- HEADLINES: Chicago mixed at midday; Corn reacts to Pro Farmer IL data; Soy adds premiums on massive crush margins; Brazilian crush to slow nearby.
- Chicago ag markets are mixed, but little changed in thin volume at midday. The lack of breaking news and a decently sized IL corn yield estimate from Pro Farmer overnight have weighed on corn and wheat prices globally. Nov Chicago soy has been resilient above $13.50 amid threatening Central US weather, rising minor oilseed markets and incredible processing margins in the US. A choppy end to today’s session is anticipated.
- The spot futures-based soy crush margin remains perched above $2.50/bu, vs. $0.50-1.00 in early summer, with meal adding to value now on weak and falling soy product output in S America. Argentine crush will struggle until 2024’s soy crop is harvested next spring, and a host of Brazilian plants plan to slow/close nearby amid the lack of margins there. Unlike the US, oil supplies are building in Brazil’s domestic market. Record US meal export demand is forecast to stay place into Q1 2024. This is important as already the US is consuming much more soyoil than it is producing. We also note that seasonal trends in canola/rapeseed markets turn decidedly positive in late summer, and seasonal lows in EU/Canadian canola markets have been scored early due to dire drought in Canada.
- Our message is that, while US soy yield and supplies are debated, Nov beans at $15.50 are not overvalued.
- India’s cash wheat market is higher again and in US dollars sits a new multi-month high $310/mt. India still must confirm a nationwide elimination of its 40% import tariff before the market begins to add demand-based premium, but we continues to hear that upward of 7 million mt of Russian origin imports have been worked. Transparency over Indian-Russian deals is unlikely to be found given the likely private nature of the business. Yet, we maintain that the lack of Indian food security is a big deal in the long run. Near zero rain is forecast in southern and western India into Sep 7. In normal years, monsoonal rains begin their seasonal exit in late Sep/early Oct. Time is running out to replenish moisture across a large swath of India’s soy/groundnut production region.
- The Buenos Aires Grain Exchange this afternoon is likely to trim wheat crop ratings another 1-2 points, at which point late August ratings will exist below last year. Recall USDA projects Argentine wheat yield in 2023 to rise 30% year on year. This recovery gets cut in half if dryness is extended into mid-Sep. S Hemisphere weather patterns remain concerning.
- US export sales in the week ending Aug 17 featured 26 million bu of corn (both years combined), vs. 37 million the prior week, 58 million bu of soybeans, vs. 50 million the prior week, and 15 million bu of wheat, vs. 13 million the previous week.
- We note that US wheat sales must average only 11 million bu/week to meet the USDA’s forecast. Some measure of wheat demand gets funnelled to the US market if yield loss in Argentina/Australia surpasses 15% relative to trend.
- The midday GFS weather forecast is not consistent with previous output in extending a pattern of near complete dryness across the Central US into the opening of September. No model has so far indicated any hurricane/tropical storm making US landfall nearby, and upper-level high pressure ridging will dominate the N American climate as autumn approaches. A brief cooling of temperatures occurs Sat-Tues. Normal/above normal temperatures resume thereafter, with highs in mid/upper 80s most probable across the C Plains and W Midwest in the 6–10-day period. Abnormal dryness/drought is building in TX/OK.
- The Dow is down another 160 points and concern over middling global economic growth continues its battle against weather/supply issues. Seasonal bottoms lie just ahead. Elevated volatility stays in place well into early 2024.