- HEADLINES: Month and quarter end liquidation felt this morning; USDA/NASS crop reports Friday; China rumoured to secure Ukraine corn; can you book freight; Chicago volatility ahead.
- Chicago ag markets are mixed at midsession with corn higher, soybeans lower with wheat trapped in between. Soyoil is lower as oil share spread unwinding is occurring which has pushed soymeal into the green. Yesterday was just the opposite with soyoil soaring to strong gains as soymeal sagged. Chicago has been choppy for most of the week with traders focused on the NASS Stocks/Final Small Grain Report tomorrow. The growing potential for the US Government to close on the Budget impasse while the harvest is ongoing produces liquidation on both sides of the ledger, selling of length in soybeans/soyoil and the buying in of shorts in corn. If we had to bet on the USDA report tomorrow, we suspect it will lean bullish to corn/soybeans based on strong cash basis bids.
- The week has produced fogginess regarding the Black Sea grain trade. Yesterday there was a cargo of Ukraine wheat offered by Nibulon at $239/mt ($16/mt below Romanian) but Egypt’s GASC nor others could fix freight to loadout the Ukraine wheat. There have been 5 vessels that have passed through Ukraine’s new export corridor, but 2 were ships that were locked down when the war started in March of 2022 while others carried grain, concrete and iron ore. Ship brokers are unable to provide a cost to transit Ukraine grain while Russia keeps attacking Ukraine port infrastructure with Mykolaiv hit overnight.
- Although newswires report that China has booked a large amount of Ukraine corn for November/December, the execution of the sale will be difficult. Freight and insurance are nearly impossible to find as no one wants to become trapped in port by the war. Thus, it is not known whether a workable marine grain export corridor exists from Ukraine for ongoing commercial grain transactions. And the fear is that the Russian military keeps targeting port infrastructure.
- US weekly export sales for the week ending September 21 were 20 million bu of US wheat, 33.1 million bu of corn, and 24.7 million bu of soybeans. For their respective crop years to date, the US has sold 337 million bu of wheat (down 56 million or 14%), 495 million bu of corn (down 17 million or 3%), and 652 million bu of soybeans (down 330 million or 33%). China has booked 7 million mt of US soybeans with another 5 million mt likely held in an unknown destination category. We anticipate China taking 1,050 million bu of US soybeans in 2023/24.
- Chicago brokers estimate that managed money has sold 4,700 contracts of soybeans and 3,900 contracts of soyoil, while buying a net 900 contracts of wheat, 6,600 contracts of corn, and 3,900 contracts of soymeal. Active meal/oil spreading is noted as yesterday’s buyers are today’s sellers.
- The EU cut its wheat crop estimate to 125.3 million mt (down 700,000 mt) and its corn crop to 59.8 million mt (down 1.9 million). The smaller corn crop will mandate additional corn imports from Ukraine to make up for the losses. A year ago, their corn crop was 52.3 million mt as drought gipped much of Western Europe.
- There have been rumours that China has shifted 3-6 cargoes US soybean to Brazil and Argentina due to cheaper price offers. The rumours started that the US PWN soybeans were being switched, but this makes no economic sense. We are hearing that 3-6 cargoes of US Gulf soybeans were swapped. The export tail of S American soybeans is long as the Argentine soy/dollar program ends.
- The midday GFS weather forecast is drier across the W Midwest and wetter across the E Midwest than was offered overnight. Neither area has rain that will delay harvest for more than a few days, but the totals will help keep the dust down and prevent soybean seeds from having moisture levels less than 11%. Much cooler temperatures and frost will touch the N Plains and the Upper Midwest after October 8.
- End of month and end of quarter position squaring is ongoing with liquidation noted in soybeans/soyoil. China is out on holiday next week (Golden Week) which has sparked rumours of US soybean sales being switched to S America. US Sept 1 corn stocks could hold a bullish surprise on feed use that is not as low as 600 million bu. We see US 2022/23 US corn end stocks at 1,409 million bu and soybean stocks at 220 million bu. Funds are now short more than 100,000 contracts of Chicago wheat, a risk in our view.