- HEADLINES: Corn bounces on the lack of farmer sales; Russian spring wheat quality in rapid decline; GFS midday weather forecast wetter for the Midwest.
- Chicago grain futures have been back and forth today. Fund managers were there to sell an early rally, but the US cash corn/soybean markets are starting to stabilise with basis bids firming amid the lack of cash grain movement.
- US farmers are harvesting corn, but the movement into the cash market is modest and related to prior contract sales. Producers will not sell open corn across the weighbridge and prefer to place the grain into farm storage. Note that basis levels relative to recent years are far weaker, and farmers fought with low basis offers throughout most of the 2023 crop year. Producers are not willing to sell cash corn at $0.20-0.60 under in the W Midwest or $0.05-0.25 under in the E Midwest. US farmers are hopeful that cash bids stay cheap through October to collect their revenue insurance checks. A cash rally in November would be ideal that allows US farmers to collect on both sides , 1) Revenue insurance and 2) From gains in cash basis and flat price bids. US farmers have a Government put (option) in place in corn at an average of $5.92 on upwards of 85% of their crop. The revenue price for 2023 US soybeans is $13.76 and here too, farmers are unlikely to part with cash beans below this level. As a footnote, the US 2024 wheat insurance revenue price was set at $7.34, down $0.85 or 10.5% from last year. This has US wheat farmers likely seeding fewer acres for 2024.
- Chicago brokers estimate that managed money has sold 3,200 contracts of wheat and 4,100 contracts of soybeans, while buying a net 2,900 contracts of corn. In the soy products, funds have sold 2,100 contracts of soymeal and a net 800 contracts of soyoil. Cash supplies of US soyoil are exceptionally tight with cash markets trading well above deliverable Chicago values. Renewable and traditional biodiesel margins are strong on surging energy valuations.
- The US Central Bank is holding their FOMC meeting today and Wednesday. It is expected that the US Central Bank will hold rates steady but talk up the potential for future rate hikes if US inflation returns. Surging energy prices must be monitored for cost push inflation, but the rising cost of gasoline and diesel also act like a tax further hitting demand. There are low odds that the US Central Bank will raise its lending rate in November, and it will await 2024 before making any additional rate hikes to further batter demand and push the inflation target rate down to 2.0%. Higher for longer is the theme for the US Central Bank.
- Siberian Russian producers are starting to abandon HRS wheat fields due to the ongoing wet weather and low interior prices. HRS wheat is said to be sprouting with disease pressures steadily rising with each day of showers. The forecast has a few days of dryness late this week, but the overall pattern shows a new round of wet weather on the weekend. And it is too dry in SW Russia for winter wheat seeding. Russian weather is something that grain traders need to follow.
- Results are awaited on the Algerian wheat tender, but the hope is that EU wheat is priced to compete against Russian fob offers. Recent demand from China and North Africa are offering post-harvest support to cash wheat.
- The midday GFS weather forecast maintains an active upper air flow pattern across the Central US with almost daily rain chances starting late Thursday. The midday forecast is wetter. Showers blanket the Plains and Western Midwest on Friday and the weekend with rain totals of 0.5-2.50” Totals more than 2.00” totals favour the Dakotas, MN, IA, and WI. The storm pushes east into the E Midwest early next week with rain of 0.25-1.25”. A few dry/warm days close out September with a new hurricane forecast for Cuba.
- Chicago is searching for a seasonal low as traders try to understand corn/soy yield trends. Small soy seed size is dropping actual Midwest soybean yields from producer expectations (and last year). We look for short covering into the Sept 29 NASS Stocks and Final Small Grain Report. With managed money short, it is the farmer that must sell cash grain to generate new Chicago selling. Don’t sell Chicago breaks!