- Interestingly, the S American corn export pace is not keeping up with the USDA forecast. WASDE has been progressively cutting their S American corn export forecasts, and raising the US. Research argues that this trend will persist and that combined S American corn exports could still drop another 2-3.5 million mt. The US corn export outlook therefore appears bright. US Gulf corn is priced at $151/mt, back near its 3 year low. Gulf fob corn is extremely cheap when compared to feed wheat and barley. 2018/19 US corn exports look to be record large above 2,500 ` million bu.
- Chicago soybean contracts closed up 15-16 cents on Wednesday. A rally in the wheat market along with rumors that Argentina booked several cargos of US soybeans fueled the recovery. Funds were buyers of 7,000 soybean and 4,000 soymeal contracts. Argentine fob soybean basis has followed Brazilian offers higher as Chinese buyers scour the globe for non-US alternatives. Argentine soybeans are offered at $1.95 over Chicago vs Brazilian beans at $2.60. The US Gulf is offered at just ten cents over. Brazilian exportable supplies are nearly exhausted. Argentine traders are taking advantage of wide fob spreads to sell their soybeans to China, and replace with significantly cheaper US product for crush. If the products are exported, Arg crushers will avoid import taxes on the beans and export taxes on the meal and oil. Profit margins are large. Initial targets for Nov soybeans are $8.50 and then the 50-day moving average near $8.60. Large carries and weak basis will continue to encourage US farmers to store newly harvested crops.
- Dec corn rallied 2.5 cents on surges in neighbouring wheat and soybean markets. Chicago corn futures are deeply oversold, with funds’ short position having largely digested record US yields, a secondary seasonal bottom is due. We mentioned above the coming boost in US corn export demand, above what is already occurring, but US domestic use is also strong. Cash corn basis across the Plains rests at a steep discount to wheat. US ethanol production through the week ending last Friday totalled 309 million gallons, up 9 million on the week and up 2% from the same week a year ago. Ethanol stocks fell slightly amid a modest increase in export disappearance. Most important for biofuel markets is the ongoing rally in crude, which today hit $71, basis spot WTI. US crude stocks fell yet again to new multi-year low. Gasoline has recovered to $2.02, basis spot. Weekly export sales are estimated in a range of 40-45 million bu. Midwest corn yields are becoming more variable as the harvest pushes ahead. Questions about an IL corn yield of 214 bushels/acre persist. Chicago corn is, in our view, below value.
- US and world wheat futures rallied moderately for a second consecutive session. Of note is that a weekly close above $5.24, basis Dec Chicago, which breaks a downtrend line going back to August 7. The same is true in Europe, where a higher close on Friday will attract a flurry of spec interest. Funds bought 8,000 wheat. A complete lack of precipitation is forecast into early October across Central and Western Europe, Australia and much of E Russia. World futures did endure what we like to view as a correction in August, but outside the US, a very modest one. Note too that Dec Black Sea futures are inching towards contract highs. Deferred cash prices in Russia also suggest supply and demand there will be tight come December and beyond. Egypt’s tender results Tuesday validated the return of rising world fob cash wheat prices. Russian exportable supplies are in retreat and the EU is never going to come close to exporting what WASDE expects. We are bullish of wheat for a Q1 2019 top.