- HEADLINES: Chicago sags in corrective trade with traders debating the yield impact of another 2 weeks of hot/dry Midwest weather; Stats Canada number supportive.
- Ongoing wheat fund selling on the charts along with traders debating the impact of late season heat/dryness across the Central US has dominated Chicago price discovery discussions. Wheat futures have pushed to new lows, while oat futures pushed to new highs. Spot Chicago oats are now trading at a $0.17/bu premium to spot Chicago corn. And soybean futures are consolidating against $14.00 November as sub 50 bushels/acre soybean yields are being bantered around.
- Soybeans will be the most impacted by the coming record heat/dryness, but the degree may require actual harvest data in late September. NASS enumerators are heading to the fields to measure crops and pull ears and pods to determine weight. Recent crop tours have placed the trade on notice that NASS survey yield will come in below their August farmer survey forecast. Note that StoneX will be out with their corn/soybean estimate on September 6 followed by the Markit/S&P group and others later that week. In a price nutshell, it is all about US corn/soy yield potential and the coming Central US weather.
- Chicago brokers report that managed money has sold 5,400 contracts of Chicago wheat, 2,500 contracts of corn, and 2,600 contracts of soybeans. In the products, funds are flat in soyoil while selling 4,100 contracts of soymeal.
- The USDA announced daily sales of 246,000 mt of soybeans and 105,000 mt of soymeal to unknown destinations. China remains active in securing US soybeans while SE Asia is booking US soymeal amid the Argentine shortfall that starts in October. It is difficult to find an offer of Argentine soymeal beyond October due to their lack of bean imports from Brazil.
- Stats Canada estimated their crops at 29.4 million mt of all wheat (down 14% from last year) with the oat crop at 2.4 million mt (down 54% from last year), and a canola crop of 17.6 million mt (down 6%). WASDE sees the Canadian wheat crop at 33 million mt, and a reduction of 3-3.5 million mt in world wheat supplies is coming. Canadian 2023/24 wheat exports will likely be cut to 20-21 million mt, which compares to 25.50 million last year. Oat prices are soaring since the US will need to import every mt of Canadian oats available to avoid dire shortages. Finnish oat quality was curtailed this year due to wet weather conditions at harvest.
- The spot Chicago wheat/corn spread has poked below $1.00/bu premium on the ongoing selling of wheat by fund managers. US SRW Gulf wheat is the cheapest in the world at 8 over December for October or $230/mt. This compares to French wheat at $260/MT for October and Russian 12.5% hi pro wheat at $265/MT. US SRW Gulf wheat is priced to sell and should a GASC tender come forward, US SRW wheat values allow the US to have a rare export chance. Russia appears to be holding their wheat offers near above $260/mt basis Novo while Argentine new crop wheat prices are impossible to find. Our point is that it never pays to be short the cheapest wheat (world) with seasonal lows due this week.
- The Plains/Midwest/Delta forecast is consistent in calling for an extended period of little/no rainfall with above to too much above normal temperatures starting Friday. High pressure ridging holds across the Central US with record heat forecast in the 6-15 day period with highs in the 90’s to the lower 100’s. The extreme heat will add new stress to summer row crops. Central US soil moisture is in sharp decline and crops in the driest areas could endure premature death. The forecast is about as hot/dry as anyone could imagine for early September and the impact will be smaller US soy/corn seed sizes. It will take actual harvest data to understand how the late summer extreme heat/dryness impacted 2023 US summer row crop yields.
- The end of the month is here and liquidation of any stale September length in wheat/corn is ongoing. September soybean, soy products and wheat futures are largely liquidated prior to first notice day on Thursday. It is corn where open interest is historically large at 81,835 contracts. The Mississippi River is declining amid the acute Midwest dryness, but river levels are above last year’s low. Transit costs on the river will be rising, which will hit new crop basis bids. Farmers report that their plans are to sell newly harvested soybeans and store corn. Look for the market to follow the price pattern of recent weeks with a rally to start the week, a mid week break and a recovery to add weather premium ahead of a long holiday weekend.