Monthly Archives: September 2023

15 September 2023

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  • HEADLINES: NOPA report surprises on member soyoil stocks, lowest since October 2017; GFS weather forecast dry next week across the Central US; Wheat rises on massive Chicago short.
  • Chicago futures are mixed at midday with wheat higher while corn/soybeans sag in thin volume trade. The weekend looks open and the harvest is rolling across the Central US, but farmers are not letting go of much new crop corn/soybean supply, outside of filling contracts on prior sales. Yields are variable with disappointment noted in IL/IA/KS/MN while better than expected yields are being reported in OH/IN. For the week, soybean prices are down around 13 cents, corn is down 5 cents, while Chicago wheat values are up 9 cents. The USDA report is behind the market, but traders are cautious about engaging in new length until Midwest corn/soybean yield trends are known. Seasonally, corn futures tend to bottom this week and soybeans next week. Cash soyoil bids stay strong on domestic demand and are trading at a 4.5-6.0 cent premium to October futures. Soyoil futures are weaker as soybeans sag. USDA/FAS did not report any new export sales this morning.
  • Weather forecasters fear that the Australian drought will worsen into November amid the rapidly strengthening El Niño in the equatorial Pacific. Limited rain has fallen in September. WASDE has Australia exporting 19 million mt of wheat with a crop of 26 million mt in 2023/24. A year ago, Australia produced a wheat crop of nearly 40 million mt with exports of 32.5 million. The 2023/24 Aussie production and export drops of 14 million/13.5 million, respectively, are massive. They do not account for additional crop losses if the drought persists. The world exports an average of 17.25 million mt of wheat/month, so with an extension of the Aussie drought into October, Australian annual export losses could equal 1 month of world wheat trade. This is important and finding other suppliers to fill the void as seasonal winter weather considerations slow Russian wheat exports.
  • NOPA members crushed 167.8 million bu of soybeans in August, just below the record and the lowest smallest monthly US crush rate in 11 months. The end of summer normally produces a diminished US crush as plants take seasonal downtime for maintenance ahead of the new crop harvest. Yet, the report surprise was the fall in US soyoil stocks to 1,250 million pounds, the smallest US monthly soyoil stock total since October 2017. The lower stocks argue for record large domestic demand during August and that biofuel consumption was well above food use during August. Analysts had expected that US soyoil stocks would decline to 1,49 million pounds, so the smaller stocks confirm the biofuel demand pull. As new plants come online before the end of the year, and US energy prices surge on tightening crude oil stocks, soyoil futures hold the best bullish story at the Chicago Exchange.
  • The Midwest midday weather forecast is little changed with a line of showers to continue eastward across the E Midwest into the weekend, followed by limited Central US rain over the next 6 days. Thereafter a much wetter weather pattern unfolds across the Central US with near to above normal rainfall into early October. This rain should start a process of refilling the Mississippi River with repeated storms forecast.
  • High temperatures will be in the 70’s and 80’s this weekend and rise back to the mid 70’s to the lower 90’s next week as a ridge of high pressure builds back across the region. Near to below temperatures follow during the last week of September. No Gulf Hurricane prospects are evident into September 25.
  • NOPA August soyoil stocks of just 1,250 million pounds (lowest in 6 years) underscores the massive existing demand from the US biofuel industry. And just a third of the proposed renewable diesel plants are operational today! The EU is expected to allow the ban on Ukraine grain imports to expire, but this won’t stop several border countries from placing their own ban which conflicts with Brussels. US corn ethanol and soybean crush margins are the best in months.
To download our weekly update as a PDF file please click on the link below:

14 September 2023

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  • HEADLINES: Tepid volume as traders measure US yield results; Weekly US export sales as expected; Better rains heading for the Central US in late October.
  • Chicago futures are mixed at midday with soybeans/soyoil higher while wheat futures are slightly lower. Corn is trading either side of unchanged not knowing whether it should follow the rally in soybeans or the fall in wheat.
  • Chicago volume remains constrained with large orders able to push the market in one direction or the other. Soyoil stays our bullish stalwart on the rapid expansion of US renewable diesel demand. The US cannot afford to export any soyoil, due to the coming fight for supply between US food producers and the US biofuel industry. Complicating the fight is the rally in spot crude oil futures above $90.00 with cash diesel prices at a yearly high. As US crude oil refiners switch their operations to heating fuel (less diesel), the need for additional US diesel supply increases. Friday’s NOPA crush report will be key in determining the US off take rate of soyoil for US bio and renewable diesel.
  • Chicago brokers estimate that money managers have sold 2,300 contracts of corn and 4,200 contracts of wheat, while buying 2,200 contracts of soybeans. In the products, funds have bought 1,900 contracts of soymeal while selling 1,200 contracts of soyoil. Meal/oil spreading provided some early pressure on oil.
  • There were early day rumours that Ukraine was preparing to load out 3 large 50,000 mt+ vessels with corn from an Eastern European port and Odessa. Most European cash traders have heard the rumours, with some suggesting that the corn is destined for China. Cash sources cannot confirm that any vessel will be loading at Odessa, but the hint that some vessel owner would be willing to take the risk of loss heading to a Ukraine port post the ending of the Black Sea Grain Corridor pact is intriguing. We will obviously continue to monitor Ukraine and Eastern European port activity for confirmation.
  • US grain export sales for the week ending Sept 7 were 16.1 million bu of wheat, 29.7 million bu of corn, and 25.9 million bu of soybeans. For their respective crop years to date, the US has sold 305.4 million bu of wheat (down 70 million or 19%), 439 million bu of corn (down 45 million or 9%), and 612 million bu of soybeans (down 317 million or 34%). Obviously, the biggest decline to date is in soybeans as Brazil continues to offer soybeans below the US from the Paranagua corridor.
  • Northern Brazilian farmers are getting worried about dry soils and near record heat with the 2023 soybean planting season starting tomorrow. The Lula Government allowed a few large Mato Grosso farmers to start soy seeding a few days early, but the other farmers that planted ahead of Sept 15 are receiving letters and may have to pay a penalty. Normally, Mato Grosso farmers like to have their soybeans seeded by mid-October so that winter corn can be seeded in the closing days of February or early March. Otherwise, winter corn runs into the end of the end of the wet season in late April and yields fall sharply.
  • The Midwest weather forecast is little changed with limited Midwest rain over the next 5-6 days. Any rain will be confined to the Southern Plains. The Midwest/Delta harvest will be accelerating amid the dry/sunny weather trend. High temperatures will be in the 70’s and 80’s and rise back to the mid 70’s to the lower 90’s next week as a ridge of high pressure builds back across the region.
  • Improved rain will fall across the Plains and the W Midwest beyond September 18 with accumulations of 1.50-2.00”. There continues to be signs of improved rain across the entire Midwest in the 11–15-day period which could aid the flow of the Mississippi River. No Gulf Hurricane prospects are witnessed in recent model solutions.
  • September futures go off the Chicago board today. The next Canadian crop production estimates are not released until December. Debate on the Canadian crop size will continue. Canadian harvest results point that WASDE estimates are close to correct. US farmers are starting their harvest of corn and finding that yields are below their hopes. Soybeans are also finding additional disease pressures as the crop rapidly dries down. We remain bullish soyoil followed by soybeans and wheat.

13 September 2023

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  • HEADLINES: Chicago soyoil/wheat values post strong gains at midday; Funds show new interest in Chicago grain; GFS weather forecast wetter beyond September 19.
  • Chicago futures are mixed at midday with soyoil/wheat the upside price leaders with soybean/soymeal futures sagging on oil share spreading. The volume of trade is in recovery with brokers indicating that new investment funds are back looking at the grain markets as the gyrations of the summer weather market have passed. The multi-year low price of corn/wheat are seen as enticing to fund managers with a potential top in the US dollar forming, and S American farmers preparing to seed their next crop under production margin duress. Commodities are seen as an asset class to invest in now that the US Central Bank is nearing an end of rate hike cycle.
  • The USDA defined US 2023 corn, soybean, and the sorghum crop sizes in their September report. The next important set of USDA reports will be released on September 30, final US 2022/23 corn, soybean, and sorghum stocks and the 2023 Final Small Grain Report. Based on the March and June Stocks reports, we forecast that NASS will find larger feed/residual use of corn and a smaller 2022 US soybean harvest (captured in the residual). WASDE awaits September stocks totals before making final adjustments to the 2022/23 US corn and soybean balance sheets. Based on the sheer strength of the Midwest cash markets, we forecast that 2022/23 US corn/soy end stocks were curtailed.
  • The US Labor Department indicated that US August inflation was 3.7%, right at industry estimates. The increase was due to a spike in US gasoline/diesel prices with the US Central Bank likely to see the rise as transitory as US refinery capacity is switched to producing heating oil for the coming cold weather season. US food prices were up 4.3% year on year with food away from home up 6.5%. Frozen vegetable prices were up 14.7% while uncooked beef gained 10.7% and set a record retail monthly price.
  • Chicago brokers report that managed money has bought 5,400 contracts of soyoil and 4,600 contracts of Chicago wheat and a net 3,900 contracts of corn. Managed money has sold 4,300 contracts of soymeal and 4,700 contracts of soybeans.
  • Hungary has joined Poland in signaling a national ban on Ukraine Grain imports starting September 15 to prevent their local cash markets from being swamped with supply. In fact, the EU ag minister is pushing to extend the ban on Ukraine grain and only allow transit of Ukraine grain to African or SE Asian markets through sealed cargoes. Ukraine corn is offered at the EU border today at $2.80/bu. Of course, this does not allow transit cost to the port of Varna or Constanza, or even a Baltic port. Although it is sketchy to work the sale price back to a Ukraine farmer, we calculate that the bid for interior Ukraine new crop corn is below $2.00/bu, which causes massive financial hardship for farmers. Based on this extremely low price, we have concern that Ukraine farmers will just leave their corn stand in the field awaiting a recovery in profitability. It makes little financial sense to harvest the corn!
  • The Central US weather forecast is like the overnight run with limited rainfall across the Midwest over the next 5-6 days. Any rain will be confined to the Southern Plains. The Midwest/Delta harvest will be accelerating in the days ahead. High temperatures will be cooler than normal into the weekend and then warm next week back to the upper 70’s to the lower 90’s. No frost or freeze risk is evident.
  • Improved rainfall will drop across the Plains and the W Midwest beyond September 18 with totals across Iowa/Missouri reaching 1.50-2.00”. This rain will help to increase the flow of the Mississippi River and barge traffic. The storm system should slowly pull through the E Midwest after September 24.
  • Funds are short a near record amount of wheat when Paris and Chicago futures are combined, which adds to the upside risk should the Ukraine war spread to Russian grain loading ports. The non-Black Sea exporter stock/use wheat ratio is historically low. It is Russian wheat price aggression which pressed futures. US soyoil values are rising on record large domestic demand tied to renewable diesel. US diesel prices are rising on tightening stocks. Soyoil is outright bullish on demand!

12 September 2023

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  • HEADLINES: USDA September report slightly bullish for wheat/soybeans; Neutral to slightly bearish for corn on extra acres; Seasonal low forming for world wheat.
  • The September USDA Crop Report was in line with trade expectations. NASS corn and soybean yields came out close to the pre-report private estimates, but Chicago values are lower following the report’s release. It is now up to actual harvest yield and crop quality reports and the late Sept Stocks/Final Small Grain Report to push Chicago valuations. We see a considerable amount of bearish news built into Chicago values ahead of the US harvest. We anticipate US corn/soy yields will fall further in the October NASS report.
  • The US September corn yield was lowered to 173.8 bushels/acre (down 1.3 with harvested corn acres raised 800,000 acres to 87.1 million acres due to FSA data inclusion). The loss of US corn yield and gain in acres added 23 million bu vs August with the 2023 US corn crop pegged at 15,134 million bu. NASS estimated the IL corn yield at 198 bushels/acre, down 16 from last year. The MO corn yield was also down 16 at 145 bushels/acre with MN down 15 at 180 bushels/acre. The IA corn yield came in at 200 bushels/acre, steady with 2022.
  • WASDE forecast 2023/24 world corn stocks at 314 million mt, up 3 million from September and up 14 million mt from last year. The 2023 Brazilian corn crop was raised to 137 million mt with exports at 57 million. China corn imports were raised by 500,000 mt to 18.50 million mt. 2023/24 world corn production is only 14 million mt more than use!
  • NASS lowered their US soybean yield by 0.8 to 50.1 bushels/acre. US soy harvested acres were adjusted up by a meagre 100,000 acres to 82.8 million acres. 2023 US soybean production was dropped by 59 million bu to 4,146 million. Old crop US soybean stocks were trimmed by 10 million to 250 million bu on a hike in exports.
  • 2023/24 US soybean end stocks were forecast at pipeline, 220 million bu.  USDA was forced to cut US 2023/24 soybean exports by 35 million bu and crush by 10 million bu to accommodate such limited stocks. We do not believe that US crush can be cut any more due to hefty margins and the onboarding of new renewable diesel plants. US 2023/24 soyoil stocks are also estimated at pipeline at 1,821 million pounds. We would argue that WASDE is too conservative on its biofuel use of soyoil at 12,500 million pounds which could be 2,000 million pounds too low. The demand led bull market is soyoil with export demand not a factor in the years ahead.
  • WASDE estimated that world 2023/24 soybean end stocks would ease slightly to 119.2 million mt via limited US stocks.
  • Chinese 2022/23 soybean imports were raised to a record 102 million mt with next year’s imports placed at 100 million. Key support rests in November soybeans at $13.25 and a test of contract highs is forecast.
  • WASDE wheat data leans supportive as USDA left its US balance sheet unchanged and trimmed a full 7 million mt from 2023/24 global ending stocks. World end stocks are now projected at 258.6 million mt, the lowest since 2015. Combined major exporter stocks were cut 1.8 million to 54 million mt, with stocks/use pegged at 13.5%, vs. 13.9% in August, the lowest since 2007/08. Crops were cut in Argentina, Australia, and Canada. USDA also lowered EU output another 1 million mt. A hike in Ukrainian production worth 1 million mt was only partially offsetting. Russia will be by far the world’s largest exporter at 49 million mt, but global wheat supplies are not abundant. We would also point out that combined wheat stocks in the US, EU, Australia, Canada, and Argentina will total only 39.5 million mt, also the lowest since 2007. Developing heat in Australia and another two weeks of dryness in Argentina now demands close monitoring.
  • WASDE lowered US HRS exports 10 million and raised HRW exports a like amount. Final US wheat production will be published in NASS’s Small Grains Summary on September 30. Seasonal lows are being formed in world wheat values.
  • Corn/soy markets have reacted negatively to NASS yield/supply data ahead of the harvest. Yet, downward yield revisions in September often foreshadow new cuts in October. We maintain final US corn/soy yield forecasts of 171 and 49 bushels/acre, respectively. The cash soy market will lead Chicago contracts higher as physical supply tightness develops. It remains critical that the wet season in Central Brazil arrives in a timely manner by October. Supply pressure is noted today, but dynamic/volatile markets persist indefinitely. Better sales opportunities occur mid-autumn onward. Actual yield data is key as Brazil sells record tonnages of corn to China.

11 September 2023

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  • HEADLINES: Chicago mixed with new contract lows in Chicago wheat; Paris wheat holds support; China to change contract specs to 13% moisture for soybeans.
  • Chicago futures are mixed at midday with soy futures higher while the grains sag. Traders argue that if NASS/USDA is to come up with any bullish surprises in tomorrow’s USDA crop report they will be focused on the complex. In August, WASDE forecast US 2023/24 corn end stocks above 2.2 billion bu, a sizeable stocks cushion. Yet, US 2023/24 soybean end stocks were forecast by WASDE at a tight 240 million bu in August. Commercials see the bare minimum of US soybean stocks (pipeline supplies) at 200-220 million bu. NASS will not update US 2023 wheat production tomorrow but wait until the 2023 Final Small Grains Report on Sept 30. Any price response of US wheat futures tomorrow will be tied to the US 2023 corn yield or WASDE change in world wheat crops. Chicago and KC wheat values should not have a sizeable reaction to the USDA September report.
  • For summer row crops, the September NASS/WASDE Crop report is one of the most important of the year since NASS pulls ears/pods and incorporates FSA data in estimating US corn/soybean seeded/harvested acres and yield. NASS in their actual field surveys will get directionally close to final 2023 US crop yields. However, in the case of soybeans, pod weights will be updated in October with final harvest results of plots available in October and November crop reports.
  • Chicago brokers estimate that funds have sold 5,900 contracts of Chicago wheat and 3,500 contracts of corn, while buying 1,200 contracts of soybeans. In the products, funds have bought 2,200 contracts of soymeal and sold 1,600 contracts of soyoil.
  • Paris wheat futures have fallen right to key support while Chicago wheat futures have scored new lows at $5.80, the lowest price since December of 2020. It makes no sense to have US wheat trading so cheaply when its stocks are down 39% from the late 2020′s.
  • US export inspections for the week ending September 7 were 24.6 million bu of corn, 11.4 million bu of soybeans, and 14.9 million bu of wheat. This was the first week of the 2023/24 crop year for corn/soybeans. In the wheat crop year to date, the US has exported 174.7 million bu (down 61.2 million or 26% from last year).
  • Disaster continues to build across RGDS in Southern Brazil in terms of widespread/excessive flooding. Additional rain has fallen following last weekend’s initial shot of 4-10.00” of rain which has damaged more than 4,000 Km of roadways and produced flooding across hundreds of thousands of hectares of crops. More heavy rains are in the forecast. Doubts are growing over the size and quality of the Brazilian wheat crop with most expecting that it will be relegated to cattle feed. Brazil was expected to export 4-5 million mt of milling wheat which is now doubtful. Imports of high pro quality wheat from Argentina will need to start by November. The outlook is the 2023 Brazilian wheat crop is becoming dire for domestic millers.
  • China has been floating new soybean moisture specs at 13% due to Brazilian soybeans that are often shipped at 15-17% and won’t store as well for crushers. Brazil would need to dry down their soybeans to reach 13%. Drying would be costly for Brazilian agriculture and would offer the US a quality advantage. This is why China’s reserve soybean buyers only use US soybeans due to lower moisture content and storability. The industry is socialising the change, China has not set a date for moisture contract change.
  • The midday GFS weather forecast is consistent with prior solutions. Another 10 days of below normal rainfall with seasonal temperatures are forecast for the Midwest/Delta. Rain is forecast to drop across the Southern and Central Plains early this week with totals of 0.25- 1.50”. This rain will aid HRW wheat seeding. No frost/freeze risk is indicated for either the US or Canada. The forecast allows the US row crop harvest to start and gain speed in the next few weeks.
  • Low volume and pre report position squaring is ongoing. China is importing massive and important amounts of Brazilian corn which is going unnoticed. Demand for US soyoil for renewable diesel demand stays robust. We are leaning bullish for US corn and soy yields on Tuesday. US SRW Gulf wheat is again the cheapest in the world. The US dollar is sharply lower on the rapidly expanding debt pile and likely pause in US lending rates at the next FOMC meeting.

8 September 2023

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  • HEADLINES: Low volume pre-report trade persists; Demand story for US soyoil; GFS weather forecast little changed.
  • Chicago futures are mixed at midday with choppiness being the feature. Chicago wheat futures pushed to new lows at $5.905 while November soybeans tested key support just above $13.50, before recovering. Chicago corn has been trading either side of unchanged for most of the morning.
  • Chicago volume remains horribly slow as few traders want to add to their risk profile ahead of Tuesday’s NASS US crop data. We doubt that NASS will offer meaningful change to US planted/harvested acres with FSA data substantially complete. Unlike prior crop years, the FSA had collected mostly all the FSA program certification data for the August report. This is why NASS updated US all wheat acres in August and did not wait until the late September final Small Grain Report. The market risk in Tuesday’s USDA report is US corn/soy yields, not planted or harvested acres.
  • USDA announced the sale of 121,000 of mt of soybeans to China. We understand that China continues to book US soybeans and was seeking another 2-4 cargoes on the morning Chicago decline. Should Tuesday’s USDA report be bearish, we expect that China will use the break to further add to their forward coverage.
  • Chicago brokers estimate that funds have sold 2,900 contracts of Chicago wheat and 4,700 contracts of corn, while being flat in soybeans. In the products, funds have sold a net 2,200 contracts of oil and bought 3,200 contracts of soymeal.
  • Stats Canada estimated July 31 all wheat stocks at 3.58 million mt (875,000 mt on farm and 2.71 million mt off farm), 1.5 million mt of canola (493,000 mt on farm and 1.0 million off farm), and 1.27 million mt of oats (789,000 mt on farm and 486,000 mt off). July 31 Canadian wheat/canola stocks were bullish due to their coming in below average trade estimates while oat stocks were slightly bearish. Canada has sizeable new crop wheat and canola export campaigns on the books and is exporting 300-500,000 mt of new crop wheat weekly.
  • US weekly export sales for the week ending September 1 were 13.6 million bu of US wheat, 37.4 million bu of corn, and 65.5 million bu of soybeans. For their respective crop years to date, the US has sold 289 million bu of wheat (down 64.4 million or 17%), 410 million bu of corn (down 51 million or 11%), and 586 million bu of soybeans (down 312 million or 34%). Brazil old crop soybean exports had a supply tail that extended into October and reduced the 2023/24 US soybean sales pace.
  • We note that global 2022/23 soybean exports are up 10 million at a record 139.6 million mt. In the first 2 months of the crop year, global wheat exports are also record large and up 2 million from last year at 22.0 million mt. World demand is record large on a 3-crop combined basis, it is just that Russia is exporting a record amount of wheat while Brazil is exporting record amounts of corn/soybeans.
  • The midday GFS weather forecast is consistent with itself and other models. Another 10 days of below normal rainfall with seasonal temperatures are forecast for the Midwest/Delta. Rain is slated to drop across the Southern and Central Plains early next week with totals estimated in a range of 0.25-1.25”. This rain comes too late to aid corn/soy yield prospects, but it will aid the HRW wheat seeding. Hurricane Lee looks to stay offshore, but its glancing pass will produce heavy rain for Maine/New York. No frost/freeze risk is indicated for either the US or Canada. The forecast allows the US row crop harvest to start and gain speed in the next few weeks.
  • Low volume and pre report position squaring is ongoing. It does not take much volume to push Chicago values either way. Long oil share spreads are being unwound. World crop production is declining, but traders want to get past the USDA September report before making any new bull bets. Argentine farm sales of soybeans on the dollar soy program have been slower than expected at 500,000 mt.  We doubt that Argentine farmers sell more than 2.5 million mt by Sept 30 and with Brazilian farmers cutting first and second crop corn seeding intentions, the Chicago risk appears to be to the upside.
To download our weekly update as a PDF file please click on the link below:

7 September 2023

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  • HEADLINES: Chicago sags on risk adjustment ahead of Tuesday’s USDA report; Pakistan secures world wheat; Canada stocks in the afternoon; GFS weather forecast stays dry for Central US.
  • Chicago futures are mixed at midday with corn/wheat steady to firm while the soy complex sags. It is all about position squaring into next week Tuesday’s USDA Crop Report and the uncertainty that surrounds US corn/soybean yields. Funds are long of soybeans/soy products and short of grain, which is why the grains are holding while liquidation pressures the complex. We note that cash markets in soyoil are firming on basis while processors are anxious for new crop soybean supplies. The drop in soyoil has taken the market back to key support on the weekly continuation chart against $0.64 spot futures. We look for a mixed close with a rally to end the week ahead of Monday’s weekly crop progress and condition report. We are looking for another 2-3% fall in soy/corn good/excellent ratings as heat/dryness rapidly pushed crop maturity. Central US weather becomes less important to price unless the pattern were to change to excessive wet to delay the Midwest harvest or if a hurricane is pointed at the US Gulf.
  • Chicago brokers estimate that funds have sold 5,600 contracts of soybeans, 6,700 contracts of soyoil, and 3,200 contracts of soymeal. In the grains, managed money is flat in wheat while buying 2,300 contracts of corn.
  • China has booked 6-8 US soybean cargoes for November on the morning Chicago price break. China continues to import record tonnages of world soybeans with 2022/23 imports to reach 103-104 million mt. China shows no slowdown in purchasing US soybeans, but there is an export tail from Brazil that will cut into September shipments.
  • USDA/FAS will release their weekly export sales report on Friday due to the US holiday on Monday. Large US corn and soybean sales are expected.
  • Pakistan is showing renewed import interest for world wheat. We hear that Pakistan has purchased 4-6 cargoes of Russian and Romanian wheat. A year ago, Pakistan imported 3.00 million mt of world wheat, just below the record of 3.6 million imported in 2020/21. Export sources expect that Pakistan will import 3.0-3.5 million mt this year (vs USDA estimate of 2.0 million) due to surging rice values and a poor wheat harvest.
  • Canada will release their July 31 grain and oilseed stocks totals tomorrow morning. It is expected that Canada will raise wheat stocks from prior forecasts. However, this year’s drought plagued grain harvest and ongoing active weekly exports of 300-500,000 mt of wheat will lower stocks in 2023/24. Canadian durum and spring wheat export demand to date has been active.
  • Monthly Ukraine Grain exports are estimated  at 2.1-2.4 million mt as marine trade out of the Black Sea is blocked by Russia’s ending of the Grain Export Corridor pact. This is half of last year’s export pace, and it will force key importers like China/North Africa to seek their corn/wheat elsewhere.
  • US ethanol production produced 298 million gallons vs 296 million last week. There was a push of US ethanol production in the last 6 weeks that raised the total corn grind near the WASDE annual estimate. We would look for only a modest downward adjustment on the 2022/23 US ethanol corn grind of 5-10 million bu next Tuesday.
  • The midday GFS weather forecast is consistent with its own prior weather run and others. Another 10-14 days of below normal rainfall and seasonal temperatures are forecast for the Midwest and Delta. Rain is forecast to drop across the Southern and Central Plains early next week. The rain comes too late to aid corn/soy yield prospects, but it will aid the HRW wheat seeding. Note that Midwest farmers are waiting for rain before beginning their SRW wheat seeding campaign. High temperatures range from the 70’s to the mid 80’s with hurricane Lee to hold offshore the NE US but produce considerable rain of 2-4.00” for W New York and Maine.
  • Chicago volume has been low as traders adjust their risk for Tuesday’s USDA Crop report. Private Crop estimates were not surprising this week and clustered around 175 bushels/acre in corn and 50 bushels/acre in soybeans. Early corn yield reports are disappointing, but producers hope that yield improves in the coming weeks. We see soyoil, soybeans and wheat as undervalued amid expanding demand and tightening supplies. This is no time to fall asleep at the wheel!

6 September 2023

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  • HEADLINES: Markets digest plunge in soy crop rating, falling world wheat production; Negative macro input caps rally.
  • Chicago futures are higher by varying degrees at midday, with soybeans and KC wheat pacing the midweek recovery. The continued trimming of exporter wheat production and last week’s collapse in soy crop ratings are cited. Corn has followed, but early anecdotal corn/sileage yield reports remain disappointing. Recall annual bottoms are very often scored by mid-September, and as our belief is that lows have been scored given US corn and soy crop ratings are likely to drop another 1-3 points next Monday. Excluding outright crippling drought years, US corn and soy good/excellent ratings in mid-September will exist at the lower end of history.
  • Soyoil has fallen slightly as crude’s rally slows and palm oil’s rally pauses, but strength in meal has kept board crush margins above $2.60/bu. The primary issue in the soy complex, and in oilseed markets as a whole, is that yield loss the in US and weak canola output in Canada are colliding with record global consumption and massively profitable processing margins. Supply-based rallies can be absorbed easily. New highs in Nov beans lie ahead if a sub-50 national yield is confirmed. A sub-49 bushels/acre yield makes the 2023/24 US soy balance sheet nearly unmanageable, and it is difficult to understate the importance of weather in Argentina and Brazil between Nov and Dec.
  • US meal and oil disappearance will remain well supported amid renewable diesel production capacity expansion and as the US picks up global meal business left by drought in Argentina and meagre crush rates there. We are uncertain what price rations domestic soybean demand prior to late winter.
  • Excessive rainfall/flooding in Brazil offers a new threat to exportable wheat supplies, and the midday forecast keeps in place a pattern of unwanted rainfall into Sep 20. Precipitation accumulation in Rio Grande do Sul and Parana in southern Brazil in the last 4 days has been recorded in a range of 3-8+”. Additional rainfall of 3-8” is forecast in this region over the next 10 days.
  • Brazil remains a net importer of wheat, but the tonnage of Brazilian exports has been rising in each year since 2020. USDA projects Brazil to export a record 3.5 million mt of wheat in crop year 2023/24, but any rapid loss of quality lowers or eliminates this. USDA’s Brazilian net wheat import forecast of 2.1 million mt may be 1-3 million too low. Note that excessive rainfall is impacting roughly 80% of Brazil’s primary wheat producing region.
  • Dec Paris milling wheat is up €3.75/mt at midday. European corn and rapeseed markets have recovered slightly. We note that Sep Matif wheat’s expiration typically marks annual lows in that market, and it is just difficult to be overly bearish of wheat as physical supply availability is peaking currently. Spot crude is up $0.50/barrel at $87.20.
  • The midday GFS weather forecast is consistent with morning output. Scattered, and welcomed, showers will dot the southern and western Plains next Mon-Thurs, while arid conditions continue across the E Plains, Midwest and Delta. Heat exits the Midwest overnight but stays in place for another few days across TX, OK, KS, MO and far western IA. Soil moisture loss will be a feature of mid-Sep weather across the bulk of the Central US, and thereafter any shift to wetter conditions will disrupt harvest, which will spread northward must faster than normal. As of now, tropical storm Lee is forecast to stay just east of the mid-Atlantic/Northeast Coast.
  • Bullish vigour this morning has been capped by strength in the US dollar, weakness in equity markets and the looming US/N Hemisphere harvest. However, breaks are now buying opportunities as the primary short-term risk is one of lower-than-expected US corn, soy and spring wheat yields.

5 September 2023

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  • HEADLINES: Chicago futures mixed with grain/soy spreading featured; GFS weather forecast at midday offers new tropical depression; Brazilian exports soar, US shipments lag.
  • Chicago grain futures have rebounded with the grains higher with the soy market staying in the red. The volume of Chicago trade has been modest with end user support noted in wheat/corn on the early break. With no quick solution to the Black Sea Grain corridor stalemate, Chicago grain futures are back to focusing on supply. Soybeans are lower on the hope that the Argentine soy/dollar program will produce renewed farmer selling.
  • Initial and early Midwest corn yields are coming in below last year and producer expectations. Small kernel size is being blamed for the poor yields. It is far too early to determine a US corn yield trend, but traders will be keeping a close ear on the ground relative to producer yield reports. We look for a higher Chicago close ahead of weekly good/excellent corn/soybean crop ratings that are expected to be down sharply this afternoon.
  • World wheat/soybean trade demand is record large, but it is being fulfilled almost exclusively by Russia in wheat and Brazil on corn/soybeans. The demand is so strong that Brazil’s waiting time to load a vessel has now reached 48 days, the most in a decade, which is causing huge demurrage costs for importers. The massive Russian and Brazilian export programs have left the EU/US seeking export scraps. The difficult question is the timing of when world demand will switch back to EU wheat and US corn.
  • Chicago brokers report that managed money has bought a net 2,300 contracts of corn and 1,200 contracts of Chicago wheat, with selling of 3,100 contracts of soybeans. In soy products, fund managers have sold 2,300 contracts of soyoil and 1,900 contracts of soymeal.
  • S&P Global estimated the US corn yield at 177.5 bushels/acre and soybeans at 51.0 bushels/acre for the September report. They also added an additional 500,000 acres due to the FSA Farm Program participation data of August. S&P noted that they held a negative bias on the US soybean yield going forward due to poor late finishing weather. We would note that the S&P corn yield would be record large.
  • US export inspections for the week ending August 31 were; 18.9 million bu of corn, 13.9 million bu of soybeans, and 11.0 million bu of wheat. For their respective crop years to date, the US has exported 159 million bu of wheat (down 49 million or 23%), 1,466 million bu of corn (down 700 million or 32%), and 1,919 million bu of soybeans (down 174 million or 8%). WASDE is likely 10-15 million bu too low on US 2022/23 US soybean exports.
  • Brazilian state agencies are forecasting sharp falls in new crop corn production with IMEA (Mato Grosso) forecasting 2024 corn production at 43.3 million mt, compared with 52.5 million this crop year.
  • Negative margins have Brazilian farmers pulling back from seeding expansion in both winter corn and first crop soybeans. The drop in Brazilian new crop corn seeding intentions is important to longer term Chicago valuations.
  • The Plains/Midwest/Delta weather forecast is consistent with recent day forecasts with a below normal rainfall trend and moderating temperatures. High pressure ridging holds across the Central US today and then retrogrades southeast with a diminished amplitude into next weekend. This allows showers on the weekend across TN, KY, and SE MO, and then next week across the Upper Lake States. The remainder of the Central US holds in an arid trend. A new tropical depression has formed in the Atlantic Basin which could target the Eastern US shoreline as a hurricane around September 15. Until then, moderating temperatures and below normal Central US rainfall are the features.
  • Chicago values are waiting for next week’s USDA Sept 12 Crop Report. Grain/soy spreads are being unwound. Cash basis bids are starting to strengthen ahead of the onset of active corn harvest in 7-14 days. US renewable diesel demand stays strong with the soy correction temporary. Support is noted below $13.50 Nov soybean futures. Seasonal lows are being formed.

1 September 2023

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  • HEADLINES: Chicago soyoil higher on demand; Additional US soybeans to unknown destinations; RGDS estimate soybean seeding up 1.5%.
  • Chicago grain futures are higher in US pre-holiday trade with soyoil futures being the bullish stalwart. Corn/soybean futures are following with soyoil rising on strong domestic demand. US renewable diesel demand continues to build with this sector completely replacing lost US export demand. Gulf US soyoil stays well above S American and tropical oil offers from SE Asia, which has limited the rally in spot Chicago soyoil to $0.70-0.72.
  • However, US soyoil values are becoming a demand driven bull as operating capacity is ramped up, with an upward price trend to persist into Q4. New US renewable diesel refineries are to come online in October/November which adds to the domestic demand outlook. The soyoil market is entering a new demand phase that must be closely monitored and how it plays into the price of soybeans. A firm Chicago close is expected today as values follow the early and late week rally with a midweek dip price trend.
  • The US$ is steady following the US Labor Dept reporting a 186,000 increase in non-farm jobs for August. The report was seen as bullish for US equities as the US Central Bank is expected to hold rates steady in their September 19-20 meeting. The FMOC is controlling inflation and not producing a recession.
  • The USDA announced that another 198,000 mt of US soybeans were sold to an unknown destination. China stays active in securing US soybeans for Oct-Dec.
  • Chicago brokers report that managed money has bought a net 3,300 contracts of corn, 1,300 contracts of Chicago wheat, and 2,600 contracts of soybeans. Funds have sold 2,000 contracts of soymeal and bought 1,600 contracts of soyoil.
  • RGDS reported that its soybean farmers planned to expand their 2023 soybean seedings 1.5% from last year. The gain was less than expected and followed Deral’s static soy planting estimate for Parana. Although Mato Grosso seeding looks to expand 2%, there is concern that poor margins will keep soy and first crop corn seeding expansion below current market expectations.
  • We do not expect that this year’s drop in Mississippi river water levels will produce the same sharp rise in barge freight rates as the fall of 2022. A year ago, the US was actively shipping old crop corn/soybeans due to the Brazilian 2022 drought and their smaller harvest. This year’s US September export program is substantially reduced with a larger share of barges upriver. The point is that US Mississippi tariff rates will be rising, but the fear of a repeat of 2022’s excessive cost are overblown. Any raise in tariff rates will be borne by the US farmer in lower basis bids. The good news is that US farmers and commercials have an abundance of storage available for the 2023 corn and soybean harvest. Any impact on US corn/soy exports will be modest.
  • The Plains/Midwest/Delta weather forecast is consistent with an extended period of little/no rainfall and above normal temperatures. High pressure ridging holds across the Central US into late next week with record heat forecast on the weekend and Monday (90’s to the lower 100’s). There is a chance of rain in the 7–10-day period across the N Plains/Upper Midwest with rainfall totals of 0.1-0.8” on 25% of the crop area. We would predict a decline of 2-3% in US corn/soybean good/excellent ratings on Tuesday.
  • It is a new month and crop year, September 1 and 2023/24. The USDA/NASS crop report will be released in 11 calendar days with a slew of private crop estimates available next week. Debate rages in the industry as to US corn/soy yields with the recent hot/dry weather conditions causing a widening range of estimates. Also, S American, and Australian weather starts to play roles in world grain pricing as their new production season starts. China has been a record large buyer of world soybeans, corn, and barley. The industry is understating Chinese and world demand. We continue to argue that world wheat/feed prices are near seasonal lows.
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