expected at 1,668 million pounds, well above July’s 1,617 million pounds and the average trade estimate of 1,555 million pounds. The larger August soyoil supply pulled Chicago futures down from their highs. Soymeal exports jumped to 856,619 tons, up from 719,508 tons in July. We continue to maintain that the USDA is too low with their 2021/22 soybean crush amid renewable diesel demand.
- We understand anxiety about soybean yields, but it is just too early to make any valid assessment. It will be another week or 10 days before a yield trend can be established. Just 40% of the US soybean crop was dropping leaves as of Sunday, 10 days of warm/sunny weather will help spur harvest.
- The world has lost more than 60 million mt of grain since March amid the Brazilian winter corn drought, a Canadian drought, and Russian drought amid disappointing winter wheat yields. The US was the one area where large corn/soybean crops appeared to be assured. This pressured Chicago values into the end of summer. However, early US corn harvest yield data is casting doubt on the size of the US summer row crop harvest. End users are extending forward coverage and new speculative buying is eyeing the bull opportunity.
- Like last year, the September Stocks report will be key amid the measurement of June-July-August wheat feeding and final US corn/soybean end stocks. The extremely strong cash basis on September 15 makes it feel like US corn /soy stocks were smaller than forecast. Our point is that any loss of 2021 US corn/soy crop is amplified due to world losses and record low exporter corn/wheat stock/use ratios.