Monthly Archives: October 2023

16 October 2023

Posted on October 16, 2023 by simon

• HEADLINES: NOPA member soyoil stocks fall to 9 year low at 1,100 million pounds, demand bull market unfolding; Northern Brazilian dryness looks to continue; Corn lower on open Midwest harvest weather.

• Chicago grain markets are mixed at midday with corn weaker while soybeans and wheat futures are higher. Soyoil has pushed to heady gains based on NOPA member soyoil stocks falling to their lowest levels in 9 years at 1.1 billion pounds due to record large domestic soyoil demand. Chicago has a firm undertone to price, but an acceleration of the US corn harvest (open weather) and abundance of world feed wheat is capping rallies.

• Soybeans will follow S American weather more closely with Northern Brazilian soy seeding and replanting to become more important in coming weeks. Acute dryness is starting to worry the North Central Brazilian farmer. Chicago will uncover support on breaks with rising Midwest cash basis levels for corn, soybeans and wheat providing a bullish undertow. Seasonally, a post-harvest recovery should unfold into the middle of November.

• The USDA announced the sale of 200,000 mt of US corn to Mexico and 183,000 mt of soymeal/soymeal cake to the Philippines. There is also talk that China booked 3-5 cargoes of US soybeans off the PNW for November. China continues to take record tonnages of Brazilian corn with exports in October estimated at 4.5-4.7 million mt based on vessel nominations.

• Chicago brokers estimate that fund managers have purchased 2,300 contracts of wheat, 3,200 contracts of soybeans, while selling 5,400 contracts of corn and 1,100 contracts of soymeal.

• The US exported 17.1 million bu of wheat, 73.9 million bu of soybeans, and 13.0 million bu of wheat for the week ending October 12. We would note that there were large export revisions for the week ending October 5 with US corn exports at 31.7 (up 10 million bu), soybeans at 51.5 million bu (up 13 million), and wheat at 11.2 million bu (up 1.5 million). For their respective crop years to date, US wheat exports stand at 233.6 million bu (down 102 million or 30%), US corn exports are 154 million bu (up 25 million or 19%), with US soybean exports at 198.6 million bu (up 25.1 million or 14%). US corn and soybean loadings are holding up much better than sales.

• NOPA reported that a record 165.5 million bu of US soybeans were processed in September, up 4.1 million bu from August, and up 7.4 million bu from last year. The crush produced a record amount of soyoil, but US NOPA member soyoil stocks fell to their lowest level in 9 years at 1.108 million pounds, down 12% from August and down 24% from last year. The US continues to use more oil for biofuel than food consumption, and WASDE will be forced to make future adjustments in demand. And as US biofuel demand takes up an increasing amount of US soyoil production, food users will want to make sure that their name is on a processor’s future production just to make sure they have the supply. A demand rationing rally is required with the latest decline in soyoil values only helping the US renewable industry to lock down margins well into 2024.

• The midday GFS weather forecast maintains an arid rainfall trend across North Central Brazil into October 26 with rain totals of 0.25-1.50” (30% of normal). Southern Brazil will endure additional heavy rain with totals of 2.50-6.50”. The S Brazilian rain adds to the flooding potential with corn yellowing becoming more pronounced. The extended 11–15-day period does offer improved Northern Brazilian rainfall, but this is a low confidence forecast. The extended range forecast has not been useful.

• Record or near record heat will also prevail across Northern Brazil this week with highs temperatures ranging from the mid 90’s to the lower 100’s. The heat/dryness has placed a halt on new N Brazilian spring planting.

• The Northern Brazilian weather forecast is worrisome with heat/dryness to linger into November. Midwest cash basis bids have rallied strongly in the past 10 days as US farmers are tight fisted with newly harvested supply amid spot export demand. The most bullish Chicago commodity is soyoil due to record and expanding renewable diesel demand. Corn/soy breaks will be well supported, but a strong rally hinges on worsening Brazilian weather or Chinese demand for US SRW wheat. Seasonally, Chicago values tend to rally into mid-November.

13 October 2023

Posted on October 13, 2023 by simon

• HEADLINES: Chicago mixed at midday; China continues wheat buying spree; Soy export demand remains tepid.

• Chicago grain markets are mixed at midday, with the soy market retreating from Thursday’s dramatic rally on tepid export demand, wheat adding premium on newfound interest for US origin from China, and corn caught in between. Participation rates remain lacklustre. Position squaring dominates price discovery on Friday (profit taking in soy, short covering in wheat), and we would maintain that it is S American weather that is key to direction moving forward. Still no pattern shift is offered to S America into Oct 22, with the GFS weather forecast keeping arid/hot weather in place across C Brazil into Oct 26, and Brazilian/Argentine crop progress data is important moving forward.

• The US dollar index continues its recovery from Wednesday’s lows. US CPI data and a worsening of conflict in the Mid-East sustains a flight to safety. Spot WTI crude oil is up $3.50 at $86.40. The Dow is up 145 points.

• In the week ending Oct 5, US exporters sold a net 36 million bu of corn, vs. 71 million the previous week. Mexico through the period secured only 21 million bu, vs. 45 million the previous weeks. Net soybean sales totalled 39 million bu, vs. 30 million the prior week. Wheat sales were a sizeable 24 million bu, vs. 10 million the previous week and a new marketing year high.

• China was confirmed to have purchased 8 million bu of US origin SRW and was announced to have secured another 7 million bu this morning. We have heard of more cargoes working to China, and also hear that China has secured upward of 15 cargoes of Aussie origin this morning. China’s wheat/feed market buying spree is beginning to change the complexity of those markets relative to current prices. Additionally, China’s commitment to import 10 million mt of wheat annually via its WTO agreement bodes favourably for US demand amid Australia’s short crop.

• For their respective marketing years to date, the US has sold 602 million bu of corn, up 14% on last year, 371 million bu of wheat, down 9% and 717 million bu of soybeans, down 31%. Brazil’s crush industry is outbidding exporters currently, but the tepid nature of US soy sales to date requires an extension of this season’s export window to validate USDA’s forecast. We would acknowledge that US soy export demand is weak, but it is S American weather that determines market share, and the timing of new crop Brazilian exports, moving forward.

• New crop US soymeal exports sit at 4.6 million mt, up 48% year on year.

• IMEA this afternoon will release Mato Grosso soy planting progress. Soy seeding last Friday was 14% complete, vs. 19% the previous week, and reports are widespread that planting has paused amid recent heat/dryness. It is December weather that determines Brazilian soy yields but seeding delays in Oct have a clear impact on Safrinha planting dates and yield potential. A year ago in Mid-Oct, Mato Grosso’s soy crop was 41% planted.

• Also, key is Monday’s NOPA crush data and whether soyoil stocks continue to decline amid rapid renewal diesel production expansion. There has been nothing to indicate a slowing of domestic soyoil disappearance. Exports must be rationed for a second year.

• The midday GFS weather forecast is further east with heavy rainfall across the Southern US in the 6–10-day period. Totals of 1-3” are now advertised in AR, MN, TN and KY, while TX and OK face another 10 days of dryness. Moderate rainfall moves across the Great Lakes and far E Midwest into Sunday, but thereafter threats to harvest will be minimal into late month.

• USDA’s trimming of US corn and soy yields provide additional support for bottoms having been scored. Seasonal trends are positive into spring, but the speed/intensity of recoveries will hinge upon the duration of unwanted dryness in Argentina and Central/Northern Brazil. S American weather dominates price discovery beginning in late October.

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

Weekend summary 13 October 2023

12 October 2023

Posted on October 12, 2023 by simon

• HEADLINES: Chicago rallies on row crop yield cuts; More attention paid to abnormal S American weather.

• Chicago grain futures rallied following the USDA October Crop report as US 2023 corn/soybean yields came in slightly below average trade estimates. The US corn yield was 173.0 bushels/acre, down 0.5 bushels/acre from trade expectations and down 0.8 bushels/acre from August. And the US soybean yield at 49.6 bushels/acre, was down 0.3 bushels/acre from the average trade estimate and down 0.5 bushels/acre from September. Historically, when the US crop yields decline from August through October, they tend to drop even more in November. We would currently maintain a final US corn yield of 171-172 bushels/acre with soybeans at 49-49.3 bushels/acre. There will be further cuts to the 2023 US corn and soybean crops, but they will be modest.

• WASDE estimated 2023/24 corn end stocks forecast to 2,111 million bu based on a 70 million bu cut to the US 2023 corn crop to 15,064 million. WASDE dropped carry in supplies by nearly 90 million to 1,361 million bu.

• 2023/24 US corn demand dropped 75 million with a 25 million bu cut in 2023/24 feed/residual to 5,600 million bu and a 50 million cut in exports to 2,025 million bu. Traders argue that WASDE is still too high with its corn export forecast.

• US 2023/24 corn export demand is a work in progress depending on S American production. The average US cash corn price was left unchanged from September at $4.95. Adverse weather is required across S America if corn is to enter a lasting more bullish price trend.

• US 2023/24 soybean end stocks were forecast at pipeline levels of 220 million bu.  NASS lowered the US soybean crop by 42 million to 4,104 million bu with a yield of 49.6 bushels/acre. WASDE left S American soy crops unchanged with the Brazilian harvest forecast at a record large 163 million mt and Chinese 2023/24 imports at 100 million mt. US 2023/24 soybean exports were cut by 35 million to 1,755 million bu with crush raised by 10 million to 2,300 million bu. We would argue that the US 2023/24 crush rate is too small by 60 million bu which requires an additional cut in US export trade. The point being is that US 2023/24 soybean end stocks will stay historically tight with S American weather growing in market importance with each passing week. WASDE estimated the average farmgate price of US soybeans at $12.90/bu, the same as September.

• If there was a surprise it was that WASDE raised their biofuel use of soyoil to a record 12,800 million pounds recognising that demand for fuel now outstrips food use. WASDE also cut 2022/23 oil carry in by 100 million pounds to 1,761 million pounds. 2023/24 soyoil end stocks were forecast at 1,736 million pounds with the average cash price being $0.63/pound. The US soyoil balance sheet is bullish.

• USDA Wheat data leaned supportive. USDA’s’ 78 million bu hike in US production was known, while 2022/24 US wheat feed/residual use was increased by 30 million bu, more than expected by the trade. US end stocks are now forecast at 670 million bu, vs. 615 million previously, with the bulk of the stocks gain centred on the US HRS balance sheet. US 2023/24 HRS end stocks are raised 35 million bu to 173 million, vs. 158 million a year ago. The year on year increase in stocks has weighed on protein spreads in recent weeks, but spring wheat supplies still aren’t overly abundant. US HRW stocks increased 23 million bu to 256 million in Sep and vs. 234 million a year ago. SRW stocks were lowered 1 million bu to 137 million as larger projected exports more than offset slightly higher final production. Wheat market focus now shifts to the potential for changes in world trade flows.

• USDA raised 2023/24 Russian exports to 50 million bu amid competitive prices. Otherwise, even global data leans positive. Combined exporter production was trimmed another 1.4 million mt amid lower projected crop sizes in Australia and Kazakhstan. Argentine production was left alone at 16.5 million mt, but there is concern USDA will lower its Argentine production estimate by 1.5-2.0 million mt amid ongoing drought and following recent exchange estimates. We also note that assuming Russian exports of 50 million mt in 2023/24, finally the Russian balance sheet normalises with stocks dropping to 8.9 million mt, vs. 14.6 in 2022/23.

• Lower corn and soy yields relative to expectations allow positive seasonal trends to kick in. More attention will now be paid to abnormal S American weather. We estimate funds were short of soybeans this morning. Short covering lies ahead as harvest lows are carved out and concern over S American weather grows.

11 October 2023

Posted on October 11, 2023 by simon

• HEADLINES: Funds add to bearish soybean bet ahead of USDA report; Corn firmer on soybean/corn ratio spread unwind; S American weather to gain into late October.

• Chicago futures are mixed at midday with corn higher while the soybean market sags to test $12.50 while wheat prices drop along with Paris futures. Fund managers are adding to their net short soybean position via the charts while cash rumours abound that China is back asking for US SRW Gulf wheat offers. China appears to be on a mission importing record amounts of feedgrain as their corn harvest is nearing the 50% completion mark. The Chinese demand for Brazilian corn and world wheat has some wondering if China’s corn crop is smaller than advertised or their feed demand is larger. Unfortunately, we will never know by the Brazilian purchases and exports of corn are rapidly growing and China imported a record amount of corn in September.

• Bearish bets are being made on soybeans/wheat ahead of the USDA report. In soybeans, traders are raising their US soy yield estimates based on the nearby trend of improving farmer reported yields while the US wheat balance sheet will reflect the finding of additional crop and feed/residual use. US 2023/24 wheat end stocks are expected to rise due to the 73 million bu of additional supply, with feed/residual adjusted upwards by 25-40 million bu. Midwest corn ethanol producers are buying futures as cash corn is tough to secure with rain looking to slow the harvest across the Northern Midwest for 4-6 days.

• Chicago brokers report that managed money has sold 3,100 contracts of Chicago wheat, 900 contracts of corn, and 5,400 contracts of soybeans. In the products, funds have sold 2,100 contracts of soymeal and are flat in soyoil. Funds sold soyoil early and are trying to cover all their sales at midday.

• The USDA reported that China booked 121,000 mt of US soybeans for the 2023/24 crop year. We hear that China has booked an additional 2-3 cargoes of US soybeans off the PNW this morning. Chinese crush margins have been dropping sharply amid the sharp drop in soymeal futures following their weeklong holiday. The Chinese pork industry is struggling with over supply.

• We understand that farmers in Mato Grosso have halted soybean seeding awaiting a germinating rain. High temperatures are staying in the 90’s/lower 100’s and aggravating soil moisture shortages. The big question is when will the normal Monsoonal flow begin from the Amazon. Today, it is too early to be overly concerned, but by month end the rain needs to drop to avert replanting or pushing back the seeding of winter corn to early to mid-March. S American weather will gain in Chicago market importance following the USDA October Crop report. The October USDA report will determine US corn/soybean crop size for 2023. It is S American weather that will direct world grain and oilseed values into yearend. We believe this is because Brazil’s soybean crop at 160 million mt implies that a 5% yield loss equals 8 million mt. The importance of S American crops has never been higher amid its importance on future US corn/soybean export demand.

• The midday GFS weather forecast is slightly drier for the NE Midwest with the rain that starts today and continues into the weekend. The rain falls across the northern half of Nebraska and eastward into N Illinois/Michigan. Rain totals range from 0.5-2.00” with locally heavier amounts. The remainder of the southern US stays arid with warming temperatures starting mid next week. The C Plains will hold in a below normal rain pattern. HRW wheat seeds will need rain for proper establishment before the onset of colder temperatures in November. We will change to updating S American weather as the US corn/soybean harvest nears/surpasses 50%.

• Is the glass half empty or half full? The trade is clustered around a 173-174 bushels/acre US corn yield and a soybean yield of 50 bushels/acre. NASS pulled and dried down ears in September and any corn yield deviation should not be large. The more difficult question centres around September Central US weather and whether heat/dryness had any impact on US soy yields. We look to 49.5 bushels/acre in October and a final US soy yield of 49.0 bushels/acre. However, it is US export demand or adverse S American weather that is needed to sustain a post report price trend. Fund managers are going net short soybeans.

10 October 2023

Posted on October 10, 2023 by simon

• HEADLINES: Chicago mixed at midday as Egypt secures Russian wheat in private deal; CONAB estimates Brazilian soybeans at 162 million mt, corn at 119.4 million mt; GFS weather forecast at midday consistent.

• Chicago futures are mixed at midday with soybeans/soymeal higher while corn/wheat and soyoil trade in the red. Soyoil futures have been pushed to sharp losses on the ongoing oil share unwind. December soyoil is back to testing $0.50-0.52 cent chart support, a level where the rally started back in June. Corn, wheat, and soybean futures appear to be trading in a broad range awaiting USDA October Crop report and US corn/soybean yield data. Traders have been raising their yield estimates as recent producer reporting has yields improving. The only worry is the S Midwest Group 3 soybeans which were impacted by late season heat/dryness. The volume of trade has been modest everywhere in Chicago except soyoil where 65,000 contracts have already changed hands basis December. It is soyoil where long liquidation is active and ongoing.

• Chicago brokers estimate that managed money has sold 3,300 contracts of corn and 4,900 contracts of wheat, while buying 4,100 contracts of soybeans. In the soy products, funds have sold 6,700 contracts of soyoil and bought 2,900 soymeal.

• Brazil’s CONAB estimated their 2024 harvest at 162 million mt of soybeans and 119.4 million mt of corn. The soybean crop would be record large and 6 million above 2022/23 while corn is down 17.5 million mt vs. the USDA crop of last year.

• The media is reporting that Egypt’s GASC secured 480,000 MTmts of Russian wheat for November/December shipment with payment under a 270-day letter of credit. The price is said to be $265/mt basis fob. No confirmation was offered by GASC, but the sale is being widely discussed by European traders. The sale was private with Russian sources late last week discussing that both parties were in negotiations. The Russian Government must have given approval for the sale at the $5/mt discount that had been routinely discussed this autumn at $270/mt as a floor price.

• The US exported 21.7 million bu of corn, 14.5 million bu of wheat and 60.4 million bu of soybeans for the week ending October 5. The weekly US soybean exports were the largest since February 9. For their respective crop years to date the US has shipped out 128 million bu of corn (up 18 million from last year), 133.5 million bu of soybeans (up 31 million from last year), and 238 million bu of wheat (down 97 million from last year). The US wheat export pace is disappointing.

• We are confused by the soyoil futures decline. Soyoil futures are dropping just as new renewable diesel capacity comes online and US soyoil supplies tighten. The bears argue that D4/D6 RIN values are falling with losses of 9-11 cents this morning with more than a 50% drop since Sept 1. The pressure on D4/D6 RINs is due to their excessive supply and the expansive production of Renewable Diesel across the US. We expect that RIN values will continue to stay at low levels amid the sheer supply that is produced each day. RD producers do not see RINs as key to their current and future production. That was in the days of biodiesel. Weak RIN values imply sizeable RD production.

• We see the drop in soyoil values as a bear trap that will only be realised following Thursday’s USDA October Crop Report. The demand for US soyoil grows sharply into Q1 as sizeable new production comes online. Large amounts of D4 RIN production and lower values are not bearish to soyoil demand.

• The midday GF S weather forecast is slightly further north with showers/storms that starts today and continue into the weekend. The rain falls across the northern half of Nebraska and eastward into N Illinois/Michigan. Rain totals range from 0.5-2.00” with locally heavier amounts. The remainder of the southern US stays arid with warming temperatures starting mid next week. The C Plains holds in a below normal rainfall pattern.

• May-September US rainfall was 2.98” below average, the twelfth driest on record and the driest since 2012. September has been noticeably dry for 4 years running. This should have the biggest impact on US soy yield. It is too early for S American weather to have any impact on summer row crop yield, but that will change in the coming weeks. China has been a massive buyer of Brazilian corn since July.

9 October 2023

Posted on October 9, 2023 by simon

• HEADLINES: Chicago shrugs off energy price rise, bio crop values decline; Key Argentine election on October 22 with Blue Peso rate rising.

• The overnight Chicago grain rally did not carry through to the upside and follow the sharp rise in world energy prices. The bio crops of corn/soyoil have come under the most selling pressure at midday. Soyoil futures have fallen to fresh lows for this decline as corn has retreated 3-4 cents from like gains overnight. Soybeans are back testing last week’s low amid the ongoing Midwest harvest. The volume of Chicago trade is tepid as traders are taking risk off amid the uncertainty of 2 geopolitical war events and a USDA Crop report on Thursday. The mindset of traders is to get smaller, on risk, at least heading into the USDA report. Few are wanting to sell breaks or buy rallies until more is known about 2023 US corn/soybean yield potential. Of course, for farmers the declining Chicago price helps boost their revenue insurance payment that is calculated by the average October corn/soybean price.

• Chicago brokers estimate that managed money has sold 4,600 contracts of soybeans and 5,100 contracts of corn, while buying 2,900 contracts of wheat. In the soy products, funds have sold 3,200 contracts of soyoil and bought 1,800 contracts of soymeal. The charts are staying bearish on soybeans, soy products and wheat. Corn charts are more neutral and basing.

• The US Government is celebrating the Columbus Day holiday and is closed. No daily export sales, weekly export inspections or US Crop Progress/Condition reports will be released today. The US government is back in business on Tuesday and today’s reports will be released then.

• The seasonal soybean buy date is Columbus Day as the US soy harvest pushes beyond 50%. The second week of October has historically been the seasonal low for soy futures. Whether or not this works again this year depends on the USDA report on Thursday and forward Chinese demand for US soybeans. China is back from holiday and watching Chicago weaken without any large US purchases.

• Brazil will be on holiday Thursday with Argentina holding a key presidential election on October 22. The Blue Peso has reached 900:1 as the fear grows that Javier Milei will be elected with his campaign stance to dollarize the Argentine economy to control inflation. There are 130 Congressional seats at risk out of 257 in the election. Historically, the Argentine Congress follows the President in its economic platform. Note that a runoff election is possible if one candidate does not control 50% of the Presidential vote. Tensions are high in Argentina amid the ongoing drought, the financial pressure from the IMF to pay off their debts and the National Election.

• The Kazakhstan wheat crop is estimated at 12.3 million mt, down 25% from last year due to harsh growing weather according EU’s crop forecasting arm MARS. The smaller crop has a big impact on durum with Canada also facing smaller trade.

• The midday GFS weather forecast is slightly further north with showers/storms that start on Wednesday and continue into the weekend. The rain falls across the northern half of Nebraska and eastward into N Illinois/Michigan. Rain totals range from 0.5-2.00” with locally heavier amounts. The remainder of the southern US stays arid with warming temperatures during the weekend. Note that the Great Plains stays dry which is worrisome with soil moisture short and HRW wheat seed trying to germinate. The 10–15-day period is warmer with the Central US weather turning wetter under a trough.

• Surging energy prices have not provided support for Chicago corn/soy futures amid the ongoing harvest and Thursday’s USDA Crop report. Yield data has been variable but is showing improvement in corn/soy. A 61.8% retracement for spot Chicago soyoil futures is $55.35, which the deliverable October futures contract is nearing. Cash soyoil is trading 5-6 cents above October and there have not been any deliveries. The demand pull of renewable diesel continues and shows no sign of slowing when measured by D4 RIN production. S American weather is abnormal with rain needed across Argentina/N Brazil. We now need to get through Thursday’s USDA report.

6 October 2023

Posted on October 8, 2023 by simon

• HEADLINES: Soybeans turn down on fund liquidation; Chicago corn futures lower after yesterday’s one-month high; Wheat futures lower after recent rally.

• Soybean futures turned lower on late-week fund liquidation and weakness in the soybean meal market. December soybean meal ended the week with the lowest close since early June, pulling November soybeans to a similarly low weekly close.

• The Commitment of Traders report showed that for the week ending October 3, funds sold just over 25,000 contracts of soybeans, sold over 18,200 contracts of soybean meal, and were net buyers of 6,300 contracts of soybean oil. Fund length in the soybean market was pared back to just 5,000 contracts, the lowest since late May. Funds were net long 41,000 contracts of soymeal or the lowest since May 2022. Fund’s largest net long position was just over 41,000 contracts in soyoil.

• Soybean futures are deeply oversold, but steady/lower price trends are expected ahead of the October USDA reports that will be released Thursday. Cash markets look to be bottoming, but a lasting recovery will wait until after the October Crop Report.

• Chicago corn futures closed at $4.92, down 5 cents on the day. Dec corn retreated today after setting a one-month high yesterday. Some traders pointed to forecasts for favourable harvest weather as a contributing factor in the market’s selloff. The bearish mood was further exacerbated by the larger than expected US Jobs report which is seen as assuring the Fed will raise interest rates once again.

• Ship line-ups indicate that corn export inspections could be 35 million bu, the largest in half a year. At least one cargo is destined for China with more vessels to depart in coming weeks.

• The next target for Dec corn is around $5.07 then $5.25. Any S American weather problem lifts spot Chicago corn to $5.50. Until then, spot Chicago corn is locked in $4.50-5.25 range.

• Chicago December wheat closed at $5.69, down 9 cents. KC wheat closed at $6.73, down 17 cents. Minneapolis wheat closed at $7.20, down 8 cents. MATIF wheat was down slightly. Traders shrugged off news that a sea mine had damaged a cargo ship in the Black Sea.

• Agronomists judge Sep rain as a defining factor determining the size of Australia’s wheat crop. The nation’s weather bureau said that this year’s Sep weather was the driest on record. In addition to the drought, temperatures soared to record highs last month. The scattered rain received in the southeast has not substantially changed the crop’s outlook. We look for further reductions in both the Aussie and Argentine wheat crops.

• Global wheat prices have bottomed. Market upside potential will be determined by the size of S. Hemisphere crop sizes and when rain falls across Argentina/Australia.

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

Weekend summary 6 October 2023

5 October 2023

Posted on October 6, 2023 by simon

• HEADLINES: Chicago corn above its 50-day moving average for the first time since July; Rumours that a Ukraine cargo ship struck a sea mine in the new corridor; GFS weather forecast drier across northern Brazil.

• Chicago grain markets are higher at midday with corn reaching above its 50-day moving average for the first time since July 28. Wheat futures have pushed to new weekly highs on the news that the Russian Government pegged their 2023 wheat crop at 90 million mt following a Rosstat stocks report that showed less than expected stocks in the hands of farmers. Chicago wheat is testing its 20-day moving average at $5.81 basis December. A close above $5.81 Dec Chicago will spur additional short covering with wheat trading 40 cents above Friday’s low and funds holding an estimated net short position of over 100,000 contracts.

• Soyoil futures are lower on the 2 day fall in energy values and the acute weakness in crude oil. WTI crude oil futures are down $1.30 and testing key support on the charts at $80-82.00. We would point out that it is order flow that is directing commodity valuations with few small traders or small funds trading. The market is being pushed up and down by large funds and their daily trading activity. We look for a strong Chicago close with Chinese traders returning from their Golden Week holiday on Friday and Monday. Soyoil prices appear to be too cheap relative to renewable diesel demand and the price of alternative vegoil and tallow prices. A bottom should be forming against $0.55.

• Chicago brokers report that money managers have bought 6,600 contracts of wheat, 17,500 contracts of corn, and 2,600 contracts of soybeans. In the products, funds have bought 4,600 contracts of soymeal while selling 3,400 contracts of soyoil. Chicago soyoil futures are closely following the intraday price moves in crude.

• FAS/USDA for the week ending September 28 that the US sold 10.0 million bu of wheat, 71.5 million bu of corn, and 29.7 million bu of soybeans. The US soybean sales lag is all due to Brazilian soybean exports and the hangover from the record 155 million mt crop. Brazil has now sold/committed for export 98.6 million mt of soybeans, so its old crop export program is finished.

• The Russian government estimated their 2023 wheat crop at 90.0 million mt, down 15 million from last year, but above the WASDE forecast of 85.0 million mt. The Siberian wheat harvest is just 57% completed. It is a sad issue in Siberia with rain producing constant quality and production falls. A year ago, Russian claims that its farmers harvested a monster wheat crop of nearly 105 million mt. The odds are high that this year’s harvest will end up between 87-89 million.

• Rosstat estimated Russian Sept 1 on farm wheat stocks at 28.8 million mt, down 9% from the year prior. The smaller stocks have some wondering of the USDA was right in forecasting 2022 Russian wheat production at 92 million vs 104.2 million mt.

• The midday GFS weather forecast is like the overnight run with showers falling in the next 24 hours across the E Midwest followed by a long stretch of cool/dry weather. The next chance of rain occurs from October 12-13 with rains of 0.4-1.50”. However, the rain is forecast to miss the Central Plains, which is far different from what the European model was forecasting overnight. Cooler temperatures start later today with Midwest highs retreating to the 50’s and 60’s with a frost/freeze this weekend. The relative chill lasts through next week with warming in the 11–15-day period.

• A smaller Russian wheat crop (and stocks) total argues that wheat has scored its annual low as pressure for Russia to actively export wheat subsides. Corn is following to the upside but will struggle to rise above $5.20. Argentine wheat crop ratings are expected to fall later today while Chicago soyoil futures bottom with energy. Group 3 Midwest soybean yields are disappointing on September heat/dryness. There are rumours that a Ukraine cargo ship has hit a sea mine which caused damage. Wheat is the upside Chicago leader.

4 October 2023

Posted on October 4, 2023 by simon

• HEADLINES: Mixed Chicago trade in slowing volume as crude oil falls $4/barrel; Rumours persist on Ukraine and China demand; Mexico secures more US corn.

• Chicago grain markets are mixed at midday with corn/wheat trading in the red while soybeans bounce on spread unwinding. Active Chicago selling was noted on the opening, but the decline was met with end user pricing on the stability in non-US wheat/corn fob price offers. And US grain merchandisers are not seeing producers part with freshly harvested grain that was not forward contracted.   US, Brazilian and Argentine corn are all priced close to parity on a fob basis for December, the US holds the price advantage for Q1 2024 export demand. Traders expect that world corn demand will be slowly switching back to the US in the coming weeks with an increase in daily sales announced.

• Ukraine and its fledgling export corridor are being monitored. Ship traffic is increasing but buyers of Ukraine fob corn/wheat/sunseeds are keenly aware that should Russia attack Ukraine port infrastructure that they (contract holder) must have another source/option included in the sales contract. It is just too early to know whether Ukraine has a viable export corridor through the Black Sea without an agreement with Russia. We doubt that Russia will go back into the Black Sea Grain Pact based on their demands not being met.

• We have noted many times that seasonal bottoms are carved out over time and are not a one-time event. That bottoming process appears to be underway.

• Chicago brokers report that money managers have sold 4,200 contracts of wheat, 2,900 contracts of corn, while being flat in soybeans. In the products, funds have sold 3,200 soyoil while buying 900 contracts of soymeal.

• The USDA/FAS reported that Mexico purchased 196,607 mt of US corn.  No additional Chinese purchase of US wheat was indicated, but exporters report that China is asking for US SRW/SWW offers for January/February. China will be returning from their weeklong Golden Week Holiday on Friday which should release some pent-up demand for US soybeans. Brazil is no longer offering soybeans for December with current export commitments now over 99 million mt.

• Mexico is the largest purchaser of US corn for the 2023/24 crop year to date of around 8.0 million mt (including daily sales announced) which is more than 50% of the US total. Canada is also expected to step up its purchases of US corn due to their dire summer drought. Combined, both US neighbours are expected to account for 850 million bu plus of US corn imports in 2023/24.

• Southern Brazilian rains have fallen in abundance with strong straight-line wind producing structural damage across Parana. The coming heavy rain will pose another challenge for Brazil’s HRW wheat crop. Record September rainfall across RGDS produced wheat quality loss with there being no offers of milling grade for export. This new round of heavy rain will pose fresh problems for feed wheat and newly planted spring corn/soybeans. It is just too wet and sunshine and firmer soils are immediately needed.

• The midday weather forecast is like the overnight run with showers over the Central Midwest in the next 36 hours followed by a long stretch of cool and dry weather. Rain totals are estimated in a range of 0.1-0.9” and locally heavier. Much cooler temperatures occur starting tomorrow with Midwest highs retreating to the 50’s and 60’s with the next chance of Midwest rain occurring during October 12-14.  The S American weather pattern stays abnormal with flooding rain across SE Brazil and a deepening drought across Argentina.

• Rumours, Rumours, Rumours, there are rumours that Ukraine’s grain corridor is working normally, and it will supplant the Russian agreement, there are rumours that China is seeking additional US SRW/SWW wheat, and there are rumours of China pricing US soybeans. The rumours have supported a wide swinging Chicago. Fund order flow and intermarket spreads are featured. Today it is all about soy/corn and meal/soyoil spreading with crude oil prices down $4.00/barrel. There is a flow of Ukraine grain, but it is not equal to last year or normal. And the US soybean harvest is speeding ahead with yield reports highly variable but generally below last year. MN/WI soy yields are 3-6 bushels/acre below 2022. Yet, our macro fear is a weaker US dollar that pulls money back into commodities on the dysfunctional US Congress.  Brazil/China completed their first soybean trade in Yuan and Reals, not the US dollar.

3 October 2023

Posted on October 3, 2023 by simon

• HEADLINES: US wheat rallies on Chinese demand confirmation; Group 3 soybean yields awaited; GFS weather forecast drier across S America next 10 days.

• Chicago grain markets are mixed at midday. Soy futures are lower on the accelerating Midwest harvest while funds are in their final stages of liquidating stale market length. Wheat futures are higher on news that the US sold 4 cargoes of SRW wheat to China (hearing additional quantities working) while Chicago corn is pinned between the two with harvest to dramatically pick up next week as soybean harvest advances and farmers switch back to cutting corn.

• Seasonal lows tend to be formed next week in soybeans with fund managers aware that international weather for wheat/soybeans is far from ideal. East Central Brazil will receive flooding rain while soils are rapidly drying across Argentina and Northern Brazil. We look for a mixed settlement today with soybeans to form a bottom either today or by early Wednesday. China should return late week with several days of pricing that has worked in their favour amid the Chicago decline. Pre-report positioning is expected next week with debates raging as to whether the US corn yield falls in the range of 170-176 bushels/acre and soybeans at 48.5-51.0 bushels/acre. Yield data that we hear paints a yield on the lower end of these trade estimates.

• Chicago brokers estimate that funds have sold 5,400 contracts of soybeans and 3,900 contracts of corn, while buying 2,300 contracts of Chicago wheat.  Funds have sold 3,900 contracts of soymeal while being flat in soyoil.

• FAS/USDA confirmed that China booked 220,000 mt of US SRW wheat and 265,000 mt of US soybeans. US SRW fob wheat had become the cheapest in the world and China saw an opportunity. Remember that under a 2018 WTO ruling, China must secure nearly 10 million mt of world wheat to follow their 2001 entry agreement. China been active booking French wheat, but Friday’s sharp Chicago price fall allowed US Gulf wheat to enter that mix. It is important to note that the 8.1 million bu US SRW wheat sale was not in the WASDE annual export grid. A sale of 500,000 mt US wheat (SRW/SWW mixed) would be 18.4 million bu and with 2023/24 US wheat exports at 135 million bu, such a sale ends up as being 14% of projected annual trade. The point is that US SRW wheat (spot Chicago futures) is cheap enough to encourage Chinese demand and likely bottom the Gulf fob market. A year ago, China booked 7.6 million mt of Australian wheat which is not available this year due to their drought. This leaves China looking to the EU/US and Black Sea wheat in the coming months for December forward shipment.

• EU wheat exports through September 30 stood at 7.4 million mt vs 9.8 million last year. The 2.4 million mt of reduced EU trade from July-October is based on last year’s strong start of the EU wheat export program before the Black Sea Grain Corridor Deal was signed in mid-July. We look for EU wheat exports to slowly increase in the months ahead (relative to last year) which makes the WASDE 37.50 million mt still too high by 1-2 million, with a total of 34.50-36.0 million mt closer to the right forecast with three quarters of the crop year remaining.

• US market analysts await Group 3 soybean yield results. The group 3 soybean harvest should start this weekend. Group 3 soybeans represent more than 30% of the US soy crop and they would be most impacted by the September (Midwest) heat/dryness due to their delayed maturation. We continue to maintain that there is great variability, but overall Midwest soybean yields are coming in below last year via small seed size.

• The midday GFS weather forecast is like the overnight run with limited Central US rainfall. The best Midwest rain looks to drop across from later today through Friday with totals of 0.1-0.9”. Thereafter, an extended period of dry weather follows which should allow the harvest to actively resume. Much cooler temperatures will occur from Thursday onward with highs retreating to the 50’s and 60’s with frost possible across N Wisconsin and N Minnesota this weekend. Next week appears to be largely dry for harvest.

• The flow of funds is dramatically reduced today which has sparked the Chicago price fall. The Midwest harvest is quickly advancing with 50% soybean progress to be reached sometime next week. There is plenty of time for cash sales on coming S American weather scares. And the Argentine Presidential election is Oct 19.