- HEADLINES: Chicago mixed with all eyes on USDA Friday: US weekly ethanol production declines; GFS weather forecast slightly wetter W Midwest.
- Chicago futures are mixed at midday in declining volume. Risk aversion for Friday’s USDA crop report is the theme with traders fearful of a strong market reaction as farmers offer (to NASS) their first measurement of US corn/soy yields. Also, FSA will be offering their first update on 2023 US farm program participation this Friday.
- The combination of the first NASS/FSA crop reports of the season will help define 2023 US summer row crop supplies. The August and September USDA crop reports have produced sizeable Chicago reactions in prior years due to their importance in measuring the US grain/oilseed crop supplies. A choppy trade is expected to continue into the Chicago close on position squaring amid the worry about a sharp rally or decline on Friday.
- Chicago brokers estimate that funds have sold 3,100 contracts of wheat and 1,900 contracts of soymeal, while buying 2,000 contracts of corn, and 2,400 contracts of soybeans and 1,900 contracts of soyoil. None of the fund selling or buying has been very sizeable.
- The USDA reported that 251,000 mt of US soybeans were sold to China for the 2023/24 crop year.
- There are cash rumours that China purchased 2 cargoes of US HRS wheat. The buyer is said to be Hong Kong Mills. And private Chinese importers have likely cleaned up the Texas Gulf sorghum market (in past 12 hours) as Chinese corn prices rallied and import profit margins enlarged. Look for Chinese private buyers to be active in booking US sorghum on any drop in Chicago corn futures. We do not expect China to book US corn until the Brazilian winter corn supply is cleaned up. Interior Brazilian corn/soybean premiums have been rising on a near daily basis for the past week on strong Chinese and SE Asian demand. Cash connected sources report that US corn will have an export opportunity from December and beyond off the PNW.
- US weekly ethanol production was 301 million gallons, unchanged from the same week last year. To reach the WASDE annual use estimate for the 2022/23 crop year, the next 3 weeks must average 314 million gallons per week. Notice that seasonally, US ethanol production tends to decline during late August before ramping up again with the new crop harvest in mid-September. We expect that WASDE may trim US corn ethanol production by 5-15 million bu in their final assessment.
- The midday GFS weather forecast is slightly wetter across the W Midwest and similar in the E Midwest vs the overnight solution. Any heavier rain will be confined to OH/IN with 10-day totals of 0.5-2.00” with reduced amounts of 0.25-1.25” for the W Midwest. Ridge riding storm systems will pass across the Central Plains and the southern half of the Midwest with regularity over the next 60 hours. One such system is noted over Missouri this morning. Thereafter a drier pattern unfolds with warming temperatures. A high-pressure ridge builds across the lower 48 with broadening warmth. Highs will range from the mid 80’s to the mid 90’s which will push crop maturity. So far there is no indication of any tropical storm systems across the Atlantic. The season for hurricanes is ahead, but the shear across the region is strong.
- The volume of Chicago trade is one of the slowest of the year as traders prepare for Friday’s USDA crop report. We remain bullish of soyoil in breaks on tightening supplies of vegoils. It is rising prices in China/India in terms of grains/oilseeds that will produce better demand once Brazilian corn/soybean supplies are exhausted. This is no place to turn bearish with commercials to raise basis bids to attract farm selling.