• Chicago grain markets have traded firm through midday, supported by higher energy prices and a decline in the US Dollar Index. Soybeans have been the leader in the Chicago grain markets on Tuesday and are holding onto gains of 12-15 cents at midday. Corn has followed, and 5-7 cents higher, while Chicago wheat has corrected 7-9 cents. The next few days will be technically important for the wheat market as December wheat has converged with the 100- and 200-day moving averages. A close above $9.50 will spark another round of technical buying, and a close under $9 will likely trigger fund liquidation. Equally important is that December corn holds $6.70.

• The US Dollar Index continues to correct and has now shed more than 3.7% in the last four days. Crude oil futures are firming this week with November now nearly $11 over the lows in just 6 sessions, and on track to mark the highest close in nearly 3 weeks as OPEC considers production cuts.

• US stock market indexes are soaring with the S&P 500 Index gaining nearly 60 points (1.6%) overnight and has traded more than 100 points higher at midday. The JOLTS survey showed that job openings in the US declined to 10.05 million in August versus expectations of 11.2 million jobs and 11.17 million in July. The 10% decline from July was the largest 1-month decline since 2009 (ex-covid), and offers evidence that the Fed’s interest rate hikes are taking hold.

• Chicago brokers estimate that funds have bought 1,000-2,000 contracts of wheat, 5,000-7,000 contracts of corn, and 5,000-7,000 contracts of soybeans. In the soy product markets, funds have bought 1,000-2,000 contracts of soybean meal and 3,000-5,000 contracts of soybean oil.

• Longer term, the advancing Brazilian crops will be highly competitive with the US market for world exports. On Monday CONAB reported that Brazil had planted 23% of its first corn crop compared to 24% last year. The first crop is typically used to satisfy domestic demand, and any residual is exported.

• Soybean planting progress was reported at 4.6% complete on a national basis compared to 3.9% last year. Mato Grosso had planted 8.9% of its soybean crop versus 6.2% last year. Planting progress in Parana was at 9% versus 7% a year ago and Mato Grosso do Sul had planted 6% of its crop versus 6.9% last year. S American weather will take on increased importance in the coming weeks as planting progress advances and crops emerge.

• The midday GFS weather model run is little changed from the overnight. The key crop-growing regions of the Central Midwest and Western Plains states will stay dry in the week ahead with light rains to move into the region in the last half of next week. Above-average temperatures are forecast across most of the Corn Belt for the next week. The open harvest window will see corn and soybean harvest advance quickly across the country. However, the lack of rain will worsen the transport problems on the US river systems.

• The advancing harvest is keeping pressure on US cash markets, which will remain under pressure until harvest at least reaches 50% complete. Basis will then likely strengthen into the end of the year. C IL on-farm storage is showing more than $1/bu return for corn and $0.70 for soybeans from harvest to December delivery.

• HEADLINES: Low volume choppy trade awaiting private US crop estimates; ISM Index shows weakening US manufacturing sector; Dow rallies 600 points.

• Chicago futures reversed overnight price trends with the grains weaker while soy futures rallied. The US$ declined which offered a bid to US equity values while crude oil futures held with gains of over $3/barrel. Bloomberg estimated that world investors have lost $37 trillion in wealth since January 1, the largest 9-month loss in history. Such massive losses is having a real impact on demand which may provide Central Bank pauses in raising rates. The 10-year US Treasury note yield has fallen to 3.6% after trading above 4.0% last week. The fall in rates has provided bullish heart back into a host of asset classes this morning, including raw materials. We doubt that corn/wheat can fall too much further amid tightening end stocks and limited farmer selling. However, we also doubt that January soybeans can rise too far above $14-14.25 on building US end stocks and favourable S American weather. A mostly higher close is expected as investment managers tentatively return to adding risk in their portfolios.

• Chicago brokers estimate that fund managers have sold 3,200 contracts of corn, while buying a net 2,100 contracts of wheat and 2,900 contracts of soybeans. In the soy products, funds have bought 4,500 contracts of soyoil while selling 200 contracts of soymeal.

• USDA FGIS weekly grain inspections for the week ending September 29 were; 26.0 million bu of corn, 21.1 million bu of soybeans, and 24.5 million bu of wheat. For their respective crop years to date the US has exported 92.8 million bu of corn (up 4 million or 4.3%), 65.4 million bu of soybeans (down 2.1 million or 3%), with wheat exports at 313 million bu (up 8 million or 2%). The US export season is following the 2021/22 crop year, with one important difference in that China is slow in securing US corn and Brazil is unlikely to have back-to-back droughts.

• The USDA confirmed that the US has sold 110,000 mt of US soybeans to an unknown destination. The buyer is rumoured to be the EU, Mexico, or S Korea.

• The ISM’s manufacturing/factory index dropped to 50.9 in September, its lowest reading since May of 2022, the height of the pandemic. The extremely slow pace of manufacturing growth confirms a rather dramatic slowing in the US economy. The slowing manufacturing rate will cause a rise in layoffs heading into the end of the year, especially if the US Central Bank raises its lending rate by another 1-1.25% heading into 2023. The US stock market rallied sharply on the theme of bad economic news is bullish. The DOW is up over 600 points, and some traders argue that the S&P index is nearing a tradable bottom.

• River basis bids continue to decline as water levels are in retreat. The December/March corn spread has widened out to a 7 cent March premium. The weather forecasts stay arid for the Central US and water levels will be restricted.

• A progressive weather pattern will hold with a shot of cold Canadian air pushed southward into the Central US during late week and the weekend. A frost/freeze looks likely across the N Plains and the NC Midwest. A warming trend follows with limited rainfall into mid-October. The US corn and soybean harvest will rush ahead. There are hints of some rain in the 11–15-day period, but in amounts that are far below what is needed to help the Mississippi River. Drought and dryness concerns will continue to plague the Central US well into late October.

• The grain markets will be unable to sustain bearish trends without a bearish supply surprise from USDA on October 12. US corn/wheat stocks are just too tight. However, soy rallies will fail amid larger US supplies and the favourable seeding forecast for Brazil.  StoneX will be out with their US corn/soybean yields on Tuesday with the Markit Group on Thursday. We see price risk to the downside following ending of the US harvest.

• HEADLINES: NASS report loses corn and finds soybeans; Wheat stocks as expected but US all wheat production declines.

Sep 1 US Stocks (million bu)

            2020        2021        2022

Corn            1,919        1,235        1,377

Soybeans        525        257        274

Wheat            2,158        1,774        1,776

• The USDA September 1 Stocks Report was bullish of corn and slightly bearish of soybeans. US wheat stocks were right at last year and viewed as neutral.

• Chicago is adjusting to the elevated risk of 2022/23 corn stocks declining near pipeline levels of 1,000 million bu with any drop in the US 2022 corn yield near or below 171 bushels/acre. Wheat/corn hold upside price risk as spot Chicago soybeans will struggle to rise above $14.50/bu. Beans have downside price risk to $13.00.

• The USDA estimated 2022/23 corn end stocks at 1,377 million bu, down 148 million from the WASDE September forecast due to larger feed/residual use. 2022/23 US corn stocks are 142 million bu larger than last year, but a smaller 2022 harvest threatens 2023 US supply availability.

• WASDE/USDA will raise their annual feed/residual corn use to 5,706 million bu as wheat feeding slumped and new crop sorghum supplies were limited. NASS did adjust the US 2021 corn harvest by edging yield and harvested acres lower. The 2022 corn crop was cut 41 million bu to 15,074 million.

• The 148 million bu drop in old crop corn stocks will pull 2022/23 corn end stocks down to 1,071 million bu without any change in yield (172.5 bushels/acre) or demand. The cut in old crop corn stocks produces an historically low stocks/use ratio of 7.5%, and growing odds that corn prices will rise above $7.00 at some point.

• We note that US farmers held 509 million bu of corn, a 29% increase from last year. It is difficult to understand why farmers held so much corn amid the cash premiums that were being offered. We look for corn prices to add upside premium to price just in case the US 2022 corn yield slides below 170 bushels/acre.

• The 2021 US soybean crop was raised 30 million to 4,465 million bu with end stocks raised 34 million to 274 million bu. The larger old crop stocks were seen as bearish punishing Chicago values. Both yield and harvested acres were adjusted slightly higher. A year ago, US soybean end stocks were 257 million bu.

• US 2022/23 soybean stocks will be raised by 34 million bu to due to the larger old crop supplies. The extra old crop supplies would raise 2022/23 WASDE soybean stocks to 234 million bu if yield (50.5 bushels/acre) and demand held steady. The extra soybean supplies would allow for new crop yield to slide near 50.0 bushels/acre without changing their current end stocks estimate of 200 million bu.

• We see the extra old crop soybean stocks as slightly bearish on price and pressuring the July/November 2023 soybean spread. Rallies in spot Chicago soybeans will be capped.

• NASS wheat data leans bullish. Final US wheat production in 2022 was lowered a surprising 133 million bu to 1,650 million, with winter wheat output down 94 million, spring wheat down 30 million and durum down 10 million relative to NASS’s early August estimates. US all wheat production will be near unchanged from last year, and this coupled with crop concerns in Argentina will keep the non-Black Sea exporter balance sheet extremely tight.

• However, Sep 1 US wheat stocks totalled 1,776 million bu, right at the average guess, unchanged from last year. This implies Jun-Aug wheat feed disappearance of 109 million bu, vs. 254 million last year and the lowest on record.  USDA in its Oct WASDE is expected to cut annual wheat feed/residual 30-40 million to just 40-50 million bu. End stocks will be cut to 520-530 million bu, but like corn and beans, the issue for the market is whether current prices are adequately rationing supplies. This largely hinges upon Black Sea geopolitics and grain flows, and whether importer demand is forced to the US during the winter and spring. Newer highs are probable, but rallies should be rewarded.

• Larger than expected US soy supplies are colliding with a slowing of export demand and mostly favourable weather in Brazil. Corn/wheat stay supportive amid escalating Black Sea risks and as the market must know final US corn yield before it knows whether $6.75-6.95 is properly slowing consumption.   Soybeans will be the ag market’s bearish laggard amid recent Argentine sales and non-threatening Brazilian weather. Corn is the bullish stalwart.