- Chicago prices are lower at midday with corn, soybean and wheat futures weaker on fund liquidation heading into the end of the month. China did not show up as a buyer of US soybeans or corn overnight. Increasingly, traders believe that China has most of their September-January purchase book in place (85-90%). Chinese crushers may have some coverage to be fulfilled, but with China having secured some 24.5-25.5 million mt of US soybeans early 2021, the coming purchase pace will be from private buyers and not the ongoing large state run purchases that have occurred in recent weeks.
- Research looks for a mixed close. We expect that any moderate Chicago rally will be sold by US farmers looking to part with some new crop harvest. Yield reports from producer clients continue to surprise on the upside with traders no longer certain that NASS will be cutting their yield estimates in October.
- Technically, December corn futures is back to testing its 200 moving average at $3.6075, while wheat tries to hold yesterday’s low at $4.695 December KC while November soybeans have fallen below their 20-day moving average at $9.94. Fund managers are closing out positions into the end of the quarter.
- Chicago traders estimate that funds have bought; 2,700 contracts of Chicago wheat while selling 6,000 contracts of corn and 4,200 contracts of soybeans. In soy products, funds have sold 3,000 soymeal and 4,500 contracts of soyoil. Fund selling is expected into the close on long profit taking.
- There are rumours that the Argentine Government is preparing to relax its export tax on soybeans to raise domestic soybean prices to farmers and facilitate a larger old crop export program. Argentine farmers are hoarding soybeans amid inflationary and continued currency devaluation fears into mid 2021. The ROFEX currency/grain exchange is trading the Peso at 107 for next July, a depreciation of 40% vs today’s trading level at 76 Pesos:1 US$. Argy farmers will see the coming depreciation as greater than a relaxation of the current export tax. However, any additional availability of Argentine soybeans is seen as slightly bearish on more than adequate G3 (US/Argentina and Brazilian stocks) as of January 1.
- The midday GFS weather model has less rain for Northern and Central Brazil beyond October 9. The model has 0.5-1.25″ which is not enough to saturate soils for soybean germination. The models are going to struggle with the dryness that is offered over the next 10 days and the prospect for monsoonal flow from the Amazon thereafter. Traders will watch Brazilian weather forecasts more closely following the purchase run of China for US soybeans. Rains will be required after October 10. The midday Brazilian forecast leans less favourable for 2020 timely Brazilian soybean seeding.
- The midday GFS weather forecast maintains blocking pattern aloft across SE Russia. This will deepen moisture deficits. The EU/Ukraine will see soaking rainfall, it is the Russian wheat areas that will hold in an exceptionally dry pattern.
- The forecast has limited Central US rainfall for the next 2 weeks with a ridge/trough pattern prevailing this week while the ridge progresses east into the Central US next week. No real weather threat to the harvest is offered with temperatures to be variable. Notice that Gulf storminess should be monitored for development. The Midwest corn and soybean harvest will speed quickly ahead.
- Russian wheat and N Brazilian soybean dryness are the supply stories to keep the bulls engaged. However, the US harvest will be pushing ahead strongly. We doubt that any Chicago rallies can be sustained. A bullish September Stocks report is likely to be sold with fund length in soybeans/soy products at decade highs. We doubt that N Brazilian dryness can be sustained beyond mid-October, but Russian dryness needs to be closely followed.