- Chicago grain futures mixed at midday: China back from holiday Tuesday; Hurricane Milton becomes a Cat 5 storm.
- Chicago grain markets have bounced from early day losses as managed money selling slowed and wheat prices rallied on firming international prices. The Midwest row crop harvest is gaining speed while yield reports stay elevated from weekend results. Midwest corn yield results continue to be surprisingly solid, often well above producer expectations, and traders are anticipating a new record USDA yield to be reported on Friday. Soybean yields are more variable, but good and debate is ongoing as to whether they will be a 0.5 bushels/acre above or below the USDA’s September estimate.
- The macroeconomic outlook with crude oil firmer is producing modest inflows into commodities. This was evident on the opening with the grains unwilling to follow the lower overnight price trend. The widening Israeli war against Iran has the attention of the crude oil market with new attacks feared as the 1-year anniversary of the war is today. The problem is that as US corn yield estimates rise and the price of Ukraine FOB milling wheat and FOB corn are equal at $218/mt, the wheat market will have to score new weekly rally highs for corn to improve. And longer term, the improved S American weather forecast casts a need for grain bulls to see bullish NASS yield data on Friday
- Chicago brokers report that managed money has purchased 3,600 contracts of wheat, 2,600 contracts of corn, 900 contracts of soybeans, and 3,100 contracts of soyoil. Managed money has sold 4,300 contracts of soymeal.
- For the week ending October 3, the US exported 36.7 million bu of corn, 52.6 million bu of soybeans, and 13.3 million bu of wheat. For their respective crop years to date, the US has shipped out 168 million bu of corn (up 30 million or 22%), 123 million bu of soybeans (equal to last year), and 316 million bu of wheat (up 81 million or 34%). It is too early in the US corn/soybean export season to make any pace analysis that is meaningful for the WASDE report on Friday.
- China will return from its weeklong holiday on Tuesday. Traders expecting that China will secure additional corn/soybeans to make up for last week’s quiet holiday purchase pace. We note that China was a buyer of US and Brazilian soybeans last week. Where China as noticeably absent was world corn. Unlike last year, China has not purchased an estimated 15 million mt of Brazilian or US corn. If China does not pick up its purchase pace soon, downward adjustments in China’s 2024/25 world corn import estimate are justified.
- Hurricane Milton has strengthened to a category 5 storm which is taking aim on Central Florida Wednesday afternoon with sustained winds of 160 MPH. Never has a tropical storm intensified so rapidly to a category 5 hurricane. Mass evacuations are underway across the western coastline of Florida with storm surge estimates growing to 12-18 feet which will cause considerable damage.
- The midday GFS is dry across the entire Central US for the next 11 days. This dry weather will allow for corn to dry down and the gut slot of harvest to emerge. The model does break out rainfall in the 12-15-day period across the Plains and the W Midwest, which is a change from recent runs, which is backed up by the EU AI model. Hurricane Milton will push back into the Atlantic as a hurricane and continue east into the Atlantic
- World wheat values must exceed last week’s high if corn is to gather any upside momentum. The improved Brazilian weather forecast has soy futures turning down with soyoil unable to sustain a recovery above $0.46/pound December without a broadening Mideast war or news from the US Treasury Dep’t. that they have approved and detailed the 45Z carbon credit program. Soymeal prices act heavy with fund’s shedding of large market length. Our view is that the grains have limited upside potential without a black swan event like a sharp rise in crude oil values. Soybeans hold a bearish outlook on supply.