- HEADLINES: China buys a few cargoes of US soybeans; Traders to monitor overnight Chinese equity markets; No US wheat offers to Morocco.
- Mixed Chicago futures in rather average volume. An early round of Chicago selling was absorbed by end user buying, while US farmers are focussed on harvest. The soy complex paced the recovery on Chinese demand. China is rumoured to have purchased 3-5 cargoes of US soybeans for November off the Gulf this morning with additional orders working. Chinese crushers are using weakening Chicago values to boost their forward coverage. Wheat futures are weaker on liquidation and Friday’s weekly drop in the Russian export tax rate. Corn appears to be caught in between soybeans/wheat awaiting yield results.
- China has purchased a known 10.3 million mt of US soybeans to date with an estimated 4.0 million hidden in the unknown category. We estimate that China will import 34-35 million mt of US soybeans in 2021/22, so their unfilled demand is pegged at 20-21 million mt. China is close bought and Hurricane Ida and the resulting 3–4-week Gulf export slowdown made matters worse. China has an immediate need for US soybeans and their return from their autumn holiday should produce a point of support. US weekly soybean exports should really ramp up in October to a point where the US is shipping 75-85 million bu/week. This demand will firm cash basis.
- There are few resting orders above Chicago with end users able to scale into purchases on the early break. The overnight price action in Chinese equities will drive raw material (Chicago) prices on Wednesday. China will return from their holiday and there is hope that Chinese equities will not melt down very much due to Evergrande. A weaker Chinese stock market is expected with the US equity recovery helping to blunt any bearish reaction. Traders are waiting for China’s stock market reaction before taking a more bullish grain/soy stance.
- Chicago brokers estimate that funds have sold 5,100 contracts of wheat and 7,600 contracts of corn, while buying 1,900 contracts of soybeans. In the products, funds have sold a net 2,200 contracts of soyoil and 1,400 contracts of soymeal. Funds are building a larger net short soymeal position.
- The industry is questioning the sharp rise in IL crop ratings when producer yield reports do not suggest improvement. And the Illinois corn and soybean crop is mature or nearly so, which makes such sizeable condition gains even more difficult to understand. Illinois crop ratings have been volatile all summer. The 2020 Illinois corn yield was 192 bushels/acre with NASS pegging the 2021 yield at a record 214 million bu (up 22 bushels/acre). Harvest data argues for an IL corn yield near or slightly above 200 bushels/acre. Yield trends in nearby Indiana and Ohio are similar. Harvest data will be watched, but the yield trend is down for later seeded corn. Soybean yield trends will be better defined by the weekend.
- There were no offers of US SRW wheat to Morocco on a reduced import quota. The tender went unfilled.
- The forecast is wetter across the Delta and through the SE US Plains. The GFS weather forecast has added rain for late September to this area. Other forecasting models are not as wet, and questions about the correctness of this rain are noted. The EU model will need to confirm the change in E Plains and Delta rain with the jet stream being pulled southward.
- US corn/soybean yield reports maintain their importance to Chicago price. Disappointing yield trends are noted in the E Midwest with N Plains/W Midwest yields down as they were impacted by drought. E Midwest corn yields has one wondering if the 2021 US corn yield can surpass last year’s 172 bushels/acre.
- However, before adding long Chicago positions, traders want to be comfortable that China’s equity market does not fall too far tonight following their 4-day weekend. Evergrande’s debt has not been restructured and some additional messiness in world financial markets is expected. And key to nearby price direction will be US export demand and how shipments ramp up in October. Chicago bulls need to see larger weekly US corn/soybean exports in October.