- HEADLINES: Mixed Chicago trade in slowing volume as crude oil falls $4/barrel; Rumours persist on Ukraine and China demand; Mexico secures more US corn.
- Chicago grain markets are mixed at midday with corn/wheat trading in the red while soybeans bounce on spread unwinding. Active Chicago selling was noted on the opening, but the decline was met with end user pricing on the stability in non-US wheat/corn fob price offers. And US grain merchandisers are not seeing producers part with freshly harvested grain that was not forward contracted. US, Brazilian and Argentine corn are all priced close to parity on a fob basis for December, the US holds the price advantage for Q1 2024 export demand. Traders expect that world corn demand will be slowly switching back to the US in the coming weeks with an increase in daily sales announced.
- Ukraine and its fledgling export corridor are being monitored. Ship traffic is increasing but buyers of Ukraine fob corn/wheat/sunseeds are keenly aware that should Russia attack Ukraine port infrastructure that they (contract holder) must have another source/option included in the sales contract. It is just too early to know whether Ukraine has a viable export corridor through the Black Sea without an agreement with Russia. We doubt that Russia will go back into the Black Sea Grain Pact based on their demands not being met.
- We have noted many times that seasonal bottoms are carved out over time and are not a one-time event. That bottoming process appears to be underway.
- Chicago brokers report that money managers have sold 4,200 contracts of wheat, 2,900 contracts of corn, while being flat in soybeans. In the products, funds have sold 3,200 soyoil while buying 900 contracts of soymeal.
- The USDA/FAS reported that Mexico purchased 196,607 mt of US corn. No additional Chinese purchase of US wheat was indicated, but exporters report that China is asking for US SRW/SWW offers for January/February. China will be returning from their weeklong Golden Week Holiday on Friday which should release some pent-up demand for US soybeans. Brazil is no longer offering soybeans for December with current export commitments now over 99 million mt.
- Mexico is the largest purchaser of US corn for the 2023/24 crop year to date of around 8.0 million mt (including daily sales announced) which is more than 50% of the US total. Canada is also expected to step up its purchases of US corn due to their dire summer drought. Combined, both US neighbours are expected to account for 850 million bu plus of US corn imports in 2023/24.
- Southern Brazilian rains have fallen in abundance with strong straight-line wind producing structural damage across Parana. The coming heavy rain will pose another challenge for Brazil’s HRW wheat crop. Record September rainfall across RGDS produced wheat quality loss with there being no offers of milling grade for export. This new round of heavy rain will pose fresh problems for feed wheat and newly planted spring corn/soybeans. It is just too wet and sunshine and firmer soils are immediately needed.
- The midday weather forecast is like the overnight run with showers over the Central Midwest in the next 36 hours followed by a long stretch of cool and dry weather. Rain totals are estimated in a range of 0.1-0.9” and locally heavier. Much cooler temperatures occur starting tomorrow with Midwest highs retreating to the 50’s and 60’s with the next chance of Midwest rain occurring during October 12-14. The S American weather pattern stays abnormal with flooding rain across SE Brazil and a deepening drought across Argentina.
- Rumours, Rumours, Rumours, there are rumours that Ukraine’s grain corridor is working normally, and it will supplant the Russian agreement, there are rumours that China is seeking additional US SRW/SWW wheat, and there are rumours of China pricing US soybeans. The rumours have supported a wide swinging Chicago. Fund order flow and intermarket spreads are featured. Today it is all about soy/corn and meal/soyoil spreading with crude oil prices down $4.00/barrel. There is a flow of Ukraine grain, but it is not equal to last year or normal. And the US soybean harvest is speeding ahead with yield reports highly variable but generally below last year. MN/WI soy yields are 3-6 bushels/acre below 2022. Yet, our macro fear is a weaker US dollar that pulls money back into commodities on the dysfunctional US Congress. Brazil/China completed their first soybean trade in Yuan and Reals, not the US dollar.