- Midday Chicago ag markets are slightly lower with corn, soybeans and wheat futures easier following the USDA Weekly Export sales report. Traders did not want to sell into the potential for another week of large US soy/corn sales based on recent Chinese buying. We note that soybean traders continue to secure breaks as they are uncertain as to when Chinese demand will subside.
- China is now booking US soybeans for December/January arrival. China already has a huge purchase book on from Brazil from mid-January onward, so discussions are underway as to how much open demand does China still possess. We see a deepening sag in corn/wheat values, with every trader watching to see if Chicago soybeans can close higher for 10 consecutive days.
- Chicago brokers estimate that funds have sold 3,400 contracts of soybeans, 2,600 contracts of wheat and 2,900 contracts of corn. In soy products, funds have bought sold 1,900 contracts of soyoil while being flat in soymeal. The macro buying in the Chicago markets is slowing as US and world energy prices decline. You can’t have inflation without a dramatic rise in crude oil prices.
- Rumours have surfaced that Brazil could be looking to import US soybeans based on their fob premiums relative to the US Gulf. We doubt any Brazilian purchases based on negative import margins of $0.20/bu excluding the 8% import tax. We believe the freight to move US soybeans to Brazilian ports at $23-25/mt excluding discharge and storage costs. The rumours of Brazilian imports were also noted back in the summer of 2018 as the Trump Administration entered a trade war with China. However, the premiums then reached nearly $3.00/bu and imports were modest. It is important to monitor fob vs fob price relationships, but we are doubtful today of Brazil taking US soybeans.
- US weekly export sales were big as expected. For the week ending August 27, the US sold 21.5 million bu of wheat, 97.9 million bu of corn, and 68 million bu of soybeans. The corn and soybean sales included modest sales of old crop.
- For their respective crop years to date, the US has sold 458 million bu of wheat (up 39 million or 8%), 621 million bu of new crop corn and 888.7 million bu of soybeans. US soybean sales at the end of August are record large. China has booked an estimated 20.0 million mt of US soybean including old crop carry forward and at least 60% of sales to unknown buyers. In fact, this week’s sales were largely to China. In corn, sales to China were 49 million bu (50% of total) while in soybeans they were 40 million bu or 59% of the total. Research has excluded unknown destinations, which some are likely destined for China. The point being is that China is carrying the US export outlook, it would be grim export landscape without Chinese buyers.
- Russia sold 55,000 mt of wheat to Egypt’s GASC in their snap tender. The wheat was sold at $225/mt with freight booked at $15.50. The landed price was a season high $240.50/mt. From the last tender, the price of Russian wheat had rallied $18.50/mt. GASC received 11 offers with prices ranging from $224-235/mt basis fob.
- The midday GFS weather forecast is like the overnight run and brings a low-pressure trough through the Central US on Sunday producing showers/storms across IA and the northern half of IL. A cold front sinks slowly south which maintains a wet 5 day period for the N Plains and the W Midwest. This front looks to produce 0.5-2.50″ of rain with isolated heavier. The rains include the drought areas of W IA. Cool to cold temperatures will push south with a frost likely for the Canadian Prairies and the eastern flank of the Rockies. No N Midwest frost/freeze is indicated through September 14.
- Market bulls will want to get smaller in their positions heading into the weekend and next week’s Sept USDA crop report. Corn is the bearish anchor with harvest dead ahead amid less certain Chinese demand. An open gap at $3.45 basis Dec futures is the next downside target. Soybeans are underpinned as China extends their forward coverage. US wheat futures lean bearish on slowing US export interest.