- Chicago futures are higher at midday as the US$ sinks sharply amid the uncertainty of the US election and movement of foreign cash back home. The weak US$ has rallied a host of raw material markets including Chicago grain futures. CME meat markets are weaker on profit taking, but otherwise, the CRB index is pushing against last week’s high. Chicago soybeans and soyoil are offering upside leadership while the July/November 2021 spread reaches above a $0.75/bu premium. US old crop soybean stocks continue to be draw down via strong demand and the risk of lower US soy crop estimate next week. December corn futures are back above $4.00, while KC wheat futures react to improving world demand and firming European wheat values. A higher close is expected with the overnight election to produce financial market volatility.
- Chicago brokers estimate that funds have bought 6,400 contracts of soybeans, 4,300 contracts of corn, and 2,600 contracts of wheat. In soy products, funds have bought 3,400 contracts of soyoil and 900 contracts of soy meal.
- IHS Markit is forecasting the US 2020 corn yield at 175.7 bushels/acre and soybeans at 50.8 bushels/acre. The former lnforma firm cut their corn yield 2.1 bushels/acre from October. The IHS Markit soybean yield was down 1.1 bushels/acre from their October estimate and such a yield would really tighten US 2020/21 soybean end stocks with any fresh Chinese demand following the election. The US soybean balance sheet cannot afford a US soybean yield much below 51.5 bushels/acre or stocks virtually run near US pipeline requirements. We note that late season corn and soybean yields were not as good as the early harvest and the drag is likely to produce a lower crop from NASS on October 10.
- Ukraine livestock producers are asking the Government to apply an annual export quota for corn much like is already in place for wheat to prevent the country from over-exporting corn and raising already high domestic corn prices. The Government will debate the request from its livestock industry in coming weeks. Ukraine fob corn is offered at $1.85 over for January vs the US Gulf at $1.46 over. The near $0.40 premium of Ukraine corn vs the Gulf has slowed demand, except to the EU where Ukraine corn is in demand as being GMO approved.
- There were no US daily sales reported by FAS/USDA today. China has been a slow buyer of US ag goods ahead of the US elections but is expected to pick up their purchase pace next week. Chinese crushers are short bought of soybeans.
- If China was more serious about importing ethanol and DDGs, it would lower its duties (70%) to allow greater purchases by private industry. However, this does not preclude state companies from making purchases/imports and paying the duty to itself. Yet, US traders will be watching for additional China demand with a cargo of US ethanol and numerous DDG containers afloat.
- The forecast is like the overnight run with limited rainfall for Argentina and S Brazil over the next 10 days. The forecast is slightly wetter for La Pampa and the southern portion of Buenos Aires. The remainder of Argentina and the southern third of Brazil is dry with warming temperatures starting on the weekend. Daily rain chances will be ongoing across N and E Brazil. Showers will allow Brazilian soy planting to accelerate. Temperatures across S Brazil/Argentina are cool this week, but warm to the 70s/80s and 90s next week. Better rains are shown for Argentina and S Brazil in the 11-15 day period but confidence this far out is low. The models have been showing rain in this timeframe for week.
- It is a Chicago macro trading session with corn, soybeans and wheat following gains in a host of other financial assets. Any Chicago break following the US election will produce a new purchase opportunity amid the arid weather forecast for Argentina and Southern Brazil. We note that rising US Covid-19 cases are being ignored today, due to politics. We do not advise chasing this rally.