• The USDA announced export cancellations from China and unknown destination, which added to the late week bearish tone. The USDA’s export cancellation notices included 180,000 mt of sales to China and 120,000 mt of optional origin sales to unknown destination. Last week China had very limited sales of less than 1 million mt on the books, and the trade expects that most of those will be cancelled. There were 7.4 million mt of sales to unknown destinations, while sales to the rest of the world were at multi-year highs. Given wide price spreads, we expect that the US will continue to win most (if not all) of the world’s non-Chinese demand in the upcoming months/year. The CoT report showed that funds had covered another 5,000 contracts through Tuesday and were net short 36,000 contracts. Our view remains that spot soybeans are caught in a wide range of $8-9 into late year. Initial support in November is at $8.45. Quality issues continue to build across the Midwest according to commercial firms.

• Dec corn fell another 4 cents and ended a shade below its 50-day moving average. Next chart based support rests at $3.55. Whether a test of this is warranted will hinge upon actual yield results over the next week. Funds on Tuesday were long a net 20,000 contracts, and long for the first time since summer. However, funds since Tuesday are believed to have liquidated net length entirely and are estimated to be marginally short as of Friday’s close. This week’s corn decline is fundamental in nature, Ukrainian yields have improved further on the week, US ethanol margins are weak, and US ethanol stocks remain record large. The Argentine weather forecast has trended wetter. None of this materially impacts world corn supply and demand, but there will be some measure of competition for world corn demand into late year. The risk of a sub-180 national yield offers support on breaks.

• US and EU wheat futures shrugged off weakness in row crops. Funds in Chicago on Tuesday were short a net 17,000 contracts, unchanged on the week. We have mentioned that Russian fob prices for Jan/Feb have rallied to levels above US and European offers. And the rally in interior Russian prices continues unabated, and it is the speed at which Russian prices have rallied that is noteworthy. Otherwise, enthusiasm in world wheat markets remains lacking. All eyes will be on deferred Black Sea offers in the weeks ahead. The Australian harvest is due in a matter of weeks, and key will be whether there has been a yield response to recent rainfall in New South Wales and Queensland. Most in the trade have kept final Aussie production estimates below 18 million mt, vs. USDA’s 18.5. Aussie futures remain perched at $8.40/bu. Wheat should trade independent from corn/beans through the balance of the year. Downside risk in our opinion is limited to $5.00.

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Weekend summary 19 October 2018

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Fund positions disaggregated data

• Red has blanketed Chicago price boards this morning amid disappointing weekly US export sales, favourable harvest weather and ongoing normal/above normal rainfall expected in S America into early November. It has also been another weak macro day, with the Dow down another 265 points. Money is moving from equities to debt, with the Fed this week hinting that additional rate hikes lie ahead. As such the US$ is stronger, while other major exporting currencies are weaker.

• FAS’s weekly sales report included 15 million bu of corn, vs. 40 million the prior week; 17 million bu of Bu of wheat, vs. 12 million; and a paltry 11 million bu of beans, vs. 16 million the previous week. Weekly corn sales were a marketing year low. Large soybean cancellations worth 25 million bu were made by unknown destinations. This is very likely China, as US beans to other origins are very cheap. China has taken 1.09 million mt of US beans, vs. 12.9 million mt last year. This week’s corn demand is viewed as an anomaly, but following weak ethanol data Wednesday, fresh news this week has been bearish on the margin. For their respective marketing years to date the US has sold 830 million bu of corn, up 41% from a year ago; 766 million bu of soybeans, down 21%; and 445 million bu of wheat, down 18% from this week in 2017.

• Canada’s harvest has resumed, but at a rather slow pace. Spring wheat harvest in Saskatchewan is 72% complete, vs. 65% last week and 98% last year. Canola harvest is 67% done, vs. 95% in mid-October a year ago. Quality issues have been cited following recent snow.

• Following this morning’s selloff, we estimate that managed funds are short 20,000 contracts of corn, 25,000 contracts of wheat in Chicago, and 30,000 contracts of beans.

• The midday central US weather pattern is much wetter across the Delta and Eastern Midwest beyond November 1. Confidence in this solution is low and requires validation by other models in the days ahead. Otherwise, meaningful precipitation over the next 11-12 days will be strictly confined to the Southern Plains and southern Delta region. Like the morning run, cooler than normal temperatures will be sustained across the Eastern half of the US into late next week. Warmer temperatures are forecast thereafter. No major snow events are indicated.

• Jan beans neared overbought territory early in the week, and with China able to refrain from the US market a S American weather issue is needed to sustain $9.00+. We maintain that deep corrections in grain markets are buying opportunities and downside risk in wheat is limited to 5-7 cents.

• It has been a mixed morning in Chicago, with row crops steady to higher and wheat down 4-6 cents. EU milling wheat futures in Paris have followed to modest losses. Better rainfall lies ahead for the driest areas of Western Argentina, but otherwise the EU and US markets are still looking for export demand.

• The highlight this morning is a bearish weekly EIA report. US ethanol production through the week ending Oct 12 fell to 297 million gallons, down 9 million on the week and slightly below mid-Oct a year ago. Slowed weekly ethanol grind is common during harvest, but production was lower than expected nonetheless. US ethanol stocks last week totalled a near-record 1,014 million gallons, up 5 million on the prior week and up 12% on this week a year ago. Ethanol stocks are large even amid solid domestic use. US crude stocks also rose another 6.4 million barrels to the largest level in 15 weeks. Record US production is needed to sustain builds in stocks, but finally production is exceeding total disappearance. Spot WTI crude is down $1.80 at $70.10, testing its 100-day moving average. Ethanol and gasoline futures have followed.

• Jordan bought one cargo of optional origin wheat at $263/mt, including cost and freight. This compares to its last purchase in early Sep at $257/mt. The trend of rising world wheat cash prices is intact, but the trade has noticed a general lack of world tender activity in recent weeks.

• The S American forecast has trended much wetter across Central Brazil in recent days. Seasonal rains have arrived much earlier than in recent years. The midday GFS features accumulation of 2-5” across Mato Grosso and Goias in the 8-15 day period. If this verifies, Oct precipitation in Central Brazil will be a bit better than average.

• US weekly export sales should include 40-45 million bu of corn, 20-25 million bu of soybeans and 17-22 million bu of wheat. All estimates are fairly routine, but in the case of beans cumulative sales will fall further behind last year.

• The midday central US weather pattern has added rain/light snow to the Great Lakes region Oct 27-29. Otherwise, the outlook maintains complete dryness across the Plains and Midwest into the opening days of November. Temperatures will lean a bit cool, but additional lasting harvest delays are not expected. Canada, too, will be dry over the next 10-12 days.

• Corn futures showing strength in the face of bearish ethanol data is noteworthy. The world wheat market has simply been rather dull since early October. And a general lack of news/excitement is expected into late month. Note also that El Niño bodes favourably for Argentine weather and yield.

• Chicago is mostly lower at midday with corn/soybeans weaker, while the wheat market trades on both sides of unchanged. The volume of trade has been below yesterday and somewhat more two-sided. Funds were early buyers, but when the early rally failed, the selling stepped up during the midday hour. The prospect that the US harvest will resume across the W Midwest in the next 36-48 hours along with stepped up cash corn selling sparked Chicago selling this morning. US farmers could be going “full bore” with harvest on the weekend which is likely to continue next week. US corn/soy harvest will likely reach more than 50% through Sunday, a data point that may interest speculators (once again).

• Chicago brokers estimate that funds have been sellers of 4,200 contracts of corn, sellers of 4,300 contracts of soybeans, whilst being flat in wheat. In soy products, funds have sold 3,200 contracts of soymeal whilst buying 1,000 contracts of soyoil. Oil/meal spreading was noted early this morning.

• We note that spot Chicago oat futures are back above $3.00/bu and testing their 2017 highs. A close above $3.12 would turn all longer-term chart patterns bullish. World barley prices rest at record highs today, and now oat values are sitting at just a 72-cent discount to corn. The message is that world wheat and small grain stocks are tightening, and that additional seeded acres are needed. We suspect that oat values may be making a statement on future corn and wheat values.

• If US legislators cannot pass a new Farm Bill before early December, they will be forced to pass a one-year extension of the 2014 Bill. Ahead of the Midterm election, the odds of succeeding with a new Farm Bill are dim. The odds-on bet at this time is an extension which will help in refunding existing programs.

• Russian fob wheat prices keep grinding higher on tightening supplies with November offered at $234/mt. Russia has been acting like it has a 50 million mt exportable wheat surplus (which is realistically closer to 25-30 million mt). The rush to push quality wheat out the door is one reason why the Government will have to place a duty or some other restriction on its wheat exports. The time for a switch from Russian wheat to other origins will likely occur in the next few weeks.

• The midday central US weather pattern shows that a ridge/trough pattern will persist across N America for the next two weeks. The pattern will allow for improving harvest conditions as soils firm. We note that very cold air evident today will moderate heading into the weekend. Highs will return to the 50’s, 60’s and lower 70’s which will help facilitate drying. Forecasts offer wide open harvest conditions into the closing days of October. Any moisture will be focused on the SE Plains and through the lower Delta. The 11-15 day period offers mild/dry weather to help finish up the Midwest harvest into the opening days of November.

• Futures contract prices are correcting from Monday’s strong rally amid open harvest weather and slowing demand for US soybeans. Wheat is holding steady as world demand is about ready to shift to the US. Russian/EU and Australian wheat prices keep rising which is placing a supportive floor under Chicago wheat values. Research maintains that US wheat has a bullish outlook as Russian exports seasonally slow. The outlook for rain is poor for the EU/E Russia wheat areas into late October.

• Chicago corn/soybean futures have rallied to sharp morning gains. November soybeans pushed above $8.75 resistance and triggered a new round of fund short covering. December corn futures keeps pushing to a short-term target of $3.80- 3.85 while the wheat market is languishing in its recent trading range. Dec KC wheat needs to close above $5.32 to confirm a new rally effort. Wheat charts are sideways as wheat/corn and wheat/soybean spreads are being liquidated. Our view is that we are heading for a higher close in the summer row crops, and that a short-term peak in the soybean market to be forged on Tuesday. The Midwest harvest restarts late week and cash soybean availability will be uncovered by Friday.

• US soybean harvest progress has been slow via persistent wet Midwest weather amid variable temperatures. Quality concern is noted amid damaged or sprouted soybeans. Interior elevators have been reporting quality issues in the Delta, and those concerns are now spreading north. Quality discounts exist on damaged soybeans above 8%. Historically, quality reductions are not bullish as it causes reduced margins for crushers and exporters. The USDA weekly export inspections report for the week ending October 11 were; 39.2 million bu of corn, 42.5 million bu of soybeans, and 16.6 million bu of wheat. All combined, weekly exports of the three principle crops were 98.3 million bu vs 92.7 million last week and 90.6 million bu last year. For their respective crop years to date, the US has shipped out 269 million bu of corn (up 115 million or 75%), 173.5 million bu of soybeans (down 93 million or 35%) with wheat at 287.2 million bu (down 104 million or 27%). The wheat and soybean export pace are disappointing. NOPA reported a record Sept soybean crush rate of 160.8 million bu compared to 136.4 million bu last year and the prior record set back in 2007 at 139.8 million. The crush was better than expected, but it is too early yet for USDA to raise their annual forecast. One reason why the Chicago soybean market has not declined more sharply is based on extremely strong crush margins and willingness of crushers to secure any cash related decline. NOPA soyoil stocks were 1,531 million pounds. This compared to 1,302 million pounds last year and 1,623 million pounds in August.

• The midday central US weather pattern shows that a ridge/trough pattern will hold across N America over the next two weeks with some eastward progression next week. The pattern will allow for improving harvest conditions as soils firm. We note that very cold air evident will moderate on the weekend and next week. Instead of temperatures being 15-20 degrees below normal this week, the warming will take readings to 3-8 degrees below normal. Some rains push back into the W Midwest during the closing days of October, but there is no evidence of a return of near to above normal rainfall. The weather pattern has improved for the Central US harvest during the next two weeks.

• Funds have been huge buyers of soybeans/meal this morning which has pushed spot futures near $8.90 basis November. Our upside price targets are being reached. We see spot Chicago soybeans as caught in a $8-9.00 trading range. Corn and wheat are following soybeans, but it will be tough for March corn to rise above $4.00. The bullish stalwart is wheat when Russian wheat exports slow. We are preparing to turn bearish soybeans as November pushes above $8.90.

• Following higher overnight trade, soybeans were able to extend gains ahead of the weekend, closing 9 cents higher for the day and barely below unchanged for the week. News at the end of the week was limited, but rains (and snow in the North) have slowed harvest, and funds are giving up on their short Chicago grain positions. News that President Trump could meet with the Chinese president next month has also renewed optimism that a trade deal could be reached. The Commitment of Traders report showed that funds had cut their net short soybean position by 3,000 contracts, but were large buyers in the soymeal and soyoil markets. In soymeal funds bought more than 12,000 contracts, taking their ownership stake to a seven week high of 39,000 contracts. In soyoil funds covered another 10,000 contracts and cut the net short position to the lowest since last April. In the last three weeks, funds have bought close to 69,000 contracts of soyoil, which has nearly been a record buying spree. Without a trade resolution, we see spot soybean in a broad $8-9 range, with an immediate target at $8.75 Nov.

• Dec corn hit a new seven-week high amid follow-through fund short covering. There is now talk of a sub-180 bushels/acre national yield, as well as talk of disappointing yield checks across the Western Corn Belt. New harvest data will be slow to find the market amid recent rainfall and cool temperatures, but very close attention will be paid to daily yield updates. Money flow is noted, but our work maintains fundamental value lies between $3.70-3.95, basis spot. US export sales totaled 40 million bu. This is down noticeably from recent weeks but still above the pace required to meet the USDA’s forecast. Total export commitments through Oct 4 are up 51% from last year. Managed funds on Tuesday were short a net 34,000 contracts. This evening we estimate managed funds are flat. A modest net long is expected as money leaves equity markets, and the US yield loss could pull end stocks below 1.6 billion bu. A bearish outlook requires confirmation of a large US acreage shift and favourable Brazilian weather next spring.

• US wheat futures rallied 7-10 cents on fund short covering. As of Tuesday managed funds were short a net 17,000 contracts in Chicago, and this evening are estimated to be short a net 28-30,000 contracts. There is little fresh news available, but prevailing trends are supportive. Dryness will persist across much of Europe and the Black Sea into the very end of October. Heavy snow will keep harvest sluggish across Saskatchewan and Manitoba. Notice that the EU market broke through a longer term downtrend line in late September, and close attention will be paid to money flow in wheat markets next week. US export sales were an uneventful 12 million bu, vs. 16 Mil the prior week, but Black Sea offers for Dec remain at $240-245/mt, near parity with Gulf HRW. Recall deferred Black Sea offers have held support as the months pass, and so we expect the US market to find equilibrium at $5.15-5.30 in the near term. A close above $5.30, turns the Dec Chicago chart bullish.

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Weekend summary 12 October 2018

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

Fund positions disaggregated data

• The October USDA crop report was supportive with Chicago corn, soybeans and wheat rallying to moderate gains following the report. The data confirmed a 600,000 acre decline in US soybean harvested acres (FSA data), while the US soybean yield rose to 53.1 bushels/acre. The US 2018 corn yield was fell by 0.6 bushels/acre to 180.7 bushels/acre. We expect that based upon extremely wet weather and saturated fields that US corn and soybean yields will decline in November. The USTHATS yield data is becoming “solid” as 80% of the NASS corn test plots had been harvested with 14% in dent and measured in the lab. The October NASS data allows the marketplace to focus on demand with US corn/soybean/wheat crop sizes largely determined. The data confirms that US corn and soybean futures scored their seasonal/annual lows in mid-September. We maintain that the grains will continue to outperform the soybean complex in the next 45 days.

• NASS estimated the 2018 US corn yield at 180.7 bushels/acre, down 0.6 from September and near the lower end of trade estimates. NASS did not alter US corn seeded or harvested acres based on FSA data. US corn ear weights were record large, but ear numbers declined from last month. The US 2018 corn yield is still record large, but latent and wet harvest efforts in the W Midwest are likely to produce additional ear loss. We see the 2018 final US corn yield closer to 180.2 bushels/acre. US 2018/19 corn end stocks were forecast to rise 39 million bu to 1,813 million. We expect that WASDE is still too low with its US corn export estimate by 25-50 million bu, and that US ethanol corn use could rise by 75-150 million bu. Both (and the fall in US production) could tug US 2018/19 US corn stocks to 1,650-1,675 million bu. Such stocks argue for a rally to $3.80-3.90 basis spot Chicago futures. Corn appears to be caught in a $3.60-3.85 range with normal S American weather for their new crop.

• NASS cut the US soybean harvested acres by 600,000 acres to 88.3 million acres and raised yield to 53.1 bushels/acre. The yield came in below trade forecasts and did not score a record. Amid the extra 43 million bu of old crop stocks, US soybean total 2018/19 supplies were record large at 4,690 million bu. WASDE increased its 2018/19 US soybean end stocks forecast to 885 million bu, up 40 million from September. Such stocks are record large but expected. USDA made no changes in 2018/19 US export or crush estimates with total US soybean demand estimated at 4,268 million bu. This is down 28 million from last year. WASDE estimated the average US farmgate price at $8.60 which argues that the downside price risk in spot Chicago soybeans is limited below $8.00. We maintain that spot Chicago soybeans will hold in a range of $8.00-9.00 until there is evidence that the US/China will head to the negotiation table.

• US 2018/19 wheat stocks were raised by 21 million bu to 956 million. The increase was based on increased supply and a 10 million bu cut in feed demand. The average farmgate cash price is estimated at $5.10. The downside price risk in December Chicago wheat is likely no more than $5.00. WASDE lowered the 2018 Aussie wheat crop by 1.5 million mt to 18.5 million while Russia crop was dropped 1.0 to 70 million mt. WASDE held its Canadian wheat crop estimate at 31.5 million mt (even with 40% of the crop under snow). We note that WASDE held its Russian wheat export estimate at (a too high) 35 million mt and EU wheat export estimate at 23 million mt. US fob wheat is cheap in relation to other destinations, but USDA will be conservative. We maintain that the outlook for Chicago wheat is bullish on budding US export demand. This is no place to turn bearish of wheat.

• The morning has been mostly red, and not just in ag markets. Crude is down $1.70/barrel at $73.30, basis spot WTI. Emerging market currencies are weaker. EU milling wheat futures look to settle down €.75-1.00/mt. Oilseed markets worldwide have found renewed selling interest ahead of Thursday’s USDA data, with EU and Canadian rapeseed contracts down $2-4/mt.

• USDA reports since July have been bearish relative to expectations. However, prices have bounced back rather quickly following the August report. Our point is that both the bulls and bears are wary of large new positions ahead of what is usually a major USDA release. Supply will be weighed against strong US corn demand, and as the US wheat market begins to find non-traditional export destinations.

• Other news this morning is lacking. No new daily export sales were reported. The US administration’s decision to allow year-round sales of E15 is being a bit more scrutinised. On the margin, this will boost US domestic corn consumption. However, this boost is estimated by the trade to range from 25- 200 million bu. It is our opinion that finding new export markets for US ethanol is more important than changes to domestic blend volumes. Hurricane Michael has made landfall in FL/GA as a Cat 4 system. The eye of the storm will impact the Southeast in the next several hours. Michael then moves quickly across the primary corn/soybean areas of GA, SD and NC. Only a small percentage of the US total crop is at risk, but grain flows across the Southeast (poultry operations) could be affected. Rainfall accumulation in the Southeast is estimated at 2-6” in the next 48 hours. Other world weather patterns are little changed at midday. Favourable rains will continue to fall across a majority of Brazil’s Ag Belt into late October. Little/no rain is offered to Central and Western Argentina, where developing dryness is being watched more closely. The Aussie forecast is wet across the driest areas of NSW in the East over the next 7-8 days, but this will only work to boost soil moisture ahead of spring planting there.

• The central US GFS weather forecast is little changed from the morning run, but importantly the model maintains a lasting patter of dryness beyond the next 24 hours. Outside of the S Plains and Southeast little/no meaningful precipitation is forecast into the final week of October. Temperatures stay cooler than normal, with freezing overnight lows to drop into NE, IA, and N IL periodically over the next 10 days.

• The fear of another big yield increase is still apparent, but we expect the market to digest any US production increases rather quickly. Ahead of Thursday’s release, we estimate that managed funds are short a net 70,000 contracts of corn, 60,000 contracts of beans and 20,000 contracts of Chicago wheat.

• The morning has been mixed in Chicago with corn/soybeans weaker while wheat is firmer. Chicago trade volume is being curtailed by Thursday’s USDA Crop Report with everyone waiting for the data. Fund managers see the stock market retreat on rising US interest rates are looking for other non-correlated opportunities. Commodities are near the top of their buy lists, and we doubt that any widespread selling pressure will develop in the grains. Soybeans are somewhat different (from grains) amid the lack of Chinese demand and potential for a US yield surprise. The fundamental view of the grains outperforming soybeans persists. The only real worry remains the amount of US soybean crop that remains unharvested across the W. Midwest and the E. Plains. Soybean quality concern is noted throughout the Delta, and issues of off quality beans are being felt much farther north into IA/S MN.

• A mixed Chicago close is expected today. We doubt that either the bulls or the bears will be able to push their case very far. The “odds-on” bet is a market that holds in a range into Thursday. World end users are hoping for a bearish report to make forward purchases. The October USDA report should delineate how big-is-big in terms of US corn/soy yields. Speculators are betting on a bearish report based on the August/September results. Anything less than a 182 bushels/acre US corn and 53.6 bushels/acre soybean yield will be positive.

• Chicago brokers estimate that funds have bought; 4,000 contracts of wheat while being flat in corn/soymeal while selling 3,100 contracts of soybeans and 4,300 contracts of soyoil. US export inspections for the week ending October 4 were; 53.2 million bu of corn, 20.9 million bu of soybeans, and 15.6 million bu of wheat. The corn export total was larger than expected while soybeans and wheat were in line. For their respective crop years to date, the US has exported 228 million bu of corn (up 87 million bu or 62%), 130 million bu of soybeans (down 70 million bu or 35%), and 269.5 million bu of wheat (down 109 million bu or 29%). The debate that traders are having is US wheat cheap enough vs. Russian offers that world demand is shifting to the US.

• Bangladesh purchased 120,000 mt of US HRS wheat for shipment this crop year. The purchase was a surprise and along with the Saudi purchase of US HRW wheat last week argues that US wheat export demand is ready to jump. We note that Russian 12.5% spread vs 11.5% has pushed out to a season’s high $11/mt.

• The central US GFS weather forecast shows hurricane Michael has become a dangerous storm and is gaining in intensity. The storm looks to make landfall as a strong Cat 3 or weak Cat 4 storm on Wednesday. This major hurricane is altering the N American weather pattern. The midday GFS is drier than was projected overnight across the W Midwest with rains of 0.50-1.50”. The diminished rain totals will help the harvest advance after a needed 5-7 days of drying. Cold air will be pulled southward from Canada and produce a frost/freeze across the N Midwest to help plant dry down. Also, a drier profile is offered during the 11-15 day period, which is a change. The midday GFS offers a drier forecast.

• The fear of another big yield increase is pressuring Chicago corn/soy prices at midday. We see the time for wheat to start a bullish move as near as export demand shifts to the US. US wheat is cheap vs Russian or EU fob offers.

• Mostly lower is the morning Chicago trade with traders positioning ahead of what is expected to be a bearish USDA October Crop Report on Thursday. Soybeans have held better than the grains as the value of the Brazilian currency, the Real, has rallied vs the US$. The Real traded down to 3.70:1 and has recovered to 3.75:1 at midday. In about 10 days, the value of the Real has rallied nearly 19% which is depressing their interior cash soybean basis bids. We do not detect that Brazilian farmers are changing their cropping plans, but their smile is not as wide based on slumping cash margins. The grains have been pressured via modest selling with wheat longs exiting their positions. Wheat bulls remember the bearish market reaction of Chicago following the August and September reports and fear that WASDE will again become more conservative in their supply cuts.

• We note that the October report incorporates FSA data in terms of US corn/soybean seeding changes. The FSA data argues for a modest cut in US corn and soy seeding. Soybean seeded acres are likely to be trimmed more than corn. NASS should have harvested some 75-85% of their operational test plots for the October report. They will rely heavily on this data for their US yield corn/soybean/sorghum estimates. Farmer surveys play a reduced role in the October report with harvest losses to be featured in NASS’s November data. The point is that much of the bearish news on large US corn/soybean crops will be known following the October USDA report. Seasonal price trends for soy/corn turn positive after October 12 and some sort of Chicago recovery is expected. US elevators are not seeing big movement off the combine as producers choose to store as much of their harvest as possible. Farmers are delivering on their prior sales contracts, but new sales are not being made amid weak cash basis bids and wide carries in futures. Chicago is telling farmers to store as much of their crop as possible, and they appear to agree.

• Private Argentine wheat estimates are dropping to 18.0 million mt vs a WASDE forecast of 19.5 million. Frost/dryness and even hail has taken their toll with rain needed by mid-October. BAGE estimates that 41% of the Argentine wheat crop is rated good/excellent vs 70% last year. Crop ratings are expected to slide this week amid the recent cold/dry weather.

• The central US GFS weather forecast shows that tropical storm Michael has become a hurricane and is stronger than forecast. The storm looks to make landfall as a Cat 3 storm late Wednesday. The midday GFS forecast is slightly drier than was projected overnight across the W Midwest with rains of 1.50-3.00”. The heaviest rain will be focused on Central Kansas with most totals across Iowa ranging from 1.50-2.00”. Such rain will keep harvest operations on hold this week. The best harvest chance is on the weekend or early next week. A wetter profile looks to return during the 11-15 day period. Other than a few days, we see no lengthy period of warm/ dry weather for the wet W Midwest to allow an active harvest.

• The bearish supply news of 2018 US corn/soy crops will be known on Thursday. It is demand and the outlook for crop production overseas that will determine Chicago price trends into yearend. We see US wheat as positioned to garner world demand with Saudi’s purchase last week being confirmation. Expect US wheat export demand to ramp up.