- Chicago futures at midday are mixed, and more or less little changed from the overnight close. Wheat’s inability to push above major moving averages has triggered modest fund selling. Beans have maintained support amid strength in crude and a country-wide strike in Argentina, which initially pushed spot meal to a two-week high. Argentina’s largest union plans to cease work for the next 24 hours in protest of President Macri’s handling of the economy and amid runaway inflation. Compensation to offset inflation is demanded. The strike has affected operations at the port of Rosario, and strike duration is key. It is unlikely that this will affect soy complex trade flows longer term, but the recent demand for US soybeans from Argentina has kept Nov beans above $8.10. Argentina’s Central Bank head has also resigned this morning, and this won’t much help investor confidence. The Argentine Peso is down 3% today, and the forward curve again suggests Argentine farmers are better off holding beans, at least into the end of 2018.
- With the month almost over, we estimate Chinese soybean imports from all origins in September at 6.8 million mt. At this point a year ago in Sep, Chinese imports of beans were estimated at 6.4 million, so there does not yet seem to be any major shift in China’s total appetite just yet. Recall the Chinese government recently pegged new crop Chinese soybean imports at 83 million mt, down roughly 10 million on the year. It is of course very early in the crop year, but the USDA is not expected to change its total bean trade forecast. Trade barriers will no doubt slow further Chinese demand growth, but a collapse in total soybean imports is not expected. EU milling wheat looked to end €1.50-2.00/mt lower on a rising €uro and as EU exports suffer (like the US) on record Russian shipments. However, premiums elsewhere in Europe remain firm. The domestic market there is scrambling to find feed, and in many places the domestic market is outbidding exports. The outlook for Russian wheat cash prices is positive amid a rising Ruble and seasonal trends in interior values.
- The GFS weather forecast is very wet in E Australia in the 11-15 day period, but confidence so far out is low. The GFS’s Aussie rainfall forecasts this season have largely failed to materialise. September rainfall across the whole of the Aussie wheat belt will range from 0-30% of normal. The central US GFS weather forecast is much wetter and cooler across the entire Central US in the 7-15 day period, but confidence in this too is low. In the near term, cool temperatures are expected into early next week. Meaningful precipitation will be confined to the Southeast. The extended forecast will be watched, though, as cumulative precipitation of 2-5” is offered to the whole of the Plains and Midwest Oct 4-9. Snowfall of 6+” is forecast in CO, NE, the Dakotas and Southern Canada.
- Better US export demand needs to be seen before wheat takes out chart-based resistance. Row crops await final US stocks on Friday.