8 October 2021

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  • HEADLINES: Low volume Chicago trade amid a lack of fresh news; Another harvest weekend with farmers storing crop.
  • Low volume/stronger Chicago futures has been featured heading into the weekend. Energy markets keep pushing higher and unlike Tuesday, Russian President Putin has no solution to cap today’s crude/gas rally. US corn and soybean harvest should be nearing 50% completed early next week and the Columbus Day holiday is normally the date for a seasonal harvest low. Fund managers are aware of this seasonal but are holding back on purchases awaiting Tuesday’s USDA report. A neutral or only slightly bearish report will engender fund buying. A bullish report will just send values upwards.
  • The surprise so far is that Midwest farmers have not been big cash sellers. Producers are meeting prior contract sales, but the rest of the grain is heading right into the bin. Mississippi River basis has rallied sharply this week as barge freight rates declined. CIF soybeans are trading above $0.20/bu above last year. US corn/soybeans are the cheapest in the world, which will attract fresh import demand. We anticipate China and others to be more aggressive buyers next week. Some importers will want to get ahead of the USDA report while others hope for a bearish reaction. As we see the set-up, corn/wheat data should be bullish while soybean stocks will grow and be bearish. China has booked 5-7 soybean cargoes overnight.
  • A US soybean yield of 51-51.5 bushels/acre would surprise no one, the harder question is related to US corn yield and will a new record be set above the 2018 high at 176.6 bushels/acre. Traders seem to forget, but the summer of 2021 was one for the record books in terms of heat, while just over 30% of the corn area battled drought right into early September. We are on the low end of NASS corn yield at a 173 bushels/acre. The report should set up a battle of more beans vs less corn.
  • The US Gulf export capacity has slowly rebuilt with only Cargill Reserve being down. But even Cargill Reserve is loading vessels from the rail. The Gulf is back to at least 90% of capacity which should help US export inspections and future US grain trade.
  • Margins for ethanol producers and soybean crushers are rising. Ethanol margins equate to $0.37/gallon or some $1.05/bu. Soybean crush margins range from $1.17-1.30/bu which is helping to raise interior soybean cash bids. However, RIN values end the week under pressure as RVO rumours prevail (once again). For weeks, traders have been guessing when the EPA will announce lower mandates for 2020 and 2021, and a mandate hike for 2022. We hear that the mandate is still being scored by OMB, but as 2021 calendar advances, a lowering of the mandate will not have much of influence on the corn grind or biodiesel blend. But it will be bearish of RIN values as a help to struggling blenders.
  • The IMF trimmed their world GDP outlook to just below 6% amid the Delta variant and logistical delays. Many feared an even larger GDP decline.
  • Chicago brokers estimate that the managed money has sold 3,000 contracts of wheat and bought 2,500 contracts of corn and 3,200 contracts of soybeans. In soy products, funds have bought 1,400 contracts of soyoil and 3,000 soymeal.
  • November WTI Crude oil futures have rallied above $80/barrel. The rise in energy values shows no sign of slowing with the cold season starting in 6 weeks. The next upside price target rests at $84-86.00 November WTI.
  • 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.
  • Chicago volume is limited with another active harvest weekend ahead and the USDA report due Tuesday. Argentina is on holiday today, the US banking system is closed Monday, with Brazil on holiday Tuesday. Export sources report that China has booked 5-7 US cargoes of beans overnight. Will China be an even bigger buyer next week. The 50-day moving average crosses at $5.39 basis Dec corn which will be important next week. It is a mixed to firm Chicago push into the weekend.
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