9 August 2024

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  • Chicago mixed on Monday yield fears; Wheat tests resistance at $5.50 and retreats: GFS midday weather forecast warmer/drier.
  • Chicago grain markets are mixed at midday. Following overnight price trends, wheat futures have been the upside leader with corn and soybeans being sideways. The volume of trade has been limited by Monday’s USDA August crop report and the recent volatility of the financial markets.
  • The trade is leaning heavily to the bearish side of the ledger in that Monday’s USDA crop report will show record large US corn/soy yields and limited change in seeded/harvested acres. Corn and soybean futures are dropping on this expectation with farmers also shedding old crop stocks.
  • September Chicago wheat tested prior highs at $5.55 and pulled back. The Chicago wheat market is having a difficult time sustaining a rally until stronger world wheat demand can be confirmed and corn stops its bearish halt. The spot wheat/corn spread at $1.65 wheat premium is already extended, and for a larger US wheat rally, the corn market will have to find a bottom. This afternoon’s CoT report will reflect a further rise in net corn, soybean, and soy product positions. A mixed close is expected with September wheat to find support under $5.40, and December corn under $3.95. As risk vs reward is measured, it appears that Chicago is oversold and cheap relative to fundamentals.
  • Chicago brokers report that managed money has sold 2,900 contracts of corn, 2,200 contracts of soybeans while buying 1,900 contracts of wheat. Funds are sellers of 2,200 contracts of soymeal and buyers of 1,300 contracts of soyoil.
  • The USDA reported sale of 132,000 mt of US soybeans to China and 100,000 soymeal to Columbia with 212,000 mt of soybeans received for the delivery to unknown destinations. Of this total, 162,000 mt are for delivery in the 2024/25 crop year and 50,000 mt in 2023/24. We hear that China continues to secure US Gulf soybeans for October/November. Brazilian soybeans for September are offered at $1.36/bu over with Argentina at $1.04/bu over and the US Gulf at $0.82/bu over. US Gulf soybeans for September are $0.54/bu cheaper than Brazil and $0.22/bu cheaper than Argentina. The US is back to gathering world soybean demand to all destinations. Brazilian soybean offers beyond early October are difficult to find.
  • There are cash connected rumours that NASS has completed a resurvey of US acres for Monday’s report. We believe that this rumour is false. NASS conducted no new surveys, but it will rely on Farm Service Program participation data for acreage changes. FSA data was collected online and is substantially available. There will be modest acreage adjustments in September, but NASS expects the big FSA planted/ harvested adjustments occur in August. The FSA August report will also update acres and the percentage of farmers participating in prevent plant and other programs. Historically, traders have struggled with FSA data and how it will impact NASS in September. That debate no longer applies with the NASS update.
  • The Central US midday GFS weather forecast is generally drier than was shown overnight. The GFS model has been erratic and its solutions beyond the next 5 days are suspect. A drier trend is offered in the next 48 hours followed by ridge riding storms early next week. The midday GFS is also warmer than prior runs with high pressure ridging noted in the week 2 forecast. The rains occur mostly next week, and we fear that the rains will be further south and located in the Plains and SW Midwest. Our confidence in the GFS model stays low. We await the more consistent EU model amid the tropical storm activity across the Atlantic.
  • The trade is heavily positioned for a bearish USDA report on Monday. Strong US crop ratings and favourable weather have traders discussing 182-184 bushels/acre corn and a 53 plus bushels/acre soy yield. However, the bearish sediment is becoming extreme. World grain crop production declining and Chinese soybean import demand is record large. USDA should raise Chinese soybean imports for 2023/23 by another 2-3 million mt by the final count to 110-111 million mt on vessel counts. Improving US grain export demand will wait until Monday’s report.
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