- Corn, soybean and wheat markets are a bit weaker at midday. Follow-through buying interest is lacking ahead of Thursday’s USDA update, in which US and world grain stocks will be presented as more than adequate. We note that it is not until combine harvesters begin to roll and NASS can more accurately assess corn and soy harvest weights that the market will have a precise handle on US production. Yield cuts are expected tomorrow, but an outright bullish report is unlikely. Very early yield checks in IL have been disappointing but it will be several weeks before a trend is established.
- Macro markets are mixed, with commodity indexes fading after testing a multi-week high on Tuesday. The trade is skeptical that a comprehensive US-Chinese deal will be scored via October’s meeting, and that soybeans and pork tariffs were not waived overnight is being digested. No new US export sales were reported this morning. Crude is down $1.60 despite another sizeable draw in US stocks.
- And world grain markets still reflect abundant near-term supplies. Russian wheat is offered at $184/mt, vs. $185 earlier in the week. This is comparable to $3.70, basis Dec KC. France’s Farm Ministry has raised French wheat production to 39.5 million mt, vs. 34 million in 2018/19 and the second largest crop on record. The EU and Black Sea grain markets continue to probe for demand. It will be difficult to sustain rallies in world corn markets amid the abundance of available N Hemisphere wheat.
- Malaysian palm oil futures have struggled on rallies despite palm oil stocks in August falling below the previous year, for the first time since June 2017.
- US ethanol production through the week ending 301 million gallons, vs. 298 million the prior week and on par with the same week a year ago. US ethanol stocks fell sharply to 945 million gallons, vs. 1,000 million the week before. Rather quickly the ethanol market has found balance. We also note that the spot futures-based ethanol production margin has rallied to $0.40/gallon, vs. $0.02/gallon in early August. End user demand will be found on breaks, and work maintains that seasonal bottoms in Chicago markets are being formed .
- The S American weather forecast remains arid into Sep 25, with high temperatures in Brazil to be consistently in the 90s, or some 4-8 degrees above normal. S American dryness will grab much more market attention if extended range forecasts fail to offer a pattern change in the next two weeks. We would mention the most immediate concern is Argentine wheat development.
- Argentina’s wheat crop is expected to reach 10-12% heading this week. Soil moisture deficits in Argentina will widen during critical growth stages.
- The midday GFS weather forecast is consistent with the morning run and maintains a pattern of well above normal temperatures into Sep 20. Maximum highs in the 80s will be widespread next week. A moderation in warmth is forecast in the 10-15 day period, but there is still no sign of frost into the very latter part of the month. We would also mention that model guidance is trending wetter, with light/moderate rain to expand into the E Plains and Western Corn Belt Sep19-22. NE, IA, MN, WI and IL will be favoured.
- The markets will again briefly re-set following the release of updated NASS yields Thursday. However, it is the Oct report that will better define US production and end stocks. Abundant and cheap nearby world supplies will work against lasting Chicago price rallies.