- Chicago rallies on Central US weather forecast, End of the September liquidation; Seasonal discussion on Chicago lows.
- Chicago futures bounce on diminished Sept liquidation amid long US holiday weekend; Chicago futures are bouncing higher with corn, soybeans, and wheat trading in the green. Wheat has been a reluctant follower. The volume of midday trade is in decline with traders preparing for a 3-day holiday weekend. US farmers report that crop maturity is pushed amid this week’s heat and the fall in soil moisture. US good/excellent crop ratings are forecast to decline on Tuesday by 1-2% with farmers/crop scouts reporting corn foliar disease on the rise. Short covering into the week is forecast with the USDA September 12 report due out in 9 trading sessions. Most traders agree that the top end of crops has been taken off via recent heat/dryness, the more difficult question is what the starting point for yield was.
- Chicago brokers report that the managed money has bought 3,200 contracts of corn, 4,200 contracts of soybeans, while being flat in wheat. In the soy products, funds have bought 4,300 contracts of soyoil and 1,700 contracts of soyoil.
- The USDA reported that US exporters reported the sale of 118,000 mt of US sorghum sales to China. This may be old business that is now being announced due to China’s slowing of sorghum/barley imports into late October.
- US weekly export sales of US corn, soybeans and wheat were larger than expected. For the week ending August 22, the US sold 19.6 million bu of wheat, 90.8 million bu of soybeans, and 59 million bu of corn. The soybean sales were the largest weekly total in nearly a year. US crop year wheat sales are up 90 million bu at 365.5 million while the US has now sold 373 million bu of new crop soybeans and 371 million bu of new crop corn. This was another good week of sales as US export demand is improving. However, Brazil did sell few leftover cargoes of old crop soybeans to China for September this morning.
- Chicago September deliveries are not expected to be heavy in corn, soybeans, or soymeal on wide spreads. The Sept/December corn spread went out to $0.25/bu December premium, which more than pays for storage/interest and provides a 5.5% return. Outside of the soy product premium spreads, it is not expected that there will be large September deliveries. Current registrations are 424 contracts of wheat, 6 oats, 15 corn, 10 contracts of soybeans, and 415 contracts of soyoil. No soymeal or KC wheat is registered for delivery.
- A new tropical system is forming in the Atlantic and the September outlook is for growing storm activity. The Mississippi River continues to retreat and barge rates are likely to rise as draft levels decline and sandbars emerge as water levels push lower. The latest weekly drought monitor reflects how quickly the Central US is drying down. The coming first half of September is forecast to be arid across the Midwest which accelerates soil moisture losses. A Gulf hurricane will be required to restore Mississippi water levels.
- The European Commission lowered their soft wheat production forecast to 116.1 million mt (including durum) would place the EU all wheat crop at 123.5-124.5 million mt. EU corn production was trimmed to 61.6 million mt. The smaller EU grain crops will limit their export capacity due to wheat quality also being severely impacted.
- The midday GFS weather forecast is wetter than the overnight solution with showers to push across the Central US in the next 24-36 hours with rainfall totals of 0.1-1.50” with the best totals across Iowa. Dry weather follows, but the GFS forecast is noting tropical storm activity in the Gulf which makes any forecast beyond the next 10 days difficult. Our bias is to the EU model which offers an extended period of Midwest dry weather.
- Chicago ran out of sellers as September liquidation ended. Funds are coming out of long equity/short commodity positions at the end of the month. In September, it is a new growing season for S America, Australia with new winter wheat crops being seeded in the Black Sea and SW Russia. China’s announcing a sorghum purchase could be related to the production of alcohol for human consumption, not for feed. The Chinese Government request was to slow feed sorghum imports. Our view is that seasonal Chicago lows are forming.