- Chicago grain futures are sharply lower at midday with corn, soybeans and wheat all sinking on profit taking and the concern of slowing Chinese demand for US soybeans in the days/weeks ahead. Funds have been moderate sellers, but totals have not been large. End users have orders resting below the market. Soybeans appear to be better supported than either of the grains.
- Key support appears to be resting below $10.00 in November soybeans and below $3.57 in December corn. Chicago wheat futures have given up all of Friday’s gain and pushed below that low. Chicago has a general bearish tone at midday with the macro markets adding to the selling. Crude oil is off more than $2/barrel with the DOW down another 800 points. “Risk off” is the theme of the day with most funds cutting risk. A lower Chicago close is expected with fund selling to persist into the close.
- Chicago brokers estimate that funds have sold 9,400 contracts of wheat, 13,700 contracts of corn, and 9,500 contracts of soybeans. In soy products, funds have sold 5,300 contracts of soymeal and 5,900 contracts of soyoil.
- The US confirmed the sale of 132,000 mt of soybeans to China, with another 171,000 mt to unknown, and 132,000 mt to Pakistan.
- There are rumours that China may be washing out a few cargoes of US sorghum for a profit. It is unknown whether China’s feed demand is slowing or there are other issues. This is the first time that China sales backs are noted, but US sorghum premiums are through the roof and it may be an economic reason why some sellers are willing to bank a profit.
- Rumours are noted of corn contract defaults from producers to commercial buyers in both Romania and Ukraine where late season dryness has also curtailed crop potential. Sources estimate the defaults at 10-15% with most at an average of 13%. The defaults make cash trading more difficult in these nations, which is often expressed by their deeply discounted basis. Farmers defaulting are unwilling to sell remaining cash grain expecting further price gains. It is difficult to originate grain in Ukraine, Romania, Bulgaria, and Russia.
- Parana in Brazil has planted 33% of its spring corn crop with seeding accelerating amid the rain. The forecast leans favourable and Parana hopes to have first crop corn seeding completed by the middle of October. It is estimated that Parana will expand their first crop corn seeding by 5-6%.
- The US exported 29.7 million bu of corn, 48.1 million bu soybeans and 17.3 million bu of wheat. US corn and soybean shipments were below trade expectations.
- The midday GFS weather forecast is drier across the Delta as Tropical Storm Beta stays further south. A pronounced ridge/trough upper air pattern develops that should accelerate the US harvest. The jet stream holds further to the north which maintains a summerlike weather pattern with favourable harvest conditions. The 11-15 day period keeps the warm/dry weather profile in place with the soybean harvest to gain speed into the weekend. The US corn crop is drying down more slowly (which could be adding to yield), but it also delays the gut slot of harvest to late September or early October. We look for 10-12% of the US corn and 5-6% of the US soybean crop to be harvested through Sunday.
- This is the first real test of the bulls since the unseasonal Chicago rally started in late August. Macro market falls has produced a “reduce risk” on hedge fund trading floors and today’s Chicago break. However, it also produces a new buying opportunity for China. The next few days will indicate if China’s Sinograin has completed their reserve purchase program, and whether others are willing to step forward on the break. If China demand evolves, a retest of Friday’s high could return by late week. Otherwise, the seasonal high has formed. Watch FAS daily sale totals for direction.