- Chicago steady at midday; Enthusiasm lacking; US gasoline consumption rises sharply; S American weather forecast favourable.
- Chicago ag markets are steady/higher at midday in sympathy with Wednesday morning’s positive turnaround in financial markets and so far, initial chart support has held. We note that corn, wheat, and soy have followed normal seasonal price trends somewhat more closely. Seasonal trends do strongly indicate bottoms in late Aug/early Sep, but a more neutral/sideways trend in Oct-Nov as the arrival of new Northern Hemisphere supplies challenge rally efforts. A more two-sided market is forecast until US row crop harvests reach 65-70% complete in late October. Additionally, bullish yield surprises are needed on Friday to re-active speculative short covering in bulk. Exporters sold 126,000 mt of corn to unknown destinations. The recent jump in Ukrainian fob premiums has made US corn even more competitive for autumn delivery.
- The midday GFS weather forecast in S America is consistent in expanding rainfall into Mato Grosso do Sul, Sao Paulo, and southern Goias beginning Sunday. The coverage of dire dryness in central Brazil will be shrinking rapidly over the next 10 days. The GFS forecast is also consistent in allowing precipitation into Mato Grosso and pockets of far Northern Brazil after Oct 16. The pace of Mato Grosso soy planting progress, updated on Fridays, will be watched but S American weather threats are in retreat. Radar maps show widespread rain currently impacting RGDS and Parana, which account for 30% of Brazilian soy and first crop corn production.
- The Brazilian Real this week is down 2%, which is raising producer revenue. Our fear is that improved farm incomes collide with regular rain to induce the liquidation of old crop Brazilian corn and soy stocks.
- The midday GFS weather forecast is wetter in the Great Lakes region but maintains a widespread/meaningful Central US pattern change stays absent into at least Oct 25. Scattered showers favour WI/MI Oct 19-20, but otherwise the outlook is bone dry throughout the next two weeks. Temperatures cool significantly, with overnight lows falling into the upper 30s/low 40s in E IA, N IL, and pockets of IN, OH, and PA. Crop threats are limited to parts of PA amid advanced maturity elsewhere in the E Midwest.
- Sustained export demand growth is needed to be bullish of corn above $4.60, basis March, and $11.00, basis forward soy contracts. Downside risk in the soy complex Dec onward is sizeable without lasting adverse S American weather. A rising US dollar acts as a weight.