Monthly Archives: October 2022

18 October 2022

Posted on October 18, 2022 by simon

• HEADLINES: Chicago weakens on US export demand worry; Cash soymeal basis drops sharply; Needed rain for Argentina in the forecast.

• Chicago grains are lower at midday on the sagging prospect of US export demand while piles of corn/soybeans grow along water tributaries amid the historically low flows of the Mississippi River. The artery of US ag exports, the Mississippi River, is playing a bearish role in helping the US reach world importers. Gulf fob corn is trading $2.00 above S American offers, while Gulf HRW wheat is $3.25/bu above Russian/Ukraine offers. And in January, US fob soybeans will be $0.70/bu more expensive than Brazilian new crop offers.

• US export potential is being lost and the market is reacting bearishly to the news. We note that WASDE cut combined US corn/soybean/wheat demand in last week’s October WASDE, with further cuts in export demand forecast in November. Chicago has a bearish feel amid the strong push ahead on the harvest and the weakening interior cash markets.

• Chicago brokers estimate that fund managers have sold 7,200 contracts of corn, 3,900 contracts of wheat, and 4,600 contracts of soybeans. In the products, funds have sold 4,400 contracts of meal while buying 5,100 contracts of soyoil.

• Cash meal basis in Decatur has been crashing for the past 10 days with offers even with December soymeal futures. The even money trade in spot cash soymeal to spot futures has NOT been witnessed since late 2021. The cash premiums of meal supported crush margins/soymeal values for the past year. The Mississippi River woes in shipping and rising costs of rail cars have pushed additional soymeal into the domestic market. At the same time, DGG prices are also in decline amid the high price of US corn.

• Questions abound on the Ukraine Export Corridor; will Russian President Putin allow it to stay open or will it be closed or will there by restrictions on which countries that Ukraine can use these 3 seaports to export to. No one knows for sure, but our view today is that the corridor will not stay open as it currently is. Russia has asked for too many restrictions to allow Ukraine grain to flow into Europe/NATO members unfettered. Our lean would be the corridor will stay open to impoverished importers.

• The midday forecast is consistent with a plume of rain for the E Plains into the Lake States starting next Tuesday. The W Plains/E Midwest miss most of the moisture. Unfortunately, this rain will not be assisting is raising Mississippi River flows. Tropical storm activity is absent in the Gulf with a pronounced warming trend starting Sunday. The US harvest should be able to push strongly ahead.

• The S American midday GFS weather forecast is wet across Argentina/S Brazil with cumulative rains of 1-3.00”. The rainfall would be ideal for the start of active spring seeding and for reproducing winter wheat. Near normal rains continue across Northern Brazil with soybean seeding gaining speed. The forecast is favourable for early crop establishment.

• Seasonal price trends are bullish, and the industry appears to be evenly split on whether the Russian/Ukraine export corridor will stay (as is) in late November. Until Putin decides on the corridor, a range trade is expected in Chicago grains. Soybean prices have downside price risk due a record large Brazilian soy crop. Don’t sell sharp breaks and don’t chase sharp rallies. Chicago grains are trading in a wide range into November. We see many wishing to sell wheat/corn/soy on coming large S American crops.

17 October 2022

Posted on October 17, 2022 by simon

• HEADLINES: Wheat, soy stay firm; Corn extracts premium amid wetter Argentine forecast, excessive Australian rainfall.

• Chicago grain futures are mixed at midday with wheat firm, soy futures mixed while corn holds in the red. The volume of trade has improved from late last week with funds on both sides of the market. Corn prices are sagging on the prospect of growing tonnages of Australian feed wheat which could help supply the SE Asian feed market. And wheat prices are rising on the tightening supply of milling supplies due to the Argentine drought and now the Australian floods. Wheat prices are quickly responding to supply changes. We look for a mixed close with wheat to hold in the green.

• Chicago brokers estimate that fund managers have sold 5,500 contracts of corn, while buying 3,900 contracts of wheat and a net 1,200 contracts of soybeans. In the products, funds have sold 900 soymeal while buying 3,100 soyoil.

• FGIS/USDA export inspections for the week ending October 13. There was 17.6 million bu of corn, 69.1 million bu of soybeans, and just 8.5 million bu of wheat. China was the big soybean exporter of nearly 50 million bu or 72% of the total. US soybean exports are supposed to seasonally be ramping up, and that is now occurring. US corn and wheat exports stay exceptionally weak, and not expected to improve on the US non-competitive position vs. others. Corn’s weak export demand draw will be compounded by seasonal trends as physical exports don’t tend to increase until mid-winter.

• For their respective marketing years to date, exporters have been shipped 129 million bu of corn, down 21% year-over-year, 172 million bu of soybeans, down 23%, and 344 million bu of wheat, unchanged from mid-Oct 2021.

• NOPA-member crush in September totalled 158.1 million bu, up 4.3 million on last year but down 3.4 million from 2020 and slightly below the trade’s average guess. We see NOPA data as market neutral and note crush in Sep is always the weakest of autumn/early winter given the lack of available supplies. Key will be whether crush is maximised Oct onward as well as the new crop’s oil yield performance. NOPA soy oil stocks on Sep 30 totalled 1.46 billion lbs, vs. 1.57 billion in August and vs. 1.68 billion a year ago. Firm prices have not deterred domestic soy oil disappearance. Dec Chicago soy oil at midday is up $1.70/lb amid eroding stocks and stability in global crude prices.

• The midday GFS weather forecast has shifted rainfall next northward into the AR, MO and IL, while eliminating rain chances across the Northern Plains. River levels across the mid-Mississippi River will generally be increasing, but complete dryness in the 1-5 and 11-15 day periods will keep extreme drought intact across the HRW Belt. Tropical storm activity is absent.

• S American midday GFS weather forecast is much wetter in Argentina, with cumulative rainfall of 1-3” offered to the heart of the country’s Ag Belt Oct 22-25. The GFS forecast may be overdone, but confidence is rising with respect to needed moisture relief in Argentina during the second half of October. The overnight EU forecast also featured regional rainfall of 0.50-1.00” across important areas of Cordoba and Santa Fe. It is too late to materially impact wheat yield potential but coming rain will aid early corn crop establishment should the forecast verify. Southern Brazil gets rain this week. Heavy precipitation shifts northward in Central Brazil next Sat-Thurs.

• Corn is extracting premium on improved Argentine forecasts and the growing likelihood of elevated feed wheat supplies in Australia. Other breaking news is absent and early week price action will be defined by a lack of enthusiasm.

14 October 2022

Posted on October 14, 2022 by simon

• HEADLINES: Macro headwinds pull Chicago lower at midday; Ukraine export corridor confusion; More China flash soybean demand.

• Chicago grain futures continue to closely mirror the price action in the financial markets. The DOW was trading 300 points higher shortly after the opening only to fall fate to new selling/liquidation. The DOW is down 200 points at midday as intraday market volatility stays high. The US$ stays strong while crude oil futures have posted losses of nearly $3.00/barrel. We look for further weakening of US equity markets as traders fear an aggressive US Central Bank intervention in their war against inflation.

• Early Chicago buying was noted amid fresh talk that Russia was increasing its demands to keep the Ukraine export corridor open, such as exporting Russian fertilizer through Odessa and that Ukraine grain could only flow to countries that are impoverished and in need. Negotiations are ongoing and the mixed signals from Moscow leave uncertainty as to what will happen to marine grain exports from the Ukraine after November 22, the current pact expiration.

• Chicago brokers estimate that funds have sold 4,500 contracts of wheat, 6,500 contracts of corn, and a net 2,300 contracts of soybeans. Fund managers were initially buyers of soybeans but turned sellers as prices slipped below unchanged. In the products, funds have bought 4,300 contracts of soymeal while selling 5,200 contracts of soyoil.

• USDA export sales for the week ending October 6 were 7.8 million bu of wheat, a paltry 7.9 million bu of corn, and 26.6 million bu of soybeans. In the products, there net cancellations of old crop soymeal/soyoil while new crop soymeal sales were an impressive 492,000 mt. US soyoil is the most expensive vegoil in the world and declining export sales will be featured in the weeks/months ahead.

• For their respective crop years to date, US wheat sales stand at 409 million bu (down 32 million or 7%), while US corn sales stand at 528 million bu (down 559 million or 51%) with US soybean sales at 1,037 million bu (up 70 million or 6.4%). The US corn export sales pace is abysmal and argues for USDA should further cut US corn export demand by 150-250 million bu. US soybean sales will be boosted next week following this week’s Chinese activity. 2022/23 US wheat exports look to be at their lowest level in modern history.

• USDA announced new daily sales of 392,000 mt of US soybeans to China and 198,000 mt to an unknown destination for combined sales of 590,000 mt.  The US also sold 230,000 mt of soymeal to the Philippines. China has been an active buyer of December/January US soybeans for their reserve.

• Except for the Southern Plains where 0.25-1.00” of rain look to drop this weekend. The midday GFS weather forecast is dry across the Central US with limited rainfall chances into late October. The US corn and soybean harvest will push ahead quickly, however the flow of the Mississippi River will continue to decline with future draft restrictions becoming more arduous. Progressively colder temperatures are felt through next week with much of the Central US seeing their growing season end. The cold will help the dry down of soybeans.

• The US$ will stay strong with the additional hikes in US interest rates that are ahead. The US Central Bank’s war against inflation is not showing much result and they will stay vigilant to curtail demand. The peak of Central Bank hawkishness is ahead. The US Mississippi River flow will continue to decline over the next 2-3 weeks. Barge costs will stay historically high which in turn pressures domestic cash basis bids. US corn/wheat export demand is horrible, with China’s reserve program securing US soybeans for December/January this week. If Brazilian weather is favourable, Chicago soy rallies fail.

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

Weekend summary 14 October 2022

13 October 2022

Posted on October 13, 2022 by simon

• HEADLINES: Chicago grains rally on reversal in the financial markets; Russia to place restrictions on corridor exports; US dry trend to persist.

• Chicago futures are following the financial market rally as traders understand that the next measure of US inflation is 30 days away. The US Labor Dept reported a September US inflation rate of 8.2% this morning, down just 0.1% from August which is sure to push the FOMC to raise interest rates by 0.75% in early November. The DOW fell by over 500 points and the US$ rallied sharply, only to reverse these trends by mid-morning.

• At midday the DOW is up 655 points, crude oil is up $1.61/barrel at $88.89 while the US$ declines on profit taking. We find no single statement as to the rationale behind the rally, other than profit taking as traders try to measure peak Central Bank hawkishness. Said another way, how many additional rate hikes are ahead.

• We look for a mixed close with the US weekly export sales report to be released on Friday. We anticipate another week of tepid sales amid the non-competitive position of US corn/wheat. US soybean sales could be larger due to the absence of S American offers, but the window for US export opportunity closes by mid-December as most buyers will wait for cheaper Brazilian supplies from mid-January onward.

• Reuters reported that Russia is asking for restrictions on the Ukraine grain export corridor beyond November 22, the end of the current agreement.  The Russian demand is that Turkey broker that Ukraine seaport grain is sold to poor nations in need, not the EU/NATO members. The UN told Russia in June/July that the reason for opening the corridor is to prevent African starvation.  We would note that once the Ukraine grain gets past Istanbul, there are no policing of whether a poor nation sells it to a developed nation at a profit.

• US ethanol production is seasonally rebounding but holding well below last year. The US produced 274 million gallons of ethanol, down a hefty 10% from last year. US gasoline consumption continues to sag amid high prices and slowing economic activity.

• US weekly gasoline consumption was down 10% to 8.28 million barrels daily. The slower gasoline consumption pattern appears to be locking in through late year. US ethanol stocks at 918 million gallons are up 10% vs a year ago.

• The midday GFS weather forecast is drier than the overnight run for the southern quarter of the US with diminished rain chances into late October. The remainder of the Central US holds in an arid weather trend. Temperatures will hold at below normal levels for the next 10 days with snow possible around the Lakes. The dry/cold forecast will not help the flow of the Mississippi River with new draft restrictions likely by the end of October. Plains HRW wheat struggles amid the ongoing deepening drought.

• It is a macro day where raw material markets follow the value of the US$. The stock market’s rally and the dollar’s decline sparked Chicago short covering. FAS will release its weekly export sales report tomorrow. The report’s data will be so skinny on US grain sales, a pace that is starting to become worrisome. December corn does not currently belong above $7.10 or November soybeans above $14.25. And Russian wheat stays cheap which caps US wheat rallies.

12 October 2022

Posted on October 12, 2022 by simon

• HEADLINES: US soy/corn/wheat crops smaller; Combined US major crop exports cut 215 million bu; It is all about demand into 2023.

• The USDA October Crop Report offered positive supply data, but a mixed market reaction. US 2022 soybean yield was the big surprise falling by another 0.7 bushels/acre to 49.8 bushels/acre. The hot/dry late summer finish impacted soybeans more than corn.

• The US corn yield fell by 0.6 bushels/acre to 171.9 bushels/acre. And US wheat stocks were adjusted lower by 34 million bu to 576 million bu. We note that US 2022/23 corn exports were cut by 125 million bu, US wheat trade by 50 million bu and US soy exports by 40 million bu for a combined demand decline of 215 million bu. We would argue that USDA’s corn/soybean exports are too high with additional cuts ahead. Long corn/Short soy spreads are being exited supporting soybeans.

• USDA lowered US 2022/23 corn end stocks to 1,172 million bu, a decline of 47 million. USDA dropped the 2022 corn crop to 13,895 million bu, down 1,179 million from last year. USDA raised its feed/residual use estimate by 50 million to 5,275 million bu but cut exports by 125 million bu and ethanol by 50 million to 5,275 million bu as Americans drive fewer miles. The average corn farmgate price was raised by 5 cents to $6.80. We argue for another 150-200 million bu cut in US corn exports which will take 2022/23 US corn end stocks to a more comfortable 1,350-1,400 million bu. China’s 2022/23 corn imports were steady at 18.0 million mt. We see spot Chicago corn trading in a range of $6.40-7.25 in weeks ahead.

• WASDE held 2022/23 US soybean end stocks at a tight 200 million bu due to a 65 million bu fall in the 2022 US soybean crop and the resulting gain in old crop stocks to 274 million bu. WASDE increased the 2022/23 US soybean crush rate by 10 million bu to a record large 2,235 million bu while cutting exports by 40 million bu. Like corn, we would expect that WASDE will further cut its soybean export estimate in the months ahead by another 50-75 million bu. This has the potential to raise 2022/23 US soybean end stocks back near the current crop year at 275 million bu.

• Commercials estimate an even larger cut in US soy exports, due to the low flow of the Mississippi River, but additional sales data is required. China’s 2022/23 soybean imports were raised to 98.0 million mt. The average annual US farmgate soy price fell to $14.00. We see spot Chicago soybeans in a range of $13.00-14.25.

• USDA’s wheat updates were rather dull and mostly reflected NASS’s stocks and production data of late September. 2022/23 US wheat end stocks were trimmed 34 million bu to 576 million as production loss (133 million) was partially offset by lower projected consumption. Wheat feed use in 2022/23 is now pegged at just 50 million bu, the lowest since 2007/08, amid disappointing disappearance in the Jun-Aug quarter. Exports were lowered 50 million bu to 775 million amid non-competitive US offers. WASDE lowered total global wheat trade another 700,000 mt. US SRW stocks are projected to fall to a tight 91 million bu. But until there are signs that Russian exports are slowed further, the fear of outright shortages is lacking.

• Russian and Ukrainian wheat balance sheets were left untouched. Non-Black Sea export production was lowered 2.5 million mt as gains in Europe were more than offset by losses in the US and Argentina. Non-Black Sea exporter stocks/use was reduced slightly for a third consecutive month.

• USDA corn/wheat balance sheets were published as expected, while US soybean yield loss was a bullish surprise. We maintain that recent market strength is weighted heavily towards supply issues, and in the long run deliverable supplies will build without a quick improvement in the pace of US export demand. Yield is largely known. Updated IMF data paints a grim global economic picture into 2024, with global GDP growth in 2023 pegged at 2.7%. Future demand concerns are real and will act to cap any post-harvest rally in early November.

To download our USDA data recap as a PDF file please click on the link below:

USDA Recap 12 October 22

11 October 2022

Posted on October 11, 2022 by simon

• HEADLINES: Chicago mixed awaiting USDA October crop report; Grain/soy spread unwind; Mississippi river worry deepens/China books US soybeans for December.

• Chicago grain futures are expectedly mixed at midday. Unwinding of the long grain/short soy spreads is occurring following the windfall gains of recent weeks as worry over a smaller US soybean and larger US corn yield circulates. And US/world financial markets are also trying to recover ahead of the key US CPI report on Thursday. The CPI report could be more important for US grain values than the October crop report in broad terms as will help define how much US bank lending rates will rise heading into 2023. There are considerable macro headwinds as the US inflation rate will decline from last month’s year on year change of 8.3%. However, the fall will be modest to 7.6-8.0% which is far from the target of a 2% inflation rate and stable world financial markets.

• Chicago brokers estimate that finds have sold 4,500 contracts of corn and 6,100 contracts of wheat, while buying 4,900 contracts of soybeans. In the products, funds have bought a net 1,200 contracts of soymeal and sold 1,900 contracts of soyoil. Amid the flow problems of the Mississippi River, traders are looking to buy the products and sell soybeans as crush margins are expected to contract.

• New US corn, soy and wheat export demand is abysmal. FOB soybean offers at the Gulf are sky high at $2.80/bu over for October, $2.40 over for November and $2.15 over for December. Even January 1-15 is offered at $1.95 over before the onset of the Northern Brazilian soybean harvest. The point is that buying US soybeans (even with the break in Chicago) is expensive for importers with freight costs rising. Brazilian soybeans for March are offered at just $0.20 over Chicago which means that there is a massive $2.00/bu to be made for waiting just a few months. The point with Brazilian fob corn cheaper by $1.00/bu vs. the US is that importers will only secure what they must from the US. Brazil is offering corn through January while new crop soybeans are available for export in LH of January. The US soybean export window is now down to 3 months.

• Chicago open interest rose sharply on Monday with wheat up 4,791 contracts, corn up 10,389 contracts and soybeans up 14,667 contracts. China’s return from holiday and pricing of prior soybean basis contracts was the rational for the big OI jump. US cash corn movement was said to be the best of the 2022 harvest.

• Russia is said that it was to drop its export quota amid all its supply. We look for WASDE to raise the 2022 Russian wheat crop size to 94-97 million mt tomorrow and to a final crop of 100 million due to record yields in Siberia. The problem is that new crop Russian winter wheat seeding is being delayed by excessive rain that could cause a seeding fall of 6-10% from 2021.

• China has purchased 3-4 cargoes of US soybeans for December from the Gulf and PNW today.  China is filling in demand in December/January.

• The midday GFS weather forecast is slightly wetter for the E Midwest, but otherwise, an arid flow holds with limited rain for the Plains, W Midwest, and Mississippi River in the next 2 weeks. The Western US drought will deepen, and a displaced southern branch of the jet stream push rain chances into the E Midwest. Colder than normal temperatures will prevail with the 2022 US corn/soybean harvest pushing to a rapid conclusion. We remain concerned about Mississippi River flows amid the arid forecast .

• The USDA report looms with the supply driven bull market coming to an end following the October Crop report. Thereafter, it is demand that will key future Chicago price direction. We see no strong reason for corn to push above $7.20 December or January soybeans to push too far above $14.40 post report. It is future US export demand that troubles us amid the potential for a record large Brazilian crop. Selling Chicago rallies as the US Central Bank hikes rates and a US/world recession looms would seem a sensible strategy for now.

10 October 2022

Posted on October 10, 2022 by simon

• HEADLINES: Chicago futures rise on massive fund demand tied to Putin retaliation; Gulf barge traffic improves but flows problematic; USDA report ahead.

• Chicago grain futures are sharply higher at midday. The grains have been the upside leaders on the worry over Black Sea export supplies. The attack on the Kersch Bridge and promise of retaliation by Russian President Putin amid the volley of rockets sent into Ukraine overnight has caused fresh anxiety that the war is escalating. This has implications for current and future Black Sea grain supplies. Wheat/corn are the upside leaders with soybeans being dragged along. The soybean market struggles on rallies above $14.00 basis spot futures while December corn reached its best price since June 21. An open chart gap remains open in December corn at $7.25, that fateful weekend when US weather improved, and traders debated the then fresh Jay Powell statement on pushing US inflation back into its 2% target. We note that NASDAQ has fallen to its lowest level since May of 2020, Covid lows, on US recessionary fears.

• Paris wheat futures are back rising to their 50% correction of the summer decline with an upside price target at €370/mt. This level offered to support a bounce in the market last May as India announced that it was going to ban exports. World wheat futures are following Chicago, and it will be interesting to see if importers are going to be willing to chase the advance. We understand that some freight and insurance companies have halted offering prices for new Black Sea business until they are fully aware of what the wrath of Russia looks like in terms of retaliation. Insurers may return to the market later this week if the barrage of Russian rockets hitting Ukraine subsides.

• Chicago brokers estimate that finds have bought 25,500 contracts of corn, 9,900 contracts of wheat, and 6,600 contracts of soybeans. In the products, funds have sellers 4,200 soyoil and 1,900 contracts of soymeal. This is the biggest morning of fund buying since late spring. Note that farmer selling has also been brisk, farmer selling caps rallies, it does not produce market breaks.

• The latest modelling of ENSO shows that La Niña should reach a peak in November followed by a rapid demise into Q2 2023 with El Niño possible mid to late next year. The La Niña demise should help restore soil moisture to portions of Argentina and Southern Brazil with time. Unfortunately, the Argentine rains are not expected to fall until mid-November or later, which means that some of their initial corn seedings will struggle. And the wheat crop will continue to suffer through drought conditions. We fear that the final Argentine wheat harvest could drop to 15.0-15.5 million mt.

• The midday GFS weather forecast has added rain like the European model in recent days across the far Southern US Gulf. A southern branch of the jet stream has formed which is expected to become more active with time. This jet should allow better rains for KS/OK with time, but any water will be appreciated by the lower Mississippi River nonetheless. Most of the remainder of the Central US holds in below to much below normal rainfall pattern with widely scattered showers forecast from west to east on Tuesday/Wednesday/Thursday. The rains will prove to be far less than what is needed and our concern for the Mississippi River barges/transit stays elevated.

• The Chicago corn rally reached long held upside price targets at $7.05 December. The Mississippi River water woes have not ended, and our fear is worsening flows in the weeks ahead. This will harm US export demand with US corn/wheat non-competitive. We look for the USDA to trim yields slightly, but a big cut is not expected. $7.20 plus spot Chicago corn is not justified with US export sales down 500 million bu. We see the rally in wheat/corn as offering new sales opportunities. Soy stays bearish on S America crop sizes.

7 October 2022

Posted on October 8, 2022 by simon

• HEADLINES: Chicago futures rebound from early selling tied to US jobs gain; E Australia becoming too wet; Dry central US harvest weather ahead.

• Chicago grain futures are mixed at midday. Initial selling tied to the robust US Jobs Report which sent the financial markets lower. The US added 263,000 to the no farm payroll rank while the US unemployment rate declined to 3.5%. US year on year wage gains were 5%, while the US Labor Participation rate edged lower. The September Jobs data showed no slowing of the US economy and raised the pressure on the US/World Central Banks to keep hiking rates. Next week’s monthly CPI Report looms large for traders with the report due a week from today. In financial markets where good news is bad and bad news is good for equity values, today’s report’s good news was bearish which has pushed the DOW to losses of over 500 points.

• End user pricing and improving profitability for biofuel producers related to surging energy costs have offered support to Chicago corn/soyoil. US soybean crush and ethanol margins are improving which on localised basis is starting to raise cash bids for new crop corn/soybeans. US soybean crushers are seeking forward coverage of cash soybeans with cash crush margins in excessive of $3.00/bu. And crude oil returning to $91/barrel has rallied ethanol amid its competitive price relative to diesel, unleaded and natural gas. The upside price target on spot WTI crude oil is $94-96.00.

• Chicago brokers estimate that finds have bought 5,500 contracts of corn, 1,900 contracts of wheat, and 3,200 contracts of soybeans. In the products, funds have bought 3,200 soyoil and 2,900 contracts of soymeal.

• FAS/USDA did not announce any new daily sales on Friday. The US continues to struggle to find world grain/soybean demand as offers are non-competitive.

• The 30-day weather forecast for E Australia calls for above normal rainfall.  The wheat crop has enjoyed an abundance of rain to date and large yield potential looms. The more difficult question is crop quality. Producers in New South Wales, Victoria, and South Australia report that soils are saturated with moisture and that future rain is unwanted as the harvest looms. World wheat markets will start paying close attention to Australian weather as the harvest starts in NWS in the coming weeks.

• The average yield guess for the US 2022 corn crop is 171.9 bushels/acre with soybeans at 50.5 bushels/acre. The corn yield is down 0.6 bushels/acre with soybeans steady vs. September. The average 2022/23 US corn stocks estimate is 1,127 million bu (down 92 million vs. September) with soybeans at 240 million bu (up 40 million), and US wheat end stocks at 563 million bu (down 47 million from Sept). Some are suggesting that Chicago is undervalued with such US corn/soybean/wheat stocks. Remember that final 2021/22 corn end stocks were 148 million bu smaller with the smaller yield dropping production nearly another 50 million bu. Traders expect that WASDE will cut US 2022/23 corn demand by just around 100 million bu.

• The midday GFS weather forecast is like previous runs. Key crop-growing regions of the Midwest/Plains are dry. Frosty temperatures occur on the weekend with warming due mid next week. An open window harvest window will allow for quick harvest progress. The extended 11–15-day forecast has backed away from offering rain for the Plains/Midwest to help river flows.

• It has been a back-and-forth week of confusion. Financial market turmoil coupled with a USDA Report next Wednesday and the unknown headline risk from the Black Sea is keeping traders from chasing rallies or breaks.

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

Weekend summary 7 October 2022

6 October 2022

Posted on October 7, 2022 by simon

• HEADLINES: Chicago futures lower on sagging US cash markets, active Midwest harvest; Slow weekly us corn export sales.

• Chicago futures are sharply lower with corn, soybeans, and wheat in retreat.  Wheat has been the downside price leader on fund selling and ongoing aggressive fob price offers from Russia and the Black Sea. The Ukraine continues to push out grain actively via the export corridor with traders noting that Russia has not made any fresh comments regarding the opening or the closing of the export corridor in 2 weeks. US rail and barge rates continue to rise amid logistical snarls and low water levels as the US harvest is in full swing. Chicago has a heavy feel with pre hedging expected ahead of the weekend. A lower close is forecast in a correction of recent day gains.

• Chicago brokers report that funds sold 7,000 contracts of wheat, 6,000 contracts of soybeans, and 8,000 contracts of corn. In the products, funds have sold 4,500 contracts of soymeal while buying 1,200 contracts of soyoil.

• FAS announced slow export sales which were expected. For the week ending Sept 29 the US sold 8.4 million bu of wheat, 28.6 million bu of soybeans and just 8.9 million bu of corn. For their respective crop years to date, the US has sold 401 million bu of wheat (down 18 million or down 4%), 520.6 million bu of corn (down 526 million or 50%), with US soybean sales at 925 million bu (up 86 million or 9%). The US soybean sales pace is the only grain running above last year’s pace. US corn export sales are falling well behind USDA annual forecasts.

• We hear that China has booked 2 cargoes of US soybeans off the PNW for November and is seeking another 2-3 cargoes for December. China is returning early from their holiday and is seeking the supply off the PNW for price and logistical reasons. We expect that China will be more active early next week with crush margins deeply green heading into the USDA October Crop Report.

• The loadout for Ukraine grain out of the export corridor continues to grow amid low price offers and growing confidence in October exports. The wait time to load Ukraine grain is now over 10 days. October could produce a strong export program out of the 3 corridor ports. Ukraine corn and wheat offers are highly attractive and continue to find new business as Black Sea freight rates soar.

• The US Labor Dept will be out with key US employment data tomorrow. We estimate that the US added 202-212,000 non-farm payroll jobs in September. This is below August and delineates a slowing jobs market into 2023 and a soften the dollar.

• The midday GFS weather model run is like previous forecasts. Key crop-growing regions of the Midwest/Plains stay in a below normal rain trend. Frosty temperatures occur Friday and the weekend with warming due next week. An open window harvest window will allow for quick harvest progress into October 20. The extended range forecast has backed away from offering rain for the Plains/Midwest to help river flows.

• Harvest pressure and a sliding US cash market is pushing Chicago grains lower amid a strong US$. Global cash markets stay weak with trade reduced on the recessionary outlook. Rising energy prices aid the US biofuel profitability and Chinese crush margins are again profitable. This has end users stepping up coverage on the break. We would look to sell rallies following the USDA October WASDE report next week. Spot Chicago corn above $7.00, spot soybeans above $14.25 and spot KC wheat above $10.50 is overvalued relative to slowing US and world export demand. A S American weather problem is needed to sustain a Chicago post-harvest recovery.

5 October 2022

Posted on October 5, 2022 by simon

• HEADLINES: Chicago futures mixed in diminished volume; Funds buy wheat on the charts/Russia; Soybeans sag on lack of fresh US demand; Corn caught in between.

• Chicago markets are mixed at midday with wheat firmer, corn and soybean futures being weaker. Soybeans are back pacing the downside as Brazilian farmers push seeding progress with China on its weeklong autumn holiday. US wheat values stay firm on Chicago fund short covering amid the growing speculation that Russia will close Ukraine’s grain export corridor as the 120-day initial contract ends on November 22. Seasonal price trends turn more positive as the US harvest advances but rising US/world interest rates and slowing economic data casts a long dark shadow on demand. World grain trade is sagging on rising US$ denominated values and tightening availability in the budgets of N Africa and SE Asian Governments. We look for a mixed close today with US weekly export sales data being monitored on Thursday morning.

• Chicago brokers report that managed money has sold 2,400 contracts of soybeans while buying 2,400 contracts of corn and 3,100 contracts of wheat. In the products, funds have bought 900 contracts of soyoil while selling 1,200 contracts of soymeal. The oil/meal spread has pushed out to a 44% oil contribution rate in the past day. Profit taking on oil share is being seen.

• OPEC will announce a 2 million barrel production cut but excluding what the Russian production cut is already (estimated at 1.0-1.2 million barrels/day), the net cut is estimated at 900,000-1.1 million barrels/day. OPEC is reflecting on the relative cheapness of crude oil vs natural gas, coal, and other energies. Crude oil looks cheap compared to gas in Europe that is priced at $400/barrel of crude on an energy equivalent basis. We maintain that the US refilling the SPR below $80/barrel and the key heating season ahead, crude oil prices are likely to rise to a new range of $90-110.00 in Q1 2022. US farmers should see current diesel prices as a new buying opportunity. Crude futures have added to their early week gains at midday.

• Russia has announced that its wheat production will grow by 5 million mt annually due to its annexation of Eastern Ukraine. Yet, the world has yet to decide what it will do with Russia’s pilfered wheat/grain in the months ahead. Grain importers will avoid this Russian wheat including Turkey (for now). Ukraine’s military forces are pushing to reduce the area under Russian control with Putin’s reaction to newly captured territory being absent (so far). Farmers in E Ukraine have seeded limited area of wheat amid the war’s impact around them.  Russia offered new decrees on its ownership of E Ukraine today.

• The US Labor Dept will be out with key US employment data on Friday, Oct 7.  The report should show that the US added 202-212,000 non-farm payroll jobs in September. This is below August and should delineate a slowing jobs market into 2023. In the financial markets, bad news is now good news.

• Tunisia purchased Russian wheat with at least 1 seller providing an option origin contract at a premium for non-Russian suppliers. Russian wheat continues to capture world wheat demand amid its attractive prices. US wheat is overvalued in world wheat trade.

• The midday GFS weather model run like previous runs. Key crop-growing regions of the Midwest/Plains stay in a below normal rainfall trend. Frosty temperatures occur Friday and the weekend with warming next week. An open window persists.

• Seasonal price trends help Chicago grains while soybeans sag on the surging US$. Global cash markets stay weak with trade reduced (to show on Thursday’s USDA sales report) on the slowing world economic outlook. Rising energy prices aid the US biofuel profitability, which will not offset US export losses. We look for corn values to gain into the report.