- HEADLINES: Chicago sinks on US Gulf exporter uncertainty, both on structural damage and the return of electricity; USDA July soybean crush due today.
- Chicago futures are lower at midday on the concern of damage to Gulf export facilities amid the uncertainty of when electrical power will return. The damage unknowns from Hurricane Ida, and its negative short-term impact on exports, pushed December corn to fresh lows at $5.2525. The next level of support rests at $5.20 December corn and $12.50-12.75 basis November soybean futures. The market never likes uncertainty and there is plenty of that this morning including when export employees will be able to return to work, and when electrical power will be restored. It is a risk off morning in Chicago.
- Yet, end users should be using the break to add to forward coverage in futures. Like 2005 when Katrina struck NOLA, the export demand returned, and the initial export loss averaged out over time. Nearby, it is the uncertainty when employees/electrical services are restored. The assessments are underway.
- Chicago brokers estimate that funds have sold 4,600 contracts of wheat, 14,400 contracts of corn, and 7,600 contracts of soybeans. In soy products, funds have sold 4,200 contracts of soyoil and 2,900 contracts of soymeal. The funds have been pushing values lower on liquidation.
- There are limited FOB/CIF offers from the Gulf as export firms assess their damage and the uncertainty on when electrical power will be restored. China (like many importers) would like to secure soybeans (or grain) if there were offers on the break. China (others) can book US soybeans/corn off the PNW, but few Gulf exporters are back to making markets. And exporters that have wheat/corn/soybeans heading to the Gulf via rail, barge or truck are trying to divert the supply to other US ports including Houston, Galveston, Longview (PNW) and the Lakes. The scramble to find bulk export capacity away from the Gulf is underway.
- Gulf export availability is concerning Chinese crushers. They are extremely short bought on future soybean import needs and desire additional coverage. Most are trying to shift September loadouts to the PNW. They are hopeful that Gulf operations are restored thereafter. The stock of old crop corn/soybeans is thin at the PNW which requires a basis push for early harvested Dakota crops. Each day that the Gulf is down creates new up and downstream issues. Understanding when the SE LA electrical grid comes back up will be key to deciding when Gulf export offers are available again in a nearby position. We expect that November forward offers will be available in the coming days.
- The July soybean crush rate is estimated in range of 165-165.7 million bu in the USDA Fats and Oil report this afternoon with soyoil stocks pegged at 2,100 million pounds. The report will be a step closer to closing out the 2020/21 crop year on crush data.
- The GFS weather forecast is slightly drier for the Lake States and wetter for the SW portion of Iowa in the next 8 days. Otherwise, the forecast is similar with near to above normal temperatures and limited rainfall for the S and C Plains. There are no new tropical storms indicated for the Gulf while temperatures will be seasonal with there being no indication of a frost/freeze. In 10 days, the only weather concern remaining for the 2021 US corn/soybean crop is a frost before September 20.
- NOLA damage and the uncertainty when electrical power will be restored has pressured Chicago futures in the past 2 days. Ida produced considerable damage with CHS’s export elevator under water, Cargill lost elevator legs and others are assessing their damage. No one knows for sure when SE Louisiana power will be coming back on, or employees can safely return to their homes. Gulf exporters are not offering any grain or soy until they know their damage and have some visibility on power.
- What is known is that there will be a market snap back when Gulf export confidence is restored and cash market trade returns to normal. US wheat is holding on the future prospect of tightening world supplies. This is not a place to be making new sales.