- Fund selling was noted in Chicago’s opening with corn, soybeans and wheat coming under pressure. Fund managers remember the bearish August crop report and fear a repeat tomorrow (the September data). Corn has held more stable relative to either wheat/corn as traders expect a record large 2018 soy yield. The problem is that although 2018/19 US soy stocks are likely to also reach records, soybean spreads are at full carry and US farmers show no indication of selling newly harvested crops. The profit this year is in storage, on soybeans, corn and wheat. Amid weak nearby basis levels, selling from the producer is likely to be limited with funds already holding a big short. The big question is who is going to be the big futures or cash related seller. This has end users looking to extend coverage on any post Chicago September report break. US corn and wheat have future demand stories.
- Chicago brokers report that funds have sold 3,600 contracts of corn, 2,600 contracts of wheat, and 3,500 contracts of soybeans. In soy products, funds have sold 2,100 contracts of soyoil and 600 contracts of soymeal.
- CONAB revised their estimates of 2018 Brazilian crops pegging the Brazilian soybean crop at 119.3 million mt (up 300,000 mt), corn at 81.4 million mt (down 800,000 mt) with the second corn crop falling 54.5 million mt (down 900,000 mt). WASDE has the Brazilian corn crop at 83.0 million mt and the soybean crop at 119.5 million mt. WASDE could reduce their 2018 Brazilian all corn crop estimate by 1.0 million mt. October Brazilian fob soybeans are offered at $2.47 over compared to the US Gulf at 15 cents over. That is a difference of $2.32/bu or 27%. For the first time, US Gulf soybeans for October rest at 27% below Brazil suggesting that their old crop stocks are exhausted. The big US discount is sucking up all non-Chinese world demand, but it has not yet produced any Chinese purchases. And Chinese domestic crush margins have reached their best levels in four years. Finally, the long-awaited run out of Brazilian bean supplies and China’s sharp rise in domestic crush margin is underway, the China supply squeeze is (at long last) on.
- Russian Ag Deputy Prime Minister Gordeev’s comment that Russia will export 30 million mt of 2019 grain. The politically strong Russian livestock/bread lobbies are hard at work to make sure that Russia does not over-export its harvest. We note that exporters report a quickly deteriorating protein level in Russian wheat, with the Government making sure that specifications adhere to contracts.
- NASS reported that 5% of the US corn crop is harvested with 86% of the crop dented. US corn good/excellent ratings improved 1% to 68%. 31% of the US soybean crop is dropping leaves with good/excellent ratings improving 2% to 68%. 24% of the US sorghum crop is harvested with 94% of the spring wheat harvest completed
- The central US GFS weather forecast brings Hurricane Florence across the border of NC/SC late Thursday as a strong cat 3 or weak cat 4 storm. The storm then stalls producing horrific flooding with rains of 20-30” plus inches. Damage to NC crops/infrastructure will be extensive. The Central US holds under a high-pressure ridge until a strong zonally flowing jet stream returns rain chances late next week. NE/IA looks to be in the cross hairs of a wet weather pattern. That wet flow persists into the last week of September.
- Traders are betting on a bearish soybean and neutral corn yield. US wheat production will not change until the final report on Sept 28. WASDE wheat changes will only include world production/trade/stocks. Our view is that grains have a bullish story to tell, while soybean outlook is bearish, but is the cash market reflecting that already?