- Chicago ag markets are mixed at midday with soybeans recovering from a lower opening while corn/wheat futures leak lower in a correction. The volume of trade has been less than prior days with end users looking forward to the coming new crop corn/soybean harvest. Corn cutting is underway in NE, KS, and the Delta States with yield reported as better than expected. However, it is far too early to decipher any US corn yield trend. We would caution that dryland corn yields of 170-200 bushels/acre in SE NE are not a precursor of W IA yields. Nonetheless, traders have become cautious in chasing rallies. Some cite China soybean pricing on Tuesday as the rational for the morning Chicago recovery.
- Chicago brokers estimate that funds have bought 6,400 contracts of corn and 6,700 contracts of soybeans while selling 3,000 contracts of wheat. In soybean products, funds have bought 4,600 contracts of soyoil and 800 contracts of soymeal. Fund managers are on the buy side of the marketplace with some additional macro investment heading into Chicago on the second day of September.
- FAS did not report any new sales with China absent as a corn/soybean buyer. Thursday’s FAS weekly export sales report is expected to offer sizeable US corn and soybean sales along with a few cargoes of wheat as China was active last week.
- There is a cargo of French wheat that has been nominated to the US which is likely to be feed wheat heading to a US poultry producer that needs GMO free grain. The tight supplies of Ukraine corn will make it difficult on the EU to source wheat/non GMO corn for feed going forward. US corn cannot work into the EU, which limits its availability from others. Ukraine has sold corn to China (estimated at 3-4 million mt) for early 2021 shipment. EU feed supplies will be tight this winter and next spring.
- The EIA reported another modest decline in US weekly ethanol production of 922 thousand barrels/day which would produce 268 million gallons of ethanol. This corn consumption rate is 10% below last year. The US appears to be locked into a weekly pattern of the corn grind being down 9-11% which is likely to call for a downward adjustment in US corn ethanol in both an old and new crop position. We estimate 2020/21 US corn use for ethanol at 5,050 million bu, down 150 million from the August WASDE forecast of 5,200 million bu.
- Midwest producers should be aware that spot cash basis bids are historically high heading into a new harvest. If producers have any old crop supplies remaining, this would be a prime opportunity to sweep clean the bins. Once the new crop supply arrives, cash basis levels will start a seasonal decline.
- The midday GFS weather forecast is like the overnight run brings a deep low-pressure trough through the Central US from late Monday into next week Friday. This low will produce showers/storms for the E and C Midwest with heavy rain totals being further west into N IL and E IA. However, W IA, NE and the Plains will stay largely dry. Temperatures will be cool with highs ranging from the 60′s to low 80′s. No frost/freeze is indicated into mid-September.
- Chicago will struggle on rallies as the Midwest harvest looms. US weekly sales will be large again which have been announced by the FAS daily. Profit taking on longs are expected heading into next Friday’s USDA Crop Report. With funds holding a huge long in soybeans, we view the Chicago risk to the downside.