- HEADLINES: Month end positioning has been key to price direction; GFS weather forecast hotter in the extended range forecast; Russia to send discounted wheat to Turkish millers.
- Chicago is characterised by low volume and mixed prices at midday. Corn and soy futures are sagging while Chicago wheat holds marginally in the green. The volume of trade is in decline heading into first notice day tomorrow against September futures and the long US holiday weekend. Few traders will chase rallies ahead of the pending harvest while end users are more willing to buy breaks due to poor finishing weather across the Central US. Field assessments will be made over the holiday weekend as producers and NASS enumerators measure US yield potential. We look for a mixed Chicago close with wheat to be the upside leader as funds have piled back into a net short position exceeding 84,000 contracts. The large net fund short and coming time for seasonal lows has captured the interest of speculators. The sharp rise in world rice prices has the other food grains, wheat, becoming of interest to SE Asian importers.
- The Mississippi River is in seasonal decline which is being hastened by the lack of Midwest rainfall during the last 4 weeks of summer. Like last year, the fear is raising barge costs that will hit cash basis bids and could slow US exports on rising FOB costs. Today, fob Gulf corn/soybean offers are near normal and should not have an impact. However, look for strong activity of unit trains running in parallel to the Mississippi River to keep US grain flowing.
- The USDA announced daily sales of 266,000 mt of soybeans to an unknown destination, rumoured to be China. US corn, soybean and soymeal export sales are expected to noticeably increase tomorrow and next week amid all of the newfound demand.
- Chicago brokers report that managed money has sold 3,400 contracts of corn and 2,300 contracts of soybeans, while buying 1,300 contracts of Chicago wheat. Managed money has been flat in soyoil while selling 2,100 contracts of soymeal,
- EIA reported that the US produced US ethanol production averaged 1,007 thousand barrels per day vs 1,048 thousand last week. This consumed 298 million bu of corn and allows the WASDE annual forecast of 5,300 million bu to be close to correct. Seasonally, US ethanol production ramps up in mid-September with the new crop harvest. We expect the seasonal demand to be strong with profit margins sitting at their best levels since 2018.
- There appears to be no willingness of Russia to return to the old Grain Corridor Export pact that they abandoned in mid-July that would allow Ukraine to return to marine grain export trade. The Russians are proposing to Turkey that Russian wheat will be discounted to Turkish millers which is turned into flour and exported to those in need across the world (hopefully at a cheaper price). Qatar is said to provide some of the financing of the transaction. Russia also claimed that it would view any Ukraine grain cargoes as potentially carrying military cargo and subject to inspection/attack.
- The Plains/Midwest/Delta weather forecast is consistent with an extended period of little/no rainfall and above too much above normal temperatures starting Friday. High pressure ridging holds across the Central US with record heat forecast on the weekend and early next week (90’s to the lower 100’s). The extreme heat adds new stress to summer row crops. Crop maturity will be pushed to the detriment of yield. The opening 10 days of September are forecast as hot/dry as anyone could imagine. The drop in the US corn/soybean yield potential will take some time to understand, but seed size will be impacted. A front pulls across the NW Midwest in the last half of next week that produces light showers. Meaningful rain is not forecast/indicated into September 10.
- The end of the month is here, and traders are banking profits on short wheat and long soybean positions. Corn futures are range bound until there is clarity on US yield. It is September when traders will look for increased US export demand, a falling US dollar and the refilling of the cash grain pipelines that are so severely depleted. Seasonal price lows are in the making and consumers should be using weakness for purchases. If US combine reports offer less than expected yields with tight producer holding, a marching bull market can unfold during the harvest.