• US export data has been released as follows:

• Brussels has issued weekly wheat export certificates totalling 568,875 mt, which brings the season total to 7.0 million mt. This is 1.3 million mt (23.1%) ahead of last year. Barley exports for the week reached 8,853 mt, which brings the season total to 1.19 million mt, which is 2.25 million mt (65.5)% behind last year.

• Today appears to have been all about pre-report positioning with corn, soybeans and wheat all pulling back from early highs as many fear a bearish corn and wheat stock estimate from NASS tomorrow.US soybean stocks are expected to be somewhat more neutral to bullish but strong yield talk persists. Some of the early trade was linked to the OPEC announcements and surging energy markets.

• Russia is reported to have harvested close to 115 million mt (clean weight) of grains of which wheat accounts for 72.5 million, which could leave them in a position to export as much as 30 million mt, an increase of 5 million over last season. The potential quality downgrade due to sprouted grains could well mean that there is a greater emphasis than normal on feed wheat exports.

• ABIOVE have estimated the 2017 Brazilian soybean crop at 101.3 million mt, which is in line with the general range of expectations that stand at 99-102 million mt. The midday S American weather forecast is calling for showers to increase across N Brazil, which would likely increase soybean seeding rates. The initial weather forecasts for S America look favourable for spring seeding and heading of winter grains.

• The USDA Stocks and FinalGrain report tomorrow together with concern over some European banks (and their bad debt) have caught the attention on Chicago traders. US equity markets turned lower although the US$ is little changed. Despite this, we do not see the current trading range breaking until after the October WASDE report, scheduled for release on 12 October.

• Chicago markets have been somewhat lacklustre today and the week’s price break has doubtless uncovered export demand within the US and we continue to question by how much these markets can rally during the peak US harvest period. There appears to be little sign of the trend in soybean yield changing, and C Plains results continue to be reported as excellent.

• Chinese soybean demand remains solid with some 344,000 mt sold (as per US daily reporting system) and it has been reported separately that upwards of 30 cargoes have been secured by China from the US and S America through to springtime. The supply driven price weakness is uncovering demand below market – unsurprisingly!

• The US reporting system also showed 1.6 million mt of corn sold to Mexico of which a million is for 2016/17, the fourth largest single sale on record.

• Weather forecasts remain generally favourable for continuation of the uninterrupted harvest through to late next week, which is good news for the growers and overall crop output.

• Our summary remains little changed with big corn and soybean supplies in the pipeline, which are capping rallies. End users have (and will likely continue to) extend coverage on breaks, and this pattern looks likely to continue until mid-October with neither the bulls or the bears able to take the upper hand – unless some fresh fundamental input emerges.

• Tuesday saw soybeans under pressure from follow through liquidation but found support at the new monthly low finishing higher on the day as late short covering featured.

• Corn saw the anticipated Turnaround Tuesday as it rebounded higher, but tha fact that US Gulf corn is the world’s cheapest is probably more significant. Gulf corn is marginally above Black Sea feed wheat for spot delivery. Despite the rally, funds continue with a sizeable net short, estimated at 180,000 contracts compared with 166,000 last Tuesday. Ethanol futures settled higher for the fifth consecutive day and production margins have grown to more than $1/gallon (basis spot futures). Such profitability has not been seen since around 2014 and this will likely drive production still further. Clearly the big supply/big demand picture remains intact, and neither a bullish or bearish stance has much to commend it at present!

• There are a number of global wheat tenders due to close this week, including a Moroccan US only tender and this has lent support to the market. The last Moroccan tender saw 265,000 mt of US wheat sourced and a similar volume is expected in this latest round highlighting the US’s competitive position. US Gulf prices compare well vs. Black Sea into late autumn. EU cash prices continue to inch higher with both German and French offered at $188-189/mt for spot delivery whilst US Gulf is $187 for SRW. We would expect to see global milling demand move towards the US as a reliable source of supply in coming  months. There are quality concerns in Australia and Canada and there is even talk that Russia is blending its higher quality old crop supplies with new crop to meet standards. This is not a time to be bearish wheat!

• Monday morning in Chicago saw prices in the red as weather models confirmed a further six to eight days of dry and mild weather. Soybean yield reports continue to stay mostly above or at expectations and C Illinois corn yields showed signs of improvement in the last half of last week. It seems that we will see further pressure as harvest ramps up and expands and we may well be witnessing the funds unwinding their net long position in soybeans, albeit slowly and maybe even reluctantly.

• Soybean meal has made new lows for this move and more DDG’s will doubtless compete for feed demand in coming months adding more pressure. EU prices in wheat and rapeseed dipped in sympathy with their bigger cousins in Chicago.

• We saw no further US soybean sales announcements today although the break will likely see a resumption of pricing and purchases as the week progresses. Chinese crush margins are reported to be at record highs for a spot position and they will doubtless want to lock in as far forward as possible if history is anything to go by. A “Turnaround Tuesday” is possible tomorrow, but still there is just too little available for the bulls to push values higher, with a vast majority of the Midwest harvest due in the first two weeks of October. Interior cash basis levels have been in retreat since early last week, as producer become more comfortable with yield estimates. Recent rallies in corn and soybeans have prodded supplies from farmers and end user/exporters remain unwilling to chase rallies higher.

• The only meaningful weather threat remains in Australia, where additional soaking rainfall is projected across Victoria and New South Wales through this weekend. The trade there is now more closely watching for quality issues. Early week trading recently has been mostly about yield estimates and combine reports. Understandably, it is difficult to find support amid ongoing record soybean yield data. Substantial demand lies below the market, and we maintain that range-bound trade will likely persist.

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Weekend summary 23 September 2016

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Fund positions

• Brussels has issued weekly wheat export certificates totalling 482,344 mt, which brings the season total to 6.43 million mt. This is 1.24 million mt (23.8%) ahead of last year. Barley exports for the week reached 84,012 mt, which brings the season total to 1.18 million mt, which is 2.12 million mt (63.3)% behind last year.

• Midday saw Chicago markets mixed with corn lower, soybean higher and wheat stuck somewhere in the middle. Moderate to (in places) heavy rains are expected to hit the W Cornbelt over the weekend, and radar images are already showing clusters of storms in E IA and W IL, although weather models do show some disagreement over how much rain may actually fall. The detail has low levels of confidence and this will have to be watched to ensure that any risk issues are not missed. Rainfall levels of 3 to six inches should not be ignored at this stage in the season because they may just lead to quality issues later on.

• Delta soybean yields have proved slightly disappointing and any ongoing wet weather pattern may prove an obstacle in bridging tight old crop to abundant new crop supplies, and short term may impact cash premiums.

• The US$ is lower after the Fed failed to raise interest rates and price support has been noted at last week’s low, but it has to be said that the Fed’s refusal to move rates is being seen as disappointing. Crude oil is $1 higher with gasoline and ethanol following.

• Egypt’s GASC has reported that it received four offers in its tender today with prices in a wide range and we would expect that they will have to pay up, at a premium, until the market is confident on the ergot policy resolution.

• In summery, unlike Argentina this spring, follow up heavy rains are not indicated, and so heavy yield or quality loss is not expected. We maintain that traders need to stay nimble through harvest. Next week’s weather forecast, and weather precipitation in early October, will be key to price direction.

• The US wheat farmer excluding Government payments, is facing its largest net loss per acre in nearly three decades. It is  forecast that US wheat farmers at current new crop prices will be facing losses exceeding $110/acre. Such losses are sizeable and reflect the reason behind the dramatic shrink in US wheat seeding since the mid 1990’s. This means an additional push into US corn and soy acres or other minor oilseed crops. Wheat is not a crop favoured by US farmers this autumn.

• We have seen Chicago markets mixed to lower with corn and soybeans trading lower as wheat attempts to rally on news that Egypt has (at last, and for now) approved ergot levels of 0.05%, the generally accepted international trade tolerance level. This will free the way for exporters to feel somewhat more confident in making offers to Egypt going forward. It is expected that Egypt will tender once again following the “cancellation” last Sunday in the face of zero offers.

• Corn and soybeans have sagged on improving US  prospects and harvest acceleration as well as a slowdown in fund purchasing which has been a feature in the last few days. There is a view that the Stocks and Small Grains report, due for release on Friday 30 September, will be somewhat bearish with wheat likely to replace corn in feed rations through the June-August quarter. This data release and the October WASDE reports are likely to keep a lid on either rallies or breaks.

• US wheat exporters are getting more interest from overseas buyers as quality becomes more important and other world exporters struggle with protein and sprout damage. As we have been suggesting for some while the outlook for US soybean and grain demand is solid.

• It has been a day of waiting for the US Central Bank decision and it remains hard to get overly bullish on corn or soybeans at these levels with harvest dead ahead and yield trends improving. We maintain a trading view of buying sharp breaks and taking profits on rallies. It’s too late to be overly bearish due to large US crops. US farmers will probably store as much crop as possible and GASC looks to return as more routine buyer of world wheat. Unfortunately, we doubt that rallies can be sustained and one has to be quick to take profits when offered.

• The latest IRI (International Research Institute for Climate and Society) probabilistic forecast for world temperatures between January and March of 2017 argues for heat invading much of Brazil and portions of Africa. Temperatures have a much better track record of being correctly projected when compared to precipitation, but the model data does argue that there should be a few good weather scares for Brazilian crops during the heart of the growing season.

• It is difficult to find any fundamental reason for a 20 cent gain in soybeans, which has eased back into the close, and the drag along for the grains is similarly hard to explain/justify although the grains have made less significant gains. Further strong gains in Dalian palm oil futures and global vegoils was the catalyst. November soybean futures pushed above technical resistance of 20, 50 and 200 day moving averages, which spurred further buying whilst December corn pushed against recent highs. The CBT Index has rallied sharply with the broader commodity price rally, which is likely to be triggering buying interest.

• There is a question over rains in the W Midwest and parallels being drawn with what happened in Argentina in April, although it is too early to suggest that we may see a similar pattern. However in a market that is looking for a reason to bounce, maybe this is one such reason. The rains are widespread and far less than those in Argentina – watch this space.

• Harvest in the E Midwest and Delta is picking up pace and the yield trend in corn remains variable, and we are informed that it correlates well with where, or where not, fungicide was used. In soybeans yield remains impressive and record large in many cases.

• It is probably best to describe today’s price action in Chicago as “a macro day” with funds adding to length across most commodities. It remains difficult to turn out and out bullish in soybeans and corn with the main US harvest directly in the headlights and with yields potentially improving in corn and at record levels in soybeans. We may well see further fund buying as they tend to follow three day patterns (and this has been day two), but we are reluctant to chase this rally. Big demand is supporting the current price upside and we would be surprised if big yield/output does not cap it before too long. It remains a choppy marketplace.

• The latest modelling does not expect that La Niña will strengthen or persist into 2017. The current La Niña is one of the weakest and shortest lived on record. Notice that  in the IRI ENSO modelling argues that La Niña will die by late year with a neutral ENSO forecast into July. This would reduce the chance of a dire ‘17 Midwest drought and any sharp rise in CBOT agri prices. However, the Pacific Decadal Oscillation is shifting to a warm phase (cold since 2012) which along with warmth in the Atlantic argues for elevated dryness worry.

• Today began with Chicago markets higher with the soybean complex leading the way on rising global vegoil prices whilst grains saw things a touch easier. Cash corn movements in the US remained limited with few willing or happy to hold long positions ahead of the advancing harvest. The bulls appear happy to take short term profits on rallies and the market appears to have the feel of one unable to sustain either rallies or price breaks as the trade continues to estimate the actual new crop size. We expect the choppiness to continue until some certainty can be found.

• It was interesting to note that Egypt’s GASC received a grand total of zero offers in its latest, unusual, Sunday tender. Clearly the zero tolerance on ergot contamination and a couple of rejections are weighing on the previous willingness of exporters to make offers. There will soon be a time pressure upon the Egyptian government to make a change, and act upon it, if the country is not to endure a tightening of stocks. At the same time the global supply position on quality wheat is fading due to adverse weather and the feed wheat stockpile appears to be growing.

• “Buy the humps and sell the dumps” is the best message to trade the Chicago according to one commentator today! This is a big crop/big demand marketplace with CBOT prices continuing to chop. It’s premature for a sustained recovery with the US harvest dead ahead, but on the other hand, buyers are waiting for breaks to buy. Slowly the markets are forging a bottom, but it will take time unless the US soybean yield ends up being above 51.5 bushels/acre. This is no time to make new sales and become bearish as we maintain the downside price risk is becoming limited.

To download our weekly update as a PDF file please click on the link below:

Weekend summary 16 September 2016

Our weekly fund position charts can be downloaded by clicking on the link below:

Fund positions