- Chicago ag markets are mostly lower at midday. A rising probability that wetter weather impacts the E Plains and Midwest in late August and weak outside markets are noted. Spot WTI crude is down $0.50/barrel at $42.40, with gasoline in tow. Spot RBOB gas futures still have been unable to exceed $1.30/gallon as weekly use remains plateaued at levels well below last year. Commodity indexes have had a solid bullish run since mid-May, but rallies moving forward will be more laboured as autumn approaches.
- The Brazilian Real at midday is down 1% and testing new 3-month lows. Political chaos in Brazil continues and it is unlikely that major government finance reform is passed in 2020. The Argentine Peso has made its habitual new all-time low. Currencies in Russia and Australia are also weak.
- Also recall that Brazil in late August will decide whether to extend its policy on allowing upward of 750 million litres of US ethanol free of tariffs. Sources suggest that there is a growing possibility that this policy is left to expire and will take full effect in November.
- The surge in Brazilian ethanol exports in recent months is another reminder of the rise in global competition for world market share of all products.
- China has also started to secure Brazilian soybeans for 2022, a long way out, but at attractive basis levels the Chinese see value in securing supply from Brazil way out in the future. Brazilian farmers can lock down handsome margins exceeding 50% over variable costs with the Brazilian Real trading at 5.65:1 US$ this morning. The profitable margins that Brazilian farmers are seeing will cause them to plant spring crops fencerow to fencerow starting on Sept 15.
- US export sales for the week ending August 13 were; 19.2 million bu of wheat, 30.9 million bu of corn (both crop years combined), and 94.0 million bu of soybeans. The soybean sales were right at trade expectations, while corn sales were less than expected.
- For their respective crop years to date, the US has sold 1,740 million bu of corn (down 231 million or 12%), 1,745 million bu of soybeans (down 41 million or 2.2%), and 408 million bu of wheat (up 25 million or 6%). China has bought a known 12 million mt of 2020/21 soybeans (1.5 million likely to be carried forward from new crop and 4.5 of unknown sales in 2020/21) likely to raise that total to 18.0 million mt. This is a record large purchase pace by China for US soybeans into January. We believe that China has the need for another 9-10 million mt to meet the WASDE forecast in the balance sheet.
- The midday GFS weather forecast is wetter in SD and IA late next week as the model brings back the chance of regionally heavy showers across the Western Corn Belt. The 11-15 day forecast is outright wet as a pattern of lingering moderate precipitation will impact a vast majority of the US Ag Belt. Totals of1.50-1.75″ Sep 1-5 will be favour MO, IL, IN and OH. It remains that the extended forecast needs to verify. The market will have a solid handle on the late Aug/early Sep by late in the coming weekend.
- Pro Farmer did not find a crop disaster and a big 2020 harvest still looms. On a national basis pod counts were higher than expected with rain in the forecast after another warm/dry 7 days. Once needed rain falls, the corn and soy harvest should pressure prices lower into late September or early October. Research looks for another 1-2% drop in corn and soybean crop ratings on Monday via this week’s total lack of rain. Condition ratings seasonally decline into mid-September.