- HEADLINES: Markets begin recovery process; New crop demand responds to competitive US prices in late August.
- Chicago’s emotional correction has paused, with wheat and soy oil leading today’s recovery as expected. We have previously mentioned that wheat and soy price determination are far less cantered on the movement of supply across the Southern US. International wheat markets are also stronger at midday, with Paris milling wheat futures up €0.75-1.00 per tonne ($0.02-.03 per bushel). EU rapeseed futures are trading sharply higher as concern there mounts over strong Canadian prices, and the need for EU rapeseed imports beginning in late autumn. Cash rapeseed oil in Europe this week is testing June’s all-time high of $0.75 per pound. Recall global vegoil seasonal price trends are positive into Nov/Dec. The vegoil bull market remains intact. Spot WTI crude is up $1.60 per barrel and has breached $70 for the first time in 4 weeks. Ongoing draws in US crude stocks implies record consumption.
- We hear that a portion of the Gulf’s export capacity will resume operations within the next 10 days. Otherwise, the timing of normal operations there is unknown. Terminals will no doubt be mended, but whether this occurs in mid, or late September will be monitored closely.
- The lack of current grain movement along with surging barge freight levels has begun to weigh on interior cash bids, though this will be short-term phenomenon.
- Importantly, the pace of new crop export sales continues to respond by rising alternative supplies. New crop corn export sales through the week ending Aug 26 totalled 43 million bushels, the largest total since China’s buying spree in mid-May. The pace of new crop corn sales has closely followed corn’s discount to Black Sea feed wheat. We note that US corn sales over the next 52 weeks must average only 30 million bushels to hit the USDA’s projected 2,400-million-bushel target. Additionally, Argentine fob corn basis has surged in recent days as exports there peak. Brazilian corn is not offered beyond November, leaving the US and Ukraine to battle over world market share thereafter into mid-summer 2022.
- New crop US soybean sales were 78 million bushels, vs. 64 million the previous week. Brazil soybean offers have disappeared completely. Daily soy sales announcements will be a feature of the marketplace once Gulf elevator activity is restored. There is no doubting structural demand for US corn and soybeans.
- This week’s Saskatchewan crop report highlights damage caused by recent rainfall and hail. Recent rainfall will work to improve pasture conditions but have caused challenges to harvest progress. Additional heavy precipitation will impact SE Saskatchewan over the next 48 hours. Ccontacts in Canada suggest that yields will be lowered further once harvest data is available. Spring wheat and canola harvests in Saskatchewan are 36% and 11% complete, respectively.
- The midday GFS weather forecast is drier across the Northern Plains and Western US in the 6-10 day period but is otherwise completely unchanged. Needed rainfall of 0.25-1.00″ will impact the Central Plains over the next 2-3 days. Locally heavier totals are possible in portions of central KS, NE and eastern SD. High pressure ridging expands across the Southern and Central Plains beginning Sep 6. Warmth and dryness then blankets the Central US into Sep 17. The risk of frost remains very low across the Northern Plains and Upper Midwest.
- US markets have taken a breather ahead of a long weekend. Technical healing is needed, but we would reiterate that annual bottoms are very often scored in late Aug/early Sep. Cash sales remain on hold as a lasting period of massive US corn and soy export demand lies in the offing.