- It has been a mostly firm session to start the week, though meaningful interest in trade ahead of this week’s USDA reports is lacking. The end of the row crop growing season is due later this week via heavy snow across the Northern Plains and Upper Midwest, including pockets of northern IA. The arrival of snow cover will usher in a cooler temperature profile across the whole of the Central US thereafter. Yet, the market expects only modest downward revisions to US corn and soy production. Russian wheat production will likely be raised 1-2 million mt. Black Sea corn yields also remain well above last year.
- We note that rising non-US production estimates will keep export demand potential limited into early 2020. It is surprising that S American corn is offered at discounts of $0.10-0.30/bu to US Gulf corn into February. Whether Brazil’s 2018/19 corn crop is being understated is unknown, but it is clear the world cash markets continue to signal adequate global supply.
- We would also mention that a Russian wheat production hike of 2 million mt will nearly offset projected further losses in Argentina and Australia. Total wheat supply in the Southern Hemisphere will be up slightly on last year amid lofty Argentine carry-in stocks of 1.9 million mt, vs. just 539,000 mt the prior year. The message remains that new supply-driven fear is needed to sustain rallies beyond the Oct 10 US crop report.
- Weekly US export inspections through the week ending Oct 3 included 18.4 million bu of corn, vs. 16.6 million the prior week; 14.2 million bu of wheat, vs. 18.5 million the prior week; and 38.2 million bu beans, vs. 36 million the prior week. Note that an average weekly corn shipment pace of 38 million bu is needed to meet the USDA’s forecast, and we remain concerned over US corn export potential longer term with normal S American weather.
- For their respective crop years to date, the US has shipped just 79 million bu of corn, down 66% from a yeara go; 327 million bu of wheat, up 21%; and 154 million bu of soybeans, up 17% from this week a year ago.
- FAS this morning announced that 198,000 mt of US beans were sold to China for 2019/20 delivery, with another240,000 mt sold to unknown destinations. Recent Chinese purchases have helped the pace of shipments, but this week’s US-Chinese trade talks are critical if US beans are to compete into China beyond Jan/Feb. On a known basis, China as of today has secured 4.65 million mt of US soy. This is nearing private estimates of 5 million mt.
- The midday S American forecast is similar to morning model output. Additional rain will fall across key areas of Mato Grosso, Goias and Minas Gerais in Central Brazil over the next 72 hours. A drier pattern returns thereafter into Oct 20. Nov-Dec rain is critical to soy yield determination, but this year’s slow transition to the wet season is being watched closely.
- The midday GFS weather forecast includes heavy snowfall worth 9-15″ that will impact the Dakotas, NE and MN Thurs-Sun. Lesser totals of 2-3″ will reach into northern IA and northern KS. Cooler than normal temperatures will then expand across the entirety of the Midwest Oct 12-18. Low readings in the 30s and 40s will be common next week. A much drier pattern is projected beyond this weekend, but slowed evaporation rates will keep soils saturated. Harvest into late Oct will remain challenged.
- The supply bulls await bullish NASS/harvest data. The demand bears highlight rather weak ethanol production to date and aggressive non-US cash prices into the end of winter 2020. This leaves Chicago choppy into harvest. Longer term S American climate forecasts feature a much more normal pattern of rainfall in November.