- Chicago ag markets are higher at midday with wheat/corn pacing the rally. Corn has pushed to new rally highs with December reaching $3.6675 while a sharp rise in Black Sea wheat values lifts US wheat futures back against $5.60-5.70 resistance basis December Chicago. The soybean rally has stalled as funds take profits on a large net long position and unwind soybean/corn and soybean/wheat spreads. There are rumours that China may have bought US corn this morning, but amounts or an actual purchase cannot be confirmed.
- We suspect that the rumours of China corn demand come from a story on Bloomberg News wire which mentions an unnamed trader at Louis Dreyfus commenting that China could import 30 million mt next year to ease domestic tightness. The speculation of how much corn China might secure is just that as it depends on China’s Government import policy. A corn importer into China needs to secure a GMO import certificate to allow the transaction. Any commercial trader knows that this is a policy decision of China, not a trade based on supply and demand or price. USDA is estimating that China will hold a massive 194 million mt of corn at the end of the 2020/21 crop year, undeniably a massive amount.
- We look for a mixed close heading into the key September USDA crop report. Traders/funds are bullish and heavily long heading into the report.
- FAS announced that China purchased another 195,000 mt of US soybeans. There are rumours that future China soybean purchases could slow from the brisk pace of recent weeks. This week, China has booked an estimated 1.2 million mt of US soybeans. The rising Gulf basis costs has some in China arguing that it is worth waiting for cheaper Brazilian soybean offers in late January/February.
- Chicago brokers estimate that funds have bought 11,000 contracts of corn and 5,000 contracts of wheat, while selling 1,000 contracts of soybeans. In the products, funds are flat both in meal and soyoil.
- US ethanol production for the first week of the new crop year is 277 million gallons, up 6 million gallons from the prior week, but down 8.4% from last year. The US needs to average weekly ethanol production of 290-295 million gallons to reach the USDA’s annual target of 5,200 million gallons. US ethanol stocks fell to 839 million gallons, down 11% from last year. Amid the uncertainty of Covid-19, blenders and producers do not want to be caught with excessive stocks amid a second wave of Covid-19.
- A corridor of rain is falling across the E Plains and Iowa. The midday forecast calls for additional rain here of 0.5-1.50″ before a period of warm/dry weather returns on Friday and through next week. This week’s cool/wet weather has helped stabilise soybean yield potential, but it comes too late for corn. High temperatures return to the 70′s/80′s to produce a favourable end of the 2020 growing season. Increasingly, US farmers desire warm/dry weather to start their corn harvest operations and seed winter wheat. The forecast maintains seasonal temperatures and near to below normal rainfall into September 25.
- Good luck guessing China’s corn import policy from the US or the world. We are sure that China is not telling what their plans are. Most sources estimate that China will import 12-20 million mt with some putting the total at 16 million mt. Corn does not become bullish with imports of 20 million mt from the world. It is ear weight and pod numbers that will key US yield totals on Friday. Research leans to bearish yield estimates based on surveys. Ahead of the US harvest, a top could be forming.