- Chicago ag markets are mixed at midday with old crop soybean futures higher while corn prices sag, with wheat futures caught in between. Funds are buyers across Chicago with their demand underpinning the summer row crops. The marketplace feels like a bullish tailwind exists, but that funds will have their corn short largely covered by $3.60, while November soybeans hold risk to $9.40- 9.50 as funds expand their upside risk profile. Chicago December wheat futures start having resistance above $4.40 as the spread to Black Sea fob values widen. US Gulf wheat is losing its export competitiveness on a further rally.
- We see Chicago closing mixed today with S American farmers hedging more aggressively on the rally. US farmers are selling old crop corn supplies but are not aggressively selling new crop amid yield weather/yield concerns.
- Chicago brokers estimate that funds have bought 4,600 contracts of corn, 4,100 contracts of soybeans, and 3,100 contacts of Chicago wheat. In the products, funds have bought 2,900 contracts of soyoil and 1,100 contracts of soymeal.
- Weekly US ethanol production was 274 million gallons vs 272 million last week. The production gain was modest and reflects that US ethanol production has stagnated since the end of June. Forecasts indicate that WASDE will cut its 2019/20 corn ethanol grind by 25-36 million bu. The 2 month US ethanol production pace is averaging 10-11% below last year which models out to a 2020/21 production estimate of 4,900 million bu in these Covid-19 times, which is down from the existing WASDE forecast of 5,200 million bu. It is hoped that by QI 2021 a Covid-19 vaccine can be found, and that normality in US economic activity will be found in the last half of the 2020/21 crop year. This why we carry a 2020/21 US corn ethanol grind estimate that is 150 million bu below the USDA at 5,050 million bu. We expect that WASDE will cut their 2020/21 US corn ethanol demand in several stages. WASDE’s 2020/21 domestic demand (feeding/ethanol) are too high by a combined 300-400 million bu.
- Fund demand is helping underpin Chicago, but traders are looking to use rallies to bank profits ahead of better Central US rain chances that start Thursday. US corn/soy conditions are likely to drop again on Monday, but any further fall in yield will depend on actual combine harvest data. The top end of 2020 US corn/soy yield has been cut, but the US will still harvest a sizeable crop with rain helping soybean yield potential more than corn into harvest.