- Red has been the morning in Chicago as macro markets plunge on weak US manufacturing data. Ag fundamentals remain mixed, with the battle between the demand bears and supply bulls to rage on into the release of the USDA’s October reports. Note that the Central US weather forecast maintains a favourable shift to drier Midwest weather beyond the weekend. Additional soaking rainfall is not indicated into the second half of October.
- This month’s ISM manufacturing index fell to 47.8%, the lowest since June of 2009 and down another 1.3 points from the prior month. The US manufacturing sector has contracted for two consecutive months, and financial markets are concerned over ongoing trade barriers and slow global economic expansion. The Dow at midday is down 490 points. Spot WTI crude is down $1.25. Ag markets have been forced to follow.
- And the EIA’s weekly energy report failed to offer any bullish corn/ethanol input. US ethanol production through the week ending Sep 27 totalled 282 million gallons. This is up 5 million on the previous week but down 17 million (6%) from the same week in 2018. Ethanol stocks still managed to rise 30 million gallons to a lofty 975 million gallons. The US ethanol market is well supplied despite weak production.
- US crude stocks, less reserves, were up 5.5 million barrels on the week and remain 5% above year-ago levels.
- FAS announced a sale of US beans to China worth 464,000 mt. This brings China’s total purchase since mid-September to 2.1 million mt. Additional sales will be announced in coming days, yet Chinese demand for beans will likely be capped at 4-5 million mt without trade deal progress.
- Egypt secured just 60,000 mt of French wheat for early Nov shipment at $199/mt on a fob basis. The rally in Russia’s market has allowed EU origin to better compete for nearby market share. German and French wheat is offered slightly below Russian for Nov shipment, and a lasting rally in world cash wheat markets will be tempered by ongoing competition for demand. Argentine corn basis has fallen to even money with Chicago futures, vs. US Gulf basis at $0.42/bu over. We continue to caution against chasing USDA driven rallies as US demand potential has failed to improve.
- Weekly US export sales on Thursday are expected to include 400-550,000 mt of corn, 300-400,000 mt of wheat and 1.2-1.5 million mt of beans. Year-over-year lags on corn and bean export commitments remain sizeable.
- The midday GFS weather forecast is cooler in the upper Midwest beyond Oct 10, with overnight low temperatures at or near freezing offered to ND, MN, WI and Ml Oct 11-12. Relative warmth returns thereafter, but close attention will be paid to whether the afternoon EU model follows this cooler trend. Otherwise, active showers continue across the E Plains and W Midwest into Friday. A much drier pattern evolves across the whole Central US beginning Sunday, which lasts through all of next week.
- Today’s break is mostly macro driven. Yet, fundamentally, rallies above $3.90, Dec corn, $5.00, Dec Chicago wheat, and $9.20, Nov beans, will struggle amid weak US export potential and a lack of growth in biofuel production.