- HEADLINES: First week of solid US export sales; China fully back on Friday; Talk of fresh Chinese soybean interest.
- Chicago futures came under early selling pressure based on bearish charts and the early slide in energy values. However, scale down commercial buying was uncovered/evident in Chicago with soyoil rallying sharply with the rally in crude oil. We hear that stronger commercial demand was noted below $5.25 December corn and $59.00 in December soyoil.
- The linkage between the bio crops of soyoil/corn and energy appears to be growing. The bio crops on a cost (or BTU) basis are priced well below the cost of coal, natgas and gasoline. Fund managers are aware of the highly profitable cash margins that ethanol/biodiesel producers are gathering. And as Americans are heading back to work (October employment report) expected to show Friday that another 500,000 people returned to work during September, the need for fuel both in the US and world is growing.
- The world energy rally is based on underinvestment in future carbon fuel production outside of OPEC+. This underinvestment along with historically low energy supplies heading into the cold season will keep energy prices rising. Any lasting break will have to wait until early winter.
- There are US consumer trade groups that wish the US to slow or halt exports of US energy/natgas to preserve domestic supplies and lower prices. This type of thinking is dangerous. It has food/grain importers wondering about the US being a reliable food supplier. Should importers lay down additional in country stocks, just in case We would hope that the US stays a free trade nation and that its energy, ag and manufactured goods trade is unencumbered. Let the markets do their job. For now, the US is not going to tap the Strategic Reserve which was also a bullish new item for crude futures.
- US export sales for the week ending September 30 were 12.2 million bu of wheat (including 3.9 million bu of spring wheat), 49.8 million bu of corn, and 38.3 million bu of soybeans. Including large sales of US soymeal and soyoil, the sales showed that US grain and soy products are again competitive in the world marketplace. As the Gulf becomes 90% operational in mid-October, the outlook for US corn, wheat and soybean export shipments is brightening.
- For their respective crop years to date, the US as sold 419 million bu of wheat (down 114 million or 21%), 1,046 million bu of corn (up 29 million or 3%), and 931 million bu of soybeans (down 559 million or 37%). US corn sales are the second largest on record as Mexico has purchased a record amount of US corn. The big question that traders are pondering is China soybean demand from the return from their Golden Week Holiday. Chinese soy crush margins have recovered strongly.
- Chicago brokers estimate that managed money has sold 3,000 contracts of wheat and 4,500 contracts of corn, while buying 2,200 contracts of soybeans. In soy products, funds have bought 5,400 contracts of soyoil and sold 3,000 soymeal.
- Brazil’s CONAB estimated their 2022 soybean harvest at 140.75 million mt, a record and some 2.5% or 3.5 million mt more than last year. CONAB estimate 2022 Brazilian corn production at 116.3 million mt based on improved weather conditions.
- The midday GFS weather forecast is similarly dry across the W Plains with showers starting to break out across the N Plains and W Midwest on Sunday. An above normal temperature pattern is forecast with highs in the 70’s/80’s. The warmth will continue to speed the harvest with any crop concern cantered on the SW Plains where dryness deepens.
- Oats have scored a new historic high at $6.22 while the oat/corn premium has reached out to $0.88/bu. Record cash market basis Canada argues for even smaller crops with record large feed imports. Inflation concerns are real and fund managers hope for a bearish USDA report to position for Chicago into 2022. Tight world markets will not allow large US crops to have a lasting bearish impact. Lower than expected US yields would be exceptionally bullish in corn/soybeans. The market is expecting a bearish report. The problem is that US farmers are not selling, and cash basis bids are rising. We doubt that Midwest farmers will sell in a down market as their costs to plant a new crop soar.