7 October 2022

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  • HEADLINES: Chicago futures rebound from early selling tied to US jobs gain; E Australia becoming too wet; Dry central US harvest weather ahead.
  • Chicago grain futures are mixed at midday. Initial selling tied to the robust US Jobs Report which sent the financial markets lower. The US added 263,000 to the no farm payroll rank while the US unemployment rate declined to 3.5%. US year on year wage gains were 5%, while the US Labor Participation rate edged lower. The September Jobs data showed no slowing of the US economy and raised the pressure on the US/World Central Banks to keep hiking rates. Next week’s monthly CPI Report looms large for traders with the report due a week from today. In financial markets where good news is bad and bad news is good for equity values, today’s report’s good news was bearish which has pushed the DOW to losses of over 500 points.
  • End user pricing and improving profitability for biofuel producers related to surging energy costs have offered support to Chicago corn/soyoil. US soybean crush and ethanol margins are improving which on localised basis is starting to raise cash bids for new crop corn/soybeans. US soybean crushers are seeking forward coverage of cash soybeans with cash crush margins in excessive of $3.00/bu. And crude oil returning to $91/barrel has rallied ethanol amid its competitive price relative to diesel, unleaded and natural gas. The upside price target on spot WTI crude oil is $94-96.00.
  • Chicago brokers estimate that finds have bought 5,500 contracts of corn, 1,900 contracts of wheat, and 3,200 contracts of soybeans. In the products, funds have bought 3,200 soyoil and 2,900 contracts of soymeal.
  • FAS/USDA did not announce any new daily sales on Friday. The US continues to struggle to find world grain/soybean demand as offers are non-competitive.
  • The 30-day weather forecast for E Australia calls for above normal rainfall.  The wheat crop has enjoyed an abundance of rain to date and large yield potential looms. The more difficult question is crop quality. Producers in New South Wales, Victoria, and South Australia report that soils are saturated with moisture and that future rain is unwanted as the harvest looms. World wheat markets will start paying close attention to Australian weather as the harvest starts in NWS in the coming weeks.
  • The average yield guess for the US 2022 corn crop is 171.9 bushels/acre with soybeans at 50.5 bushels/acre. The corn yield is down 0.6 bushels/acre with soybeans steady vs. September. The average 2022/23 US corn stocks estimate is 1,127 million bu (down 92 million vs. September) with soybeans at 240 million bu (up 40 million), and US wheat end stocks at 563 million bu (down 47 million from Sept). Some are suggesting that Chicago is undervalued with such US corn/soybean/wheat stocks. Remember that final 2021/22 corn end stocks were 148 million bu smaller with the smaller yield dropping production nearly another 50 million bu. Traders expect that WASDE will cut US 2022/23 corn demand by just around 100 million bu.
  • The midday GFS weather forecast is like previous runs. Key crop-growing regions of the Midwest/Plains are dry. Frosty temperatures occur on the weekend with warming due mid next week. An open window harvest window will allow for quick harvest progress. The extended 11–15-day forecast has backed away from offering rain for the Plains/Midwest to help river flows.
  • It has been a back-and-forth week of confusion. Financial market turmoil coupled with a USDA Report next Wednesday and the unknown headline risk from the Black Sea is keeping traders from chasing rallies or breaks.
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