- HEADLINES: Chicago markets lack direction following early-week recovery; NOAA climate forecast features autumn dryness in S Plains.
- Chicago futures are flat in mediocre volume at midday. Fresh input is lacking, and the trade now waits on additional yield results from the principal Midwest and waits for Gulf loading capacity to expand in the weeks ahead. CHS says its Myrtle Grove, LA facility will be ready by peak harvest but otherwise the exact rate of weekly shipments will remain uncertain into early/mid-October.
- We do note that international markets are firm. Spot Paris milling wheat is up €0.25 per tonne. Paris rapeseed is up another €9 per tonne and looks to touch €600 per tonne for the first time since April, and second time in history. Brazil’s interior corn price index remains perched at $7.55 per bushel. Spot Chicago oats have scored a newer 7½ year high at $5.50, basis December. Note that Dec Chicago oats carries a premium to corn of $170 per ton, also the highest since 2014. Solving oat and spring wheat supply tightness will be incredibly difficult this year amid the lack of Canada’s exportable supplies.
- Weekly export sales are supportive wheat/soy but corn sales were rather weak, though this was not unexpected given the lack of fob offers in early Sep.
- Corn sales through week ending Sep 9 totalled a meagre 10 million bu, vs. 36 million the previous week. There were no cancellations to speak of, but rather new interest was hindered by the closure of Gulf operations. Soy sales totalled 46 million bu, vs. 54 million the prior week. All-wheat sales totalled 23 million bu, vs. 14 million, following last week’s sizeable reported HRW sale to Nigeria. Wheat and soy markets benefit more from logistic capabilities across the West Coast. We also note that US wheat sales moving forward must average only 13 million bu to meet the USDA’s forecast. Wheat export potential, longer term, stays bright amid the lack of milling supply in western Europe and bullish seasonal trends in cash prices worldwide.
- NOAA’s monthly long-term climate update pegs the odds of La Niña development at 70-80% by winter. IRl’s associated S American climate forecast includes high odds of widespread drought across key areas of Argentina and Southern Brazil. The global feed market cannot tolerate additional supply dislocation, and any hint of first-crop yield loss in Brazil adds a new leg to Brazilian corn’s long-term bull market. Recall some 30% of Brazil’s first corn crop is grown in RGDS an d Santa Caterina, states in the bullseye of projected drought development.
- NOAA climate guidance also features warmth and dryness across the Southern Plains and Southwestern US in the Oct-Dec period. Drought development is likely by early winter across the bulk of the US HRW Belt. PNW soil moisture will be replenished via active autumn precipitation.
- The midday GFS weather forecast is much drier than the overnight release across all areas but New England. Expansive high pressure ridging meanders into the heart of the Midwest on the weekend, and this upper air pattern cuts off precipitation entirely from the Central US. Cooler but still very dry conditions are projected in the 6–10-day period. Harvest rolls along smoothly into the first week of October. Additionally, there is no risk of frost in the next 10 days, and max highs temperatures in the 80s and low 90s return to the Dakotas and MN on Sunday.
- Chicago ag markets last week were too cheap given high global cash markets and concern over the details of US corn and soy yields. A lasting recovery lies ahead, the intensity of which will be determined by combine data and Gulf loadings in the next 30 days. Breaks remain buying opportunities for end users.