- Chicago futures are lower at midday following an early round of fund buying. Wheat futures paced the morning decline which pulled corn/soy futures lower into midday. Chicago grains are on a big run to the upside and traders are anxious to book profits ahead of the key USDA October Crop Report due Friday. Funds are long a record amount of soybeans estimated at 280,000 contacts.
- Extreme volatility will mark the post report trade with end users hoping for a bearish report to buy. World traders (including China) will be gone for the weekend with their buying or selling not evident until Sunday afternoon. The real reaction to the USDA report won’t be known until midday Monday.
- Funds were large opening buyers, but then turned sellers with their net position being sellers of 7,000 contracts of wheat, 2,500 contracts of soybeans, and 4,000 contracts of soymeal. Funds are flat in corn while buying 1,500 contracts of soyoil.
- There is a cargo of US DDGs that is in the export line up that has a listed destination of China. Research cannot confirm that China has ended its anti-dumping duty against US DDGs, which makes the nomination suspect.
- US DDGs would be a more economic feed ingredient into China than corn. There are also rumours that China has purchased a cargo of US ethanol which cannot be confirmed. The trade is closely watching to see if US ethanol and DDGs are starting to flow to China under the Phase One Deal. Both would be a new avenue of demand for the US corn market.
- US corn/soybean export sales as of October 1 were; 19.5 million bu of wheat, 48.3 million bu of corn, and 95.2 million bu of soybeans. All were above trade estimates. For their respective crop years to date, the US has sold 533 million bu of wheat (up 40 million or 8%), 1,018 million bu of corn (up 625 million or 158%), with soybean sales at 1,496 million bu (up 899 million or 150%). US soybean sales as of October 1 are record large with corn near a record.
- The US wheat market has forged a reversal from 5-year highs as traders are having difficulty dealing with the loss of a crop that won’t be harvested until next July. WASDE is likely to raise 2020 Russian wheat production in Friday’s WASDE by 2-4 million mt. There is no shortage of world wheat today, it is the prospect of the world’s largest exporter cutting their exports by 10-15 million mt in 2021/22.
- The midday GFS weather forecast is mild/dry for the next 10 days. Limited rainfall is evident into October 18 (likely longer) with harvest operations to strongly advance. Hurricane Delta makes landfall in WC LA and turn north and northeast on the weekend. The storm is a slower mover across LA which produces flooding rains of 4-6.00″. No rain is forecast for the Plains through the 11-15 day period. Moisture is needed to germinate a newly seeded winter wheat crop.
- Funds are holding a record net long position in soybeans which will increase market volatility going forward. Funds have added to their length in corn/wheat this week. A demand led bull market with weather issues in SW Russia is the catalyst for the 7 week bull Chicago market. 5 year high prices in Chicago wheat with soybeans at $10.50 have digested a considerable amount of bullish news. Buy the rumour and sell the fact trading could evolve on Friday. Unless S American crop problems develop in coming weeks, March corn above $4.10 or January soybeans above $10.85 appear overdone. Be prepared for a wide ranging Chicago trade.