- It has been a mostly higher session this morning, with a host of raw material markets shrugging off early weakness. Spot WTI crude is flat, and well off session lows. EU milling wheat futures look to close slightly lower in old crop and slightly higher in deferred positions. Newswires have been quiet, but concern over global weather patterns persist. Pockets of New South Wales and Queensland in Eastern Australia will see rainfall of 0.75-1.50” over the next 72 hours. However, this looks to be a one-time event rather than the beginning of a pattern change. The Aussie bureau of meteorology expect a moderate El Niño to take effect by December, which along with severely short soil moisture will sustain drought there through the period. It is too late for rain to boost wheat and canola potential, but sorghum planting typically begins in October. The Aussie grain market can ill afford to lose both winter and spring crops.
- In the US, NOAA’s QPF (quantitative precipitation forecast is the expected amount of melted precipitation accumulated over a specified time period over a specified area) has fine-tuned expected rainfall totals to upwards of 5-7” into early next week across OK, KS, NE, MO, IA, MN and WI. Yet more rain is expected in the 8-15 day period. Quality issues will be watched for, and harvest/winter wheat seeding will be halted completely into the latter part of the month. Also, in Europe there is still no sign of needed rainfall into Oct 17. The primary window for winter canola seeding there has passed. EU and Canadian canola market have rallied sharply since mid-September. The time available to plant wheat is longer in duration, but early wheat seeding will be done amid near zero soil moisture.
- The only real bright spot is S America, where normal/above normal rainfall finds its way north into Mato Grosso and Goias. The pace of corn and soybean planting in Brazil will be much improved on recent years.
- Wednesday’s weekly EIA report is expected to include a modest boost in US crude stocks, but recall stocks remain some 16% below last year despite rising production. Ethanol grind will be seasonally reduced over the next 1-2 weeks. We would mention that Brazilian ethanol prices continue to rally and are quoted $.36/gallon (21%) above US Gulf origin. US ethanol exports will stay elevated.
- The central US GFS weather forecast is wetter in the Eastern Midwest Oct 12-13, and wetter in pockets of the E Plains in the near term. A steady flow of moderate to heavy rainfall begins Thurs/Fri, and persists into Oct 13. The biggest risk of flooding lies in OK, KS, NW MO and W IA. Note that soil moisture there is already abnormally high. The models have trended warmer in recent releases, with freezing temperatures to stay relegated to the Dakotas and Canada.
- The question ahead is whether coming rainfall materially affects crop quality/quantity. Grain markets are, in our opinion, forming a base amid coming demand.