- HEADLINES: Algeria books mostly Russian wheat; Big spread trade in Dec/March corn and Nov/Jan soybeans; Central US weather stays dry.
- Position squaring has been featured in early Chicago trade with soybeans/soyoil the upside leaders (reversal of yesterday) while wheat sags, and corn is (again) in the middle. Chicago grains are holding relatively well compared to the other financial markets with the DOW down over 500 points with the US$ unable to rally. The bearishness is overwhelming in the equity market to a degree that it feels like a tradable bottom could be forming.
- We note that in the overnight and daily trade there has been massive spreading of Dec/March corn (over 20,000 contracts) and November/January (over 28,000 contracts) soybeans amid low Miss River water levels and sagging basis in the interior as the harvest hits a higher gear. The Dec-March corn spread has pushed out to 6.50 cent March premium with January soybeans gaining 3 cents to November at 10 cents over. Bear spreading has been featured amid the weakening interior cash market. US farmers are not active sellers of the newly cut corn/soybean crops.
- Chicago brokers estimate that funds have bought 2,300 contracts of wheat, while selling 2,000 corn and 3,500 contracts of soybeans. In the products, funds have sold 1,700 contracts of soymeal while buying 3,600 contracts of soyoil.
- We understand that Algeria has purchased mostly Russian wheat in their latest tender with tonnages mentioned in the range of 350-450,000 mt at a price of $369-372/mb basis CIF. The news that Russia had filled the tender caused a quick retreat in EU fob basis of several €uro/mt according to exporters. The EU wheat was priced some $14-16/mt above the Russian offers to Algeria. We note that Russia will continue to be active offering wheat amid their massively large crop/stockpile. The Russian’s will not miss many future wheat tenders.
- Russian President Putin is expected to annex far eastern areas of Ukraine that is under Russian military control on either Friday/Saturday under decree. The key unknown is how the sham annexation of Ukraine territory will change the war or said more correctly, what will the weekend headlines be if Ukraine troops now cross into the new Russia. There is headline risk this weekend and early next week as the world financial markets try to understand on how Russia will act when attacked on what they see as their own land.
- US export sales for the week ending Sept 22 were 10.3 million bu of wheat, 20.2 million bu of corn, and 36.9 million bu of soybeans. For their respective crop years to date, US wheat sales are off 14 million bu (-3%) while corn is off 485 million bu (-49%), with soybean sales up 93 million bu (10%). The export side of the equation will disappoint unless a S American weather problem develops later this year.
- Dry/cool weather conditions will prevail across the Central US into October 9. The Central US harvest rapidly advance amid the dry weather. The only meaningful North American rain falls from the remains of Ian across the SE US into Sunday. A progressive pattern follows in the 10–15-day period with a deep trough of low pressure establishing itself across Eastern North America. This trough shoves the jet stream south and allows for improved Midwest showers. Dryness for the Plains remains the biggest crop concern as a new HRW wheat crop is being seeded.
- The US$ is unable to rally which should be monitored closely. Amid the DOW falling over 500 points, Chicago grain values are holding firm. The NASS/USDA crop report will be released Friday 11am CT. We look for near steady soybean stocks, but a decline in corn. In wheat, little wheat was fed in Q1 of the crop year due to high prices. The Brazilian soy crop is going in quickly under mostly favourable conditions. World Central Banks are in a war against inflation and world economic activity is in decline.