- HEADLINES: China secures US soybeans for October/November on the morning break; World wheat prices resume rally on demand; Hurricane into LA/MS/AL.
- It has been slow morning of trade with corn, soybean and wheat futures mixed at midday. Price action has been a reversal of yesterday with meal gaining on oil while wheat gains on soybeans. However, we want to highlight that the volume of trade is extremely slow as few want to extend their risk profile heading into the weekend or next Monday’s Stats Canada report.
- We look for a mixed close with old crop September corn/soy futures supported by extremely tight cash markets. Cash corn bids are holding at $1.00 plus premium over for spot delivery while crushers are paying up for remaining old crop soybeans. The historically tight September spreads highlights the lack of supply which will be important at the end of September when NASS releases September 1 Stocks in All Position estimates.
- US exporters report that China has been active securing US soybeans this morning. We hear that as many as 10-14 cargoes of US soybeans have been sold to China for October/November in some of the biggest buying since the start of the year. Exporters report that China has booked at least 25-30 cargoes of US soybeans this week or estimated tonnages of 1.5-1.7 million mt. In total, we expect that weekly US soybean sales will easily exceed 2.0 million mt. Noteworthy is that Chinese crushers are being discreet in their purchases, not wanting to look like they are bulling the market (and adding to price speculation). However, Chinese crushers are extremely short bought on forward crush needs and will use breaks like today to add to forward coverage.
- The USDA/FAS reported that for the week ending August 19 the US sold 4.3 million bu of wheat (marketing year low), 67.1 million bu of soybeans (2.8 million old and 64.3 million bu of new crop), and 27.2 million bu of corn (300,000 bu of old and 26.9 million bu of new). The weekly wheat sales were disappointing, but the corn and soybean sales were in line with trade expectations.
- China has now shipped out a record 21.2 million mt (833 million bu) of US old crop corn, 1.5 million mt less than sales with net cancellations of 135,200 mt. If China ships out 500-700,000 mt by August 31, some 1 million mt of old crop corn sales will likely be rolled forward. China added 90,800 mt of old crop soybean sales with just 700,000 mt (25.7 million bu) left to be shipped. We look for 16-19 million bu of old sales to be rolled forward to new crop. China has done well shipping out its promised US corn and soybean purchases.
- EPA confirmed that is forwarding its recommendation for a cut in the 2021 US biofuel mandates due to the pandemic. The mandate will rise again in 2022. The news was debated by traders last week. With the 2021 calendar year 8 months complete, we see the impact on 2021 US biofuel demand as “modest”.
- The midday GFS weather forecast is slightly further east with hurricane coming in across E Louisiana/Mississippi. The storm would make landfall late Sunday or early Monday. Flooding rains and strong winds are a risk to unharvested crops in LA/MS/AL. The storm slowly shifts NE into the SE US leaving behind flooding rains. Temperatures are warm to hot through the weekend with highs in the mid 80′s to the mid 90′s with cooling next week.
- China has been active securing US cash soybeans for export on the break this morning. A sales announcement is expected Friday. Ag Canada estimated the Canadian wheat crop at 20.2M million mt, down nearly another 4 million mt from the August USDA estimate. A further drop in Canadian, Brazilian, and Russian crop sizes lie in the offing which we expect will produce a demand led rally into year end. Seasonal lows are forming.