- Mostly lower is the morning Chicago trade with traders positioning ahead of what is expected to be a bearish USDA October Crop Report on Thursday. Soybeans have held better than the grains as the value of the Brazilian currency, the Real, has rallied vs the US$. The Real traded down to 3.70:1 and has recovered to 3.75:1 at midday. In about 10 days, the value of the Real has rallied nearly 19% which is depressing their interior cash soybean basis bids. We do not detect that Brazilian farmers are changing their cropping plans, but their smile is not as wide based on slumping cash margins. The grains have been pressured via modest selling with wheat longs exiting their positions. Wheat bulls remember the bearish market reaction of Chicago following the August and September reports and fear that WASDE will again become more conservative in their supply cuts.
- We note that the October report incorporates FSA data in terms of US corn/soybean seeding changes. The FSA data argues for a modest cut in US corn and soy seeding. Soybean seeded acres are likely to be trimmed more than corn. NASS should have harvested some 75-85% of their operational test plots for the October report. They will rely heavily on this data for their US yield corn/soybean/sorghum estimates. Farmer surveys play a reduced role in the October report with harvest losses to be featured in NASS’s November data. The point is that much of the bearish news on large US corn/soybean crops will be known following the October USDA report. Seasonal price trends for soy/corn turn positive after October 12 and some sort of Chicago recovery is expected. US elevators are not seeing big movement off the combine as producers choose to store as much of their harvest as possible. Farmers are delivering on their prior sales contracts, but new sales are not being made amid weak cash basis bids and wide carries in futures. Chicago is telling farmers to store as much of their crop as possible, and they appear to agree.
- Private Argentine wheat estimates are dropping to 18.0 million mt vs a WASDE forecast of 19.5 million. Frost/dryness and even hail has taken their toll with rain needed by mid-October. BAGE estimates that 41% of the Argentine wheat crop is rated good/excellent vs 70% last year. Crop ratings are expected to slide this week amid the recent cold/dry weather.
- The central US GFS weather forecast shows that tropical storm Michael has become a hurricane and is stronger than forecast. The storm looks to make landfall as a Cat 3 storm late Wednesday. The midday GFS forecast is slightly drier than was projected overnight across the W Midwest with rains of 1.50-3.00”. The heaviest rain will be focused on Central Kansas with most totals across Iowa ranging from 1.50-2.00”. Such rain will keep harvest operations on hold this week. The best harvest chance is on the weekend or early next week. A wetter profile looks to return during the 11-15 day period. Other than a few days, we see no lengthy period of warm/ dry weather for the wet W Midwest to allow an active harvest.
- The bearish supply news of 2018 US corn/soy crops will be known on Thursday. It is demand and the outlook for crop production overseas that will determine Chicago price trends into yearend. We see US wheat as positioned to garner world demand with Saudi’s purchase last week being confirmation. Expect US wheat export demand to ramp up.