- HEADLINES: Speculative selling overwhelms Chicago; Soybeans fall back to early August lows; Wheat tests September crop report low; Negative mentality deepens following US Central bank hawkishness.
- Grain futures are sharply lower in Chicago as bearish demand fears grip commodities amid the US Central Bank’s hawkish talk against inflation. End users are booking their cash needs on Chicago breaks, but money managers are in long liquidation mode in soybeans/soymeal and soyoil. Liquidation of stale long soy positions has pulled November soybean futures back against key support at $12.80-13.00. This support price was carved out in early August before weeks of hot/dry Central US weather occurred.
- Soyoil briefly rallied on oil share spreading but unlike recent days, the volume of Chicago soyoil trade is massive with over 70,000 contracts of December soyoil futures changing hands. October soyoil futures has nearly retraced 50% of the summer rally at $59.20. There may be another 1 cent down in soyoil futures, but due to tight US stocks (we believe in the NOPA soyoil stocks data as members reported correctly) and growing US renewable diesel demand, it is time again to be looking at a longer term buy in soyoil futures.
- Speculators are already short of corn and wheat, but few want to chase a rally until they see improved US export demand, or the market can confirm lower US corn yield trends. The US soybean harvest is estimated to be just 8-9% complete as of today, and additional yield data is needed to confirm the early disappointing yield trends. Additional harvest is needed.
- Chicago brokers report that money managers have sold 6,500 contracts of soybeans, 3,900 contracts of soyoil, and 4,400 contracts of soymeal. In the grains, funds have sold a net 4,600 contracts of wheat and 6,900 contracts of corn. It is a risk off day as fund managers reduce market exposure. The US DOW has fallen for the third consecutive day as US Treasury yields reach multiyear highs. The yield on the 10-year note has reached 4.5% on the fall in US jobless claims this morning to the lowest levels in decades.
- US weekly export sales for the week ending September 14 were 11.3 million bu of wheat, 22.4 million bu of corn, and 16.0 million bu of soybeans. Such sales were disappointing and reflecting that Brazil is (still) cutting into US export opportunities. We note that Brazilian fob corn basis had risen to levels that equal the US which now makes the Gulf competitive.
- For their respective crop years to date, the US has sold 317 million bu of wheat (down 65 million or 17%), 462 million bu of corn (down 30 million or 6%), and 627.5 million bu of soybeans (down 318 million or 33%). Last year the US was an active seller of new crop beans amid Brazil’s drought reduced crop. It is far too early to make any new assessments of future US export trends as it all hinges upon the coming size of the 2023/24 S American crops.
- The UN did not miss a chance for Chairman Guterres to meet and discuss the Grain Corridor Deal with Russian PM Lavrov in New York. The UN continues to push Russia for a deal, but doubts remain that Russia will return to the pact.
- The midday GFS weather forecast maintains an active upper air flow pattern across the Central US with rain chances starting tomorrow across IL. Showers blanket the Plains and Western Midwest on the weekend with rain totals of 0.5-1.50” Totals more than 2.00” favour the Dakotas, MN, IA, and WI through early next week. The storm pushes east into the E Midwest mid next week with a new system for the W Midwest late next week. Midwest high temperatures hold the 70’s/80’s into October.
- The heaviness of the Chicago decline can be felt today with fund managers sellers across the complex. Today’s close will be important to determine Friday’s price direction. A late day bounce would suggest oversold conditions and that the soy complex has liquidated. US soybean fundamentals are bullish, but tight 2023/24 US soybean stocks does not make much difference until disappointing US soy yield trends are confirmed or the harvest is beyond 50%. Chicago wheat is trying to hold the USDA Crop Report low at $5.70 while Paris wheat futures hold well above their late May low. We believe that soyoil/wheat futures are too cheap with rallies due into the end of 2023.