Monthly Archives: September 2024

6 September 2024

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  • Chicago weaker at midday; Macro markets weigh; GFS weather forecast wet in Delta but drier in S Midwest.
  • It started out as being a macro morning in Chicago with the US September employment report reflecting a step down to 142,000 in job creation (and potential of US Central Bank to cut its fed funds lending rate by 0.5%). The larger rate cut potential spurred commodity fund demand from the macro traders which initially pushed Chicago values higher. Chicago corn/soy pushed to a new weekly high amid the hope for US rate cuts in a decline in the US dollar. The US greenback is in decline, but the US stock market has fallen sharply on the news that has caused a pause in the macro buying of commodities. The midday tone of Chicago grain markets is one of bearishness as the early rally failed.
  • With the US September Jobs report in the rearview mirror, the USDA September Crop Report is next Thursday with traders fearing new record large US corn and soy yields. November soybean futures poked above $10.30 before hedge-related selling emerged from the US/S America farmer. Soybean fundamentals are bearish with the US harvest ahead and record large US soy crop likely. The market must digest large cash supplies nearby before S American weather comes forward. Brazilian dryness is acute, but it is too early to pay much attention until the middle of October. We look for a lower Chicago close amid long liquidation ahead of Thursday’s USDA report.
  • Chicago brokers estimate that funds have bought a net 1,900 contracts of wheat and 4,200 contracts of corn while selling 3,800 contracts of soybeans. In the products, funds have sold 3,200 contracts of soyoil and bought 1,300 soymeal.
  • FAS reported for the week ending August 29 that the US sold 12.5 million bu of wheat, a net 52.5 million bu of soybeans, and 64.9 million bu of corn. For their respective crop years to date, the US has sold 378 million bu of wheat (up 89 million or 31%), 2,196 million bu of corn (up 599 million or 37%), and 1,669 million bu of soybeans (down 294 million or 15%). The US has sold 442 million bu of new crop corn and 434 million bu of new crop soybeans, not including old crop carryover.
  • There is growing concern that Mexico will (again) try to restrict GMO corn imports. The Mexican Senate is debating and will likely pass a bill next week that limits GMO corn imports unless the corn is cracked. The anti GMO platform has been pushed by Mexico’s President Almo as he leaves office on September 30. President Almo and the Congress look to make a final attempt to limit GMO corn imports and help Mexican corn farmers amid low margins.
  • The US would likely push back on any Mexican GMO corn import ban through existing trade agreements. Yet, Mexico keeps reminding the US to stay out of its sovereignty. Mexico needs large US corn imports due to a 2.5-year drought, but a political fight could produce upheaval in corn trade. Importing large tonnages of US cracked corn does not work due to dust and storage difficulty for Mexican end users. Be aware of the potential headlines that might emerge regarding Mexico and US GMO corn.
  • The midday GFS weather forecast is much wetter across the Delta region as an organised tropical storm is forecast to make landfall in TX/LA next Wed/Thurs and move into AR/W TN during the second half of next week. Rainfall of 3-6” favours LA, AR, and MS. Elsewhere dryness and variable temperatures persist for another 10 days. Chilly overnight readings are probable across the E Midwest this weekend, though no frost is indicated. Abnormal warmth blankets the whole of the Central US Sep 10-18, with highs in the 80s to be widespread. Highs in the 90s will favour the Central Plains. Rain will be needed across the HRW Belt by mid-autumn.
  • It is a day of profit taking and pre-weekend hedge pressure. Bottoms in wheat and corn are scored typically in the first week of September, but recoveries are rather back and forth until October. The soy market stays tied to USDA yield forecast into NASS’s October report. Be prepared for choppiness/volatility during the remainder of September. The complete absence of water in Central/Northern Brazil grabs more attention after the next 2-3 weeks.
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5 September 2024

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  • Chicago weaker at midday with dry weather forecasts supporting soybeans; Black Sea FOB wheat unmoved; GFS forecast dry for the Midwest.
  • It has been a red morning in Chicago with corn, soybean, and wheat futures lower. The oil share spread is gaining, with soymeal retreating from recent day gains as oilseed workers appear to be in a deal with crushers. Large US corn/soy yields are being reported by private analytical firms with the September USDA Crop report just a week away. This is the first actual survey report from NASS and a record large US soybean yield/crop is anticipated. Wheat futures are in decline as Black Sea cash wheat markets are unmoved by the recent Chicago/Paris rally. Russian fob wheat ended the day at $217/mt, the same price as late August. Russia exported a record 5.0 million mt plus of wheat during August with similar large exports to occur in September.
  • The USDA reported that China booked 126,000 mt of US soybeans with 189,700 mt sold to unknown destination. This helps confirm that China booked 5-8 cargoes of US soybeans on Tuesday. We understand that China continues to seek and book US soybeans on a daily basis. Note that the weekly USDA/FAS export sales report will be released on Friday due to the Monday Labor Day holiday. Another week of large US corn/soybean sales are expected.
  • US corn and soybean crop maturity is being pushed by the dry/sunny/mild September weather with corn harvest to start in earnest by the end of next week. Farmers had hoped that the 2024 corn crop would dry down quickly, and that is what is occurring. Should the dry weather last for another 2 weeks, the Southern and Central US corn harvest could be in full swing by September 21. The market is sensing harvest hedge pressure starting this weekend. The soybean crop is also maturing quickly with the harvest in April planted beans to commence in late September.
  • The Brazilian Senate approved a bill yesterday that would create an expanding national program for green fuels into early 2030. The Fuels of the Future Bill was overwhelmingly approved by the Brazilian Senate with the amount of soyoil to be blended into Brazil’s diesel supply to rise 1% each year until it reaches 20% by 2030. This would be a massive increase in Brazil’s domestic soyoil use in the years ahead. Currently, Brazil is blending 14% of its diesel supply with soyoil and the country may have to import Argentine soyoil to meet its domestic 2024 mandate before the new 2025 harvest.
  • The Fuels of the Future Bill also set Brazil’s ethanol percentage in gasoline to reach 27% and vary within a range of 22-35%. Currently, only 18% of Brazil’s gasoline supply is blended with ethanol. Brazil is pushing to dramatically increase its blend of green fuels into its domestic fuel supply which would aid its farmers. The Fuels of the Future Bill requires passage in the Lower House and signature by the president before it becomes law. It is important legislation to follow for world agriculture.
  • Canadian canola futures are bouncing as it is possible that China could import its canola into yearend. However, Chinese importers would likely have to get government approval to make sure it did not fall foul of China’s trade intentions. If history is a lesson, it is feared that Canada/China trade dispute will take years to resolve which is unnerving for Canadian farm income.
  • The midday GFS weather forecast is unchanged with dry and warming temperatures forecast for the next 10 days. Topical activity soaks parts of the Southeast and Florida, but a lengthy period of dryness and normal/above normal temperatures is forecast for the Central US. Highs in the 80s will be widespread across the Midwest with 90’s across the Plains next week.
  • Chicago traders will be looking forward to the USDA September Report in 5 trading days and the onset of the 2024 Midwest corn harvest. Black Sea wheat prices are well below the US/European offers and are gathering world demand. S American corn premiums are in retreat as the Brazilian Real stays weak which is sparking farmer selling. Central US dryness is a supportive Chicago price feature. The sharp decline in Chicago grain open interest speaks of sizeable short covering in recent days.

4 September 2024

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  • Chicago higher at midday on strong July census exports; Still no rain forecast in US Midwest, Brazil.
  • Chicago row crop futures firm but off highs; wheat paces Tuesday rally on strengthening European market; Census US exports suggest USDA too low across the board. Macro markets are mixed, with crude down slightly but the US dollar index finding resistance at initial chart-based resistance.
  • Global ag markets are firm at midday as Dec Chicago corn attracts buying/short covering interest above key moving averages, and as official US crop exports in August suggests varying degrees of upward revisions to US demand lie ahead. Additionally, world weather issues, outside of Australia, remain numerous and meaningful pattern changes are unlikely prior to the latter part of September.
  • Census US corn exports in July totalled 207 million bu, up 115 million or more than double that of the 2023. Work suggests August US corn exports will be at/slightly above 200 million bu, which places final 2023/24 US corn exports at 2,285-2,290 million bu, vs. USDA’s projected 2,250 million. Census soy exports were 55 million bu, vs. 47 million the prior year and the lack of outright collapse in recent weeks implies final US soy exports will be 1,700-1,710 million bu, at/slightly above USDA’s forecast.
  • Official US wheat exports in July totalled 73 million bu, vs. 64 million last year, and exports in August are projected at 92 million bu, up 38 million year on year. Jun-Aug US wheat exports are calculated at a 4-year high 220 million bu, up 37% from last. Low prices are uncovering demand for US products.
  • Exporters sold another 131,000 mt of soybeans to China for 2024/25 delivery. Attention is being paid to rising hog prices and crush margins. We doubt US soybean exports in 2024/25 can exceed 1,800 million bu without S American weather issues or without lengthy seeding delays in Brazil this autumn, but we maintain China is likely to price an additional 675-700 million bu of US soy between now and early/mid-January. It is the condensed nature of Chinese buying that lends support on breaks.
  • Brazilian soy producers will soon be allowed to plant soybeans as regional moratoriums are lifted, Sep 7 in Mato Grosso and Sep 20 in Parana, but Mother Nature is unlikely to cooperate with early seeding in Brazil. The midday GFS weather forecast is similar to other models in keeping S American rainfall rigidly confined to RGDS in far Southern Brazil into Sep 18-19. High temperatures in Central/Northern Brazil will be routinely in the low/mid-100s, or some 5-14 degrees above normal.
  • It is far too earl for concern, but the timing of the arrival of Brazil’s soy surplus will be largely determined by weather over the next 45 days. Closer attention will be paid to S American weather beyond the next two weeks.
  • Canadian canola futures are down sharply as that market looks for non-Chinese demand. Spot WTI crude is down $0.55/barrel at $69.75.
  • The midday GFS weather forecast is more intense with incoming rainfall in LA, where 5-day accumulation will reach 3-10”, but is otherwise unchanged from the morning run. Elevated tropical activity soaks parts of the Southeast and Florida, but a lengthy period of dryness and normal/above normal temperatures is forecast elsewhere. Warmth returns next week. Highs in the 80s will be widespread across the Midwest. The GFS forecast hints of max temperatures Sep 11-15 in the 90s across the Southern and Central Plains.
  • Focus is shifting from record US row crop yields to elevated disappearance in autumn/early winter. Recoveries between Sep and mid-winter are unremarkable, though we note that US Gulf corn is now offered at parity with S American origin and bulk short covering next week requires decently sized cuts to US corn/soy yields.

3 September 2024

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  • Corn/wheat push Above 50-day moving average, produce chart market “melt-up”; China booked 6-8 cargoes of US soybeans; GFS weather forecast dry for the Central US next 10 days.
  • Grains rally on morning reopening amid US corn/soybean yield questions and unwind of long stock/short commodity spread by hedge funds. December corn futures pushed above its 50-day moving average at $4.0775. Soyoil bounces as canola futures edge off limit losses and Canadian farmers fret over the loss of China as key import customer. The Canada/China canola row provides political pressure on Prime Minster Trudeau ahead of 2025 election. A higher Chicago close is expected due to the expectation of falling crop condition ratings.
  • Midday Chicago grain futures are higher with wheat/corn pacing the advance. December corn futures rallied to $4.10 while December wheat futures to $4.66 on speculative short covering. The 50-day moving average was breached at $4.0775 in December corn and is being tested at $5.66 in December Chicago wheat. Dry Central US weather and the start of a new Southern Hemisphere growing season are offering Chicago support. The soybean rally has been constrained by the acute weakness of Chicago soyoil tied to the sharp fall of Canadian canola futures. Soymeal has been the upside product leader on strong cash premiums and talk of additional US export demand. US producer selling is limited with farmers not willing to sell new crop harvest amid the uncertainty of yield. The market has “technically” melted up in rather active volume.
  • The USDA/FAS reported the sale of 132,000 mt of soybeans to China in 2024/25 crop year. Rumours are that China purchased another 6-9 cargoes of US soybeans on the overnight break. China remains active as a US soybean buyer.
  • Chicago brokers report that the managed money has purchased 8,200 contracts of Chicago wheat, 10,400 contracts of corn, and 9,700 contracts of soybeans. In the soy products, funds have sold 4,300 contracts of soyoil and bought 7,100 contracts of soymeal. Active spreading of meal/oil has been reported.
  • For the week ending August 30 the US exported 38.0 million bu of corn, 18.3 million bu of soybeans, and 21.3 million bu of wheat. For their respective crop years to date, the US has shipped out 2,048 million bu of corn, 1,642 million bu of soybeans and 210.8 million bu of wheat. Adding back 247 million bu on additional census corn exports (through June) takes the US 2023/24 corn export total above 2,300 million bu. USDA is 50 million bu too low with old crop corn exports at 2,250 million. And in soybeans, 72 million bu needs to be added back for Census which jumps 2023/24 US soybean exports to 1,715 million bu. WASDE is 15 million bu light on old US soybean exports. It is too early in the 2024/25 wheat export year to make any conclusions.
  • US Presidential candidate Trump made China weekend comments that indicated that he and President Xi would manage to have a good relationship. Trump continued that US tariffs are not taxes on Americans but are paid for by other countries. However, as seen by Canadian farmers overnight, retaliation can often be swift and unexpected. China will not favour rising US goods tariffs.
  • The midday GFS weather forecast is like the overnight solution. The GFS model is dry in the 10-day period for the entire Central US with any rain confined to the Northern Lakes and the Gulf States. A few showers may occur across MI/OH/PA but totals would range from 0.1-0.6”. The best rain falls across the Gulf states from afternoon convective thunder-storm activity.  Ours confidence in the GFS forecast is average due to the potential formation of tropical storms. An extended dry period is forecast across the Central US.
  • Chicago is “melting up” on the charts as key moving averages are breached and the bears reduce risk ahead of the USDA September 12 crop report. Yet, we doubt that coming private crop estimates will veer too far from their August forecasts. Soybean seed size is in decline and could cause a bigger yield fall in October, but NASS will not catch soybean seed size drop in its September forecast. The sharp fall in US crude oil prices offers worry over world economic growth. The US is unlikely to run out of US soybeans without a dire S American weather problem from November into 2025.