26 August 2022

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  • HEADLINES: Chicago rallies on expectation of bullish ProFarmer tour yields; US Central Bank to be at war against inflation for longer.
  • Midday Chicago futures are higher with grain/soybeans pushing upwards in an expectation that ProFarmer will come out later today with a low yield estimate following their 4-day tour that concluded yesterday. Rumours have ProFarmer releasing a US corn yield of 172 bushels/acre and a soybean yield of 50.5 bushels/acre. Whether these “whisper” yield estimates are correct is unknown. Some years, ProFarmer releases final US corn/soybean yield estimates that seem disjoined with their actual tour results. The early Chicago rally is due to ProFarmer yield positioning.
  • Funds are modest early Chicago buyers with resting orders lacking above or below the market. The lack of resting orders is producing choppiness and a wide swinging market. We see this choppiness continuing as smaller US/world crops battle a rising US$ and slowing economic outlooks. World grain demand is the big unknown going forward, but most would agree that the sharp rise in the US greenback is not helping emerging market demand/use.
  • US Chairman Powell indicated that the US Central Bank would remain resolute in their war against inflation, for an extended period…… The US Central Bank hinted that it would raise its fed funds lending rate to 3.5-4.0% by yearend.
  • We have concerns that the US Central Bank’s war against inflation will be difficult/lasting and that the US fed funds rate could rise above 4%, and hold heady levels amid wage pressures. Rising US lending rates blunt demand and could tip the US economy into a recession later this year or in early 2023. The US Central Bank’s resolve to push inflation back into their 2% target is unwavering. This will have an adverse impact on US/world grain demand that caps Chicago price rallies. There is no sign that the US Central Bank will lower rates at least into mid-2023. The US DOW is down over 500 points at noon on Chairman Powell’s hawkish Jackson Hole speech as the use of the word “pain” was used twice to describe
  • Chicago brokers estimate that funds have bought 3,900 contracts of wheat, 6,700 contracts of corn, and 7,900 contracts of soybeans. In soy products, funds have bought 4,800 contracts of soymeal and 1,900 contracts of soyoil.
  • The USDA/FAS confirmed the sale of 146,000 mt of US soybeans to an unknown destination. USDA/FAS has not updated a date/time to correct yesterday’s errant release of the weekly export sales report.
  • China is said to have purchased 3-4 cargoes of US soybeans overnight for October/November shipment. China is also active in booking Brazilian soybeans for February-March taking at least 6 cargoes. US exporters suggest that future Chinese demand will slow due to negative spot crush margins. No one seems to know when China will release TRQs that could spark corn demand.
  • The December/July corn and the November/July soybean spreads are extremely tight, reflecting a limited return to storage. September futures head into first notice day next Wednesday. Strong cash bids will soon roll over as the new crop harvest nears. Old crop September has been supportive for Chicago. We expect that Dec/July corn and Nov/July soybean spreads will weaken.
  • The midday GFS weather forecast 60-hour high resolution NAM model has been the best in forecasting rain from ridge riding storms all summer long. The NAM has a system crossing the W Midwest and producing rain for NE/IA/MN this weekend with rain totals of 0.25-1.50”. The GFS forecast has the system further NE and weaker. Thereafter, an extended period of warm/dry weather follows that should push crop maturity with tropical activity picking up in the Gulf. The forecast has normal rains for the Gulf States, which following rains of 5-10” is welcomed.
  • The US Central Bank’s hawkish policy curtails fund buying of commodities. And strong cash bids will fade with the arrival of the new crop harvest. Finally Russian wheat/Ukraine corn offers are exceptionally weak relative to the US Gulf/Brazil northern arc export facilities. We see no fundamental reason why March soybeans should rise above $15.00 or Dec corn above $7.00 pre-harvest.  We see Chicago corn/soybeans/wheat caught in a broad trading range into harvest.
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