- HEADLINES: Chicago falls to sharp losses on fund selling amid a lack of resting buy orders from China; Stonex yields out this afternoon; GFS wetter for Lake States.
- Chicago futures are sharply lower at midday with corn, soybean and wheat coming under acute selling pressure. November soybean futures fell below the 50 and 100-day moving averages which triggered resting layers of sell stops. The stops pushed November soybean futures back to key support at $13.00-13.10.
- Corn/wheat followed the complex lower following active opening fund related buying. Several funds combined to secure 4,000 contracts of corn and 3,200 contracts of wheat which rallied both markets after the morningf reopening.
- Trade volume has subsided at midday with few resting orders above or below the market. The midday tone of Chicago is bearish with algo traders on the sell side via bearish chart signals. But it is the sheer size of the algo selling this morning that could produce a late day bounce. There are no resting orders above the market but buying is noted in November below $13.00.
- US soybean crop condition ratings unexpectedly gained on Monday, which started the overnight selling. More important is that Chinese soybean demand is slow to arrive for US soy. This has some wondering if US soybean values must fall to values to turns China’s crush margins positive for October I November.
- The Chicago break has Chinese crush margins pushing close to near breakeven, the question is what levels would start China in making new US soybean purchases. China has been largely absent for weeks from the US soybean market after making record large purchases back in March/April. Brazil will mostly fill China’s soybean demand in September, with the US taking over in early October. We look for China to start a US purchase program in the next few weeks.
- Chicago brokers estimate that managed money has sold 14,500 contracts of soybeans, 5,500 contracts of corn and 2,700 contracts of wheat. In soy products, funds have sold 5,600 contracts of soyoil and 3,500 contracts of soymeal.
- The Delta Covid variant has traders questioning world commodity demand. Energy, grains, industrial metals are weaker at midday on liquidation. Yet, history shows that world raw material demand increased in 2020, amid all of the Covid lockdowns and negative GDPs. With 70% of American vaccinated and the vaccination total rising again, we doubt that economic lockdowns will be anything more than localised events. US livestock futures are higher at midday, and they would be the first to be impacted. For now, US GDP rates look to be 4-6% through to the end of the year.
- In the past 28 years. the FC Stone/StoneX corn estimate has been high 61% of the time with the maximum variance vs the USDA August estimate being 4%. In soybeans, StoneX has been high 57% of the time with the biggest miss vs the USDA being in 1995 at 3.8%. Traders expect near trend 2021 yields from StoneX
- The GFS weather forecast is wetter across Wisconsin/NW lllinois/S Ohio but otherwise unchanged from the overnight run. A few showers could fall on Wisconsin/Michigan on the weekend, but totals would be less than 0.40″ with coverage no better than 50%. The remainder of the Central US holds in an arid trend through the coming weekend.
- A Northern Midwest storm system forms early next week that produces 0.25-1.00″ of rain for E Iowa/Wisconsin/Northern Illinois/Michigan. This system produces waves of rain for the Lake States with totals of 0.25-1.25″. The Midwest rain ends Wednesday with a drier trend following as a high-pressure ridge rebuilds across the Western US. An arid 11-15 day forecast is offered thereafter
- Chicago soybeans are trying to find a price that entices fresh Chinese demand. Corn and wheat are reluctantly following. We would remind that resting orders above and below the market are limited which leads to exacerbated price moves. Rains come too late for Canadian crops and yield losses range from 30-60%. It is the loss of world crops that produce a bullish trend during the US harvest.