• HEADLINES: Early Chicago rally fails with soybeans/corn in retreat; 2 wars have portfolio managers looking to diversify into commodities; GFS midday weather forecast drier for N Brazil.

• Chicago is mixed at midday with the summer row crops lower while wheat holds in the green. And soyoil futures are higher and soymeal is down in a reversal of recent day price action. Spot Chicago wheat is back above $6.00 with December corn futures rising to their highest price since August 2 at $5.095. Chicago corn values rallied following a long consolidation that extends backwards for 11 weeks. Yet, the morning;’ rally uncovered new farm selling with producers yet to harvest 50% of their crop and cash basis (and futures improvement) taking cash bids back to levels that have not been witnessed since July.

• Soybean futures have struggled with profit taking in soymeal noted following a near $60/ton rally. Traders are aware that Argentina could enjoy needed rain later this weekend while Northern Brazil sees showers mid next week. Weather leans bearish of soybeans. Traders are debating whether several large funds entered a long new meal/oil spread position which pushed the oil share trade down to 38%, near a 2-year low.

• Key heading into the weekend is whether December Chicago wheat can close above its 50-day moving average at $5.945. The last time that wheat was above its 50 day was in late July. We estimate that US farmers have harvested 73-77% of their soybeans and 49-53% of their corn crops. US cash soybean basis offers are rising as crushers bid for supply with cash margins near $3.00/bu.

• Chicago brokers estimate that funds have bought 4,000 contracts of wheat and 1,000 contracts of corn, while selling 4,700 contracts of soybeans. In soy products, the managed money has sold 5,300 contracts of soymeal and bought 4,100 contracts of soyoil.

• The USDA did not make any daily sales announcements contrary to rumours on Thursday that China may be securing US corn. We cannot confirm any new sales of US corn to China.

• Risk managers are assessing whether the Israeli war can spread beyond Gaza, upend world energy supplies, and produce a spike in crude oil values. A broadening Mideast cultural war that includes either Iran/Iraq or the Strait of Hormuz could have a crippling effect on Mideast energy production/exports. Wars tend to be bullish of raw material markets if they persist over several years. The Russian war against Ukraine is starting to curtail supplies of metals, energies, and soft commodities like grains. The Israeli war would raise energy values with the result being a fall in equity prices while macro fund managers would seek to diversify into raw materials as a portfolio hedge. Being short of commodities in a long war is an unfavourable portfolio strategy.

• The record low flow of 4 major river systems is unprecedented; 1/ The Danube River, 2/ The Rhine River, 3/ The Amazon River, and 4/The Mississippi River are all posting historically low flows. History shows no precedent for European, S American and the US ag waterways to be this low at the same time.

• The midday GFS weather forecast is drier across Northern Brazil than the overnight forecast. A few scattered showers will slide into Mato Grosso and pockets of Goias during October 25-28 before a new dry spell returns. Otherwise, meaningful S American rain is relegated to Southern Brazil and Argentina. The Argentine rain starts Sunday with the Brazilian rain being pushed backwards by a day to Thursday, October 26. Heavy rain will continue to drop across Southern Brazil. Extreme heat exacerbates soil moisture loss across Brazil with highs ranging from the mid 90’s to the lower 100’s. The Northern Brazilian heat abates late next week.

• US soymeal/soyoil have compelling demand stories into yearend which underpins soybeans on breaks. Longer term, it is soyoil that will dramatically gain on soymeal as Argentine soy crop supplies return to normal. An Argentine Presidential election occurs on Sunday with high expectation that there will be run off of the top two candidates. We expect that the flow of funds will be into raw material markets into yearend with the fund rebalance offering considerable buying in the grains due to low prices. We maintain that in El Niño years that Brazil will not produce trend corn/soy yields.

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