8 September 2023

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  • HEADLINES: Low volume pre-report trade persists; Demand story for US soyoil; GFS weather forecast little changed.
  • Chicago futures are mixed at midday with choppiness being the feature. Chicago wheat futures pushed to new lows at $5.905 while November soybeans tested key support just above $13.50, before recovering. Chicago corn has been trading either side of unchanged for most of the morning.
  • Chicago volume remains horribly slow as few traders want to add to their risk profile ahead of Tuesday’s NASS US crop data. We doubt that NASS will offer meaningful change to US planted/harvested acres with FSA data substantially complete. Unlike prior crop years, the FSA had collected mostly all the FSA program certification data for the August report. This is why NASS updated US all wheat acres in August and did not wait until the late September final Small Grain Report. The market risk in Tuesday’s USDA report is US corn/soy yields, not planted or harvested acres.
  • USDA announced the sale of 121,000 of mt of soybeans to China. We understand that China continues to book US soybeans and was seeking another 2-4 cargoes on the morning Chicago decline. Should Tuesday’s USDA report be bearish, we expect that China will use the break to further add to their forward coverage.
  • Chicago brokers estimate that funds have sold 2,900 contracts of Chicago wheat and 4,700 contracts of corn, while being flat in soybeans. In the products, funds have sold a net 2,200 contracts of oil and bought 3,200 contracts of soymeal.
  • Stats Canada estimated July 31 all wheat stocks at 3.58 million mt (875,000 mt on farm and 2.71 million mt off farm), 1.5 million mt of canola (493,000 mt on farm and 1.0 million off farm), and 1.27 million mt of oats (789,000 mt on farm and 486,000 mt off). July 31 Canadian wheat/canola stocks were bullish due to their coming in below average trade estimates while oat stocks were slightly bearish. Canada has sizeable new crop wheat and canola export campaigns on the books and is exporting 300-500,000 mt of new crop wheat weekly.
  • US weekly export sales for the week ending September 1 were 13.6 million bu of US wheat, 37.4 million bu of corn, and 65.5 million bu of soybeans. For their respective crop years to date, the US has sold 289 million bu of wheat (down 64.4 million or 17%), 410 million bu of corn (down 51 million or 11%), and 586 million bu of soybeans (down 312 million or 34%). Brazil old crop soybean exports had a supply tail that extended into October and reduced the 2023/24 US soybean sales pace.
  • We note that global 2022/23 soybean exports are up 10 million at a record 139.6 million mt. In the first 2 months of the crop year, global wheat exports are also record large and up 2 million from last year at 22.0 million mt. World demand is record large on a 3-crop combined basis, it is just that Russia is exporting a record amount of wheat while Brazil is exporting record amounts of corn/soybeans.
  • The midday GFS weather forecast is consistent with itself and other models. Another 10 days of below normal rainfall with seasonal temperatures are forecast for the Midwest/Delta. Rain is slated to drop across the Southern and Central Plains early next week with totals estimated in a range of 0.25-1.25”. This rain comes too late to aid corn/soy yield prospects, but it will aid the HRW wheat seeding. Hurricane Lee looks to stay offshore, but its glancing pass will produce heavy rain for Maine/New York. No frost/freeze risk is indicated for either the US or Canada. The forecast allows the US row crop harvest to start and gain speed in the next few weeks.
  • Low volume and pre report position squaring is ongoing. It does not take much volume to push Chicago values either way. Long oil share spreads are being unwound. World crop production is declining, but traders want to get past the USDA September report before making any new bull bets. Argentine farm sales of soybeans on the dollar soy program have been slower than expected at 500,000 mt.  We doubt that Argentine farmers sell more than 2.5 million mt by Sept 30 and with Brazilian farmers cutting first and second crop corn seeding intentions, the Chicago risk appears to be to the upside.
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