- Corn, wheat score newer rally highs; Crude eases on build in US stocks; GFS weather forecast wetter in Argentina.
- Chicago ag markets are mixed at midday, with wheat and corn scoring new rally highs and beans shedding modest premium on weakness in meal. The EU Commission’s proposal to delay deforestation regulations by 12 months has been the catalyst for a trimming of soy crush margins. The EU’s parliament has the final say with respect to EUDR’s implementation, but there is no doubt that there has been sizable pushback from the processing community there. We also note that soaking rain is forecast in key areas of Argentina Oct 8-10, which adds to a projected expansion of Argentine soy planted area.
- Wheat supply issues remain numerous. The midday GFS forecast keeps in place a pattern of mostly dry and abnormally hot conditions in E Ukraine and Russia through Oct 10. Lingering dryness is also present in New South Wales, South Australia, and parts of Western Australia. Chilly temperatures in Southeast NSW are being monitored, with lows overnight there recorded in the upper 30s. An expansion of drought is probable across the US HRW Belt into the second half of October.
- Egypt’s GASC this morning states it has agreed to purchase 3.1 million mt of Black Sea wheat (very probably Russian) in a direct deal, which will feature shipments of 510,000 mt per month into spring. Details are absent, and supplier price/execution risks are sizeable. This adds to an already near record large Russian wheat export program and places more attention on the movement of interior prices. Whether Russian producers become more tight-fisted with remaining 2024 supplies is important given seeding delays and germination issues. Russia has also effectively banned the transshipment of Kazakhstan wheat through Russia, which challenges robust Kazakh wheat shipments into the Mid-East.
- US ethanol production in the week ending Sep 27 totalled 298 million gallons, vs. 292 million the previous week and up 1% year on year. The ethanol industry’s seasonal downtime was short-lived. A slow/steady recovery in weekly ethanol grind is anticipated between now and mid-Dec. We do note ethanol production margins are beginning to get squeezed as cash ethanol prices fail to follow corn higher, which provides additional weight to Dec Chicago above $4.35.
- Energy markets are well off morning highs following confirmation of a build in US stocks, with spot WTI up only $0.25 at $70.05/barrel. US commercial crude stocks on Sep 27 were 417 million barrels, up 4 million on the prior week, and seasonally the US crude balance sheet should loosen into the holiday season. We see value in crude below $65, but Iranian/Israeli conflict is being offset by larger production in other OPEC nations.
- The midday GFS weather forecast is wetter in Central Argentina, where 7-day accumulation is projected at 1-3”. Rainfall of 1”+ will be spread across the entirety of Argentina’s primary ag belt. The GFS forecast remains hesitant on the date and intensity of Brazil’s coming pattern shift. Rain expands into Parana and Sao Paulo beginning Oct 9. Better rain chances don’t reach into Mato Grosso until Oct 12.
- Chicago corn and wheat futures are technically overbought, and we would counsel against chasing this rally higher. Soybeans stay a function of S American weather details, with the timing of Mato Grosso rainfall key. Grains continue to gain on soy unless N Brazilian dryness is extended into late Oct.