6 September 2024

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  • Chicago weaker at midday; Macro markets weigh; GFS weather forecast wet in Delta but drier in S Midwest.
  • It started out as being a macro morning in Chicago with the US September employment report reflecting a step down to 142,000 in job creation (and potential of US Central Bank to cut its fed funds lending rate by 0.5%). The larger rate cut potential spurred commodity fund demand from the macro traders which initially pushed Chicago values higher. Chicago corn/soy pushed to a new weekly high amid the hope for US rate cuts in a decline in the US dollar. The US greenback is in decline, but the US stock market has fallen sharply on the news that has caused a pause in the macro buying of commodities. The midday tone of Chicago grain markets is one of bearishness as the early rally failed.
  • With the US September Jobs report in the rearview mirror, the USDA September Crop Report is next Thursday with traders fearing new record large US corn and soy yields. November soybean futures poked above $10.30 before hedge-related selling emerged from the US/S America farmer. Soybean fundamentals are bearish with the US harvest ahead and record large US soy crop likely. The market must digest large cash supplies nearby before S American weather comes forward. Brazilian dryness is acute, but it is too early to pay much attention until the middle of October. We look for a lower Chicago close amid long liquidation ahead of Thursday’s USDA report.
  • Chicago brokers estimate that funds have bought a net 1,900 contracts of wheat and 4,200 contracts of corn while selling 3,800 contracts of soybeans. In the products, funds have sold 3,200 contracts of soyoil and bought 1,300 soymeal.
  • FAS reported for the week ending August 29 that the US sold 12.5 million bu of wheat, a net 52.5 million bu of soybeans, and 64.9 million bu of corn. For their respective crop years to date, the US has sold 378 million bu of wheat (up 89 million or 31%), 2,196 million bu of corn (up 599 million or 37%), and 1,669 million bu of soybeans (down 294 million or 15%). The US has sold 442 million bu of new crop corn and 434 million bu of new crop soybeans, not including old crop carryover.
  • There is growing concern that Mexico will (again) try to restrict GMO corn imports. The Mexican Senate is debating and will likely pass a bill next week that limits GMO corn imports unless the corn is cracked. The anti GMO platform has been pushed by Mexico’s President Almo as he leaves office on September 30. President Almo and the Congress look to make a final attempt to limit GMO corn imports and help Mexican corn farmers amid low margins.
  • The US would likely push back on any Mexican GMO corn import ban through existing trade agreements. Yet, Mexico keeps reminding the US to stay out of its sovereignty. Mexico needs large US corn imports due to a 2.5-year drought, but a political fight could produce upheaval in corn trade. Importing large tonnages of US cracked corn does not work due to dust and storage difficulty for Mexican end users. Be aware of the potential headlines that might emerge regarding Mexico and US GMO corn.
  • The midday GFS weather forecast is much wetter across the Delta region as an organised tropical storm is forecast to make landfall in TX/LA next Wed/Thurs and move into AR/W TN during the second half of next week. Rainfall of 3-6” favours LA, AR, and MS. Elsewhere dryness and variable temperatures persist for another 10 days. Chilly overnight readings are probable across the E Midwest this weekend, though no frost is indicated. Abnormal warmth blankets the whole of the Central US Sep 10-18, with highs in the 80s to be widespread. Highs in the 90s will favour the Central Plains. Rain will be needed across the HRW Belt by mid-autumn.
  • It is a day of profit taking and pre-weekend hedge pressure. Bottoms in wheat and corn are scored typically in the first week of September, but recoveries are rather back and forth until October. The soy market stays tied to USDA yield forecast into NASS’s October report. Be prepared for choppiness/volatility during the remainder of September. The complete absence of water in Central/Northern Brazil grabs more attention after the next 2-3 weeks.
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