- Chicago midday grain trade is mostly lower with soyoil pacing the decline on fund long liquidation amid the acute weakness in palmoil prices in recent days. The corn/soybean markets have been largely followers of the soy product values while December soymeal pushes to a new rally high against $350/ton. Funds have been sellers of Chicago wheat as key chart support is broken. We look for a mixed to weaker Chicago close as the consolidation pattern persists. The bulls will want to talk another week of large US export sale on Thursday while the bears point to the ongoing Midwest harvest and better than expected corn yield data.
- Research argues that counter seasonal highs are being formed in corn/soy and wheat futures with all eyes on S American and Black Sea weather. A weaker Chicago requires rain to seed the Brazilian soybean crop. December corn does fundamentally not need to rise above $3.80 or November soybeans above $10.50 as Midwest cash pipelines are being actively replenished.
- Chicago brokers estimate that funds have bought 2,300 contracts of corn, 4,500 contracts of soybeans and 6,900 contracts of soymeal. Funds have sold 4,000 contracts of wheat and 7,700 contracts of soyoil.
- FAS confirmed the sale of 132,000 mt of soybeans to China and 126,000 mt to an unknown destination, likely the EU. We maintain that China’s Sinograin is nearing an end of their active purchase program with Chinese crushers now having to step forward and make future purchases.
- US Gulf soymeal is offered this morning at $30/my over vs Brazil at $24/mt over and Argentina at $27 over for October. Argentine and Brazilian meal premiums fall to $20-23/mt over for November and December suggesting that both S American suppliers have soybeans to process and products to sell. We maintain that it makes little economic sense that Argentine meal sales will be shifted to the US on mass in coming weeks.
- US weekly ethanol production stayed well below last year at 266 million gallons, which is well below the 285 million gallons pace needed to justify the WASDE 5,100 million bu grind estimate. The current annualised production rate points to a 2020/21 US corn grind of 4,900 million bu, down another 200 million from the September WASDE forecast. US weekly gasoline consumption was down 11% from last year at 8.52 million gallons. As Covid-19 infections spike, we doubt that US gasoline consumption will be expanding into the end of the year.
- The Central US will stay dry as the overall pattern shifts to a more zonal flow on the weekend before forming a broad ridge/trough pattern next week. The southward sinking jet increases rain chances across the Lake States on Saturday with cooler temperatures settling southward starting Monday. California and the Western US will hold in a hot/dry weather pattern. The trough over the Lake States produces cooler temperatures with below normal readings to persist into October 8. No frost or freeze is featured, but should this chilly pattern hold into mid-October, the odds of freezing temperatures will be increasing. The US summer row crop harvest will be pushing strongly ahead in the next 2-3 weeks.
- The value of the US$ is rallying as “risk off” is the theme on expanding US/World Covid-19 hot spots. The Brazilian Real is back to 5.55:1 US$ while the Argentine Peso is at a record low 75.7. The Argentine Grain Exchange cut their wheat crop estimate to 17.5 million mt, but we see no reason why they would cut corn/soy production by 3 million mt each to 47 million mt. You cannot lose a crop that is still in the seed bag. Amid Australia’s larger wheat harvest and rain for Ukraine/W Russia, US wheat futures are under pressure.