- It was a lower start to the week with futures focused on the deepening Trump trade dispute with China and the onset of a record large US soybean harvest. Funds were estimated sellers of 4,500 soybeans, and 3,000 each in the soy products. US soybeans are quickly maturing. NASS reported that 67% of the US crop was rated as good or excellent, down 1%. National US harvest progress was pegged at 6% complete versus expectations of 5%. Most of that fieldwork has been done in the Delta States, with LA at 51% and MS at 33%. In the north, ND led harvest progress at 10% and MN had 7% of the crop cut through Sunday. Chicago soy fell as President Trump promised to announce new tariffs against China after the close of business Monday. This would likely derail high level US/China trade talks to be led by Treasury Sec Mnuchin. That negotiation was to start next week. China will not negotiate in good faith with the US a tariff gun pointed at them. Support rests at $8.10 November and with spreads near full carry, US farmers will store their crop.
- Dec corn fell 4 cents on concern that the Trump Administration would ramp up its trade dispute with China. This would more directly impact soybeans, but corn is following in sympathy. Funds were net sellers of 6,800 contracts of corn futures. We would highlight the ongoing strength in world energy markets, with ethanol blending margins historically high. Brazilian ethanol prices continue to move seasonally higher. Like recent years, sizable US ethanol exports are expected beginning in Oct/Nov. A story is developing for US ethanol exports. NASS pegged US harvest at 9% complete, vs. 6% on average. It is important that daily harvest yield reports are highly variable. Such yields do not validate the NASS 181.4 bushels/acre yield, but additional harvest progress is needed. US farmers were active sellers of old crop corn in late August. However, most look to store as much of the new crop harvest as possible. Unless fund managers want to put their foot on corn futures, it will be difficult to find aggressive new sellers. This is not the time or place to become bearish of corn. December corn futures are below value at this time in our opinion.
- Modest fund liquidation continued despite overnight frost/freeze in Australia and as other world markets rallied. Matif in Paris ended €0.50/mt higher, basis spot. Black Sea futures rallied $1-3/mt, with the best gains occurring in deferred months. Gulf wheat’s position in the world market has improved. It is clear the US market’s recovery will be led by the world cash market. Russian wheat exports continue at a record pace (at multi-year high prices). We expect Russian spring wheat yields to be down sharply amid snow and cold weather. Russia’s domestic wheat market continues to surge, particularly across the interior of the country on a shortage of quality of supply. Egypt’s GASC is in for early and mid November shipment. Amid the wheat quality checks by Russian authorities, we expect that offered fob prices will be higher. Another round of freezing temperatures will impact SE Australia overnight. The GFS weather model features expanding snowfall in early Oct across Siberia, where spring wheat harvest is significantly delayed. US winter wheat planting is 13% completed vs. 14% on average. Declining Russian/Australian/Canadian production is further tightening world exportable supplies. Buying further price breaks is our considered view.