- Chicago ag futures are higher at midday. Again the story is the same: China’s daily buying of US soy continues while US soy yield uncertainty lingers in the background. Black Sea farmers are reluctant to add to cash sales amid severe dryness and as optimal winter wheat seeding windows begin to close in early October. The Russian weather forecast remains dry into Oct 2.
- Contacts indicate spot Russian fob wheat is bid at $235 and offered at $240/mt, the mid-point of this range reflecting a new seasonal high. Russian fob wheat quotes at Thursday were $229-233/mt for Oct-Nov arrival. This has pushed EU milling wheat futures higher, with US contracts following. US Gulf wheat is still too expensive to boost export demand, and in fact in current prices will act to curtail future export interest. But it is difficult to be bearish as the world’s benchmark market continues to rise.
- There is also some concern over Argentine wheat yields, with Argentine wheat crop ratings this week falling to just 14% good/excellent. This compares to 44% in mid-Sep 2019.
- China this morning secured another 132,000 mt of soybeans and 210,000 mt of corn for 2020/21 delivery. Sources suggest this is still COFCO/Sinograin buying. Even private traders within China have been caught short, and until Government buying ends or private firms within China capitulate the path is higher. Work suggests current price require confirmation of US soy yield loss, but the timing of any top is unknown. There is no meaningful sign of a top in Chicago soy just yet, but it is important that markets holds near session highs today.
- We estimate that since last Tuesday, managed funds have extended their net length in soy by an impressive 55,000 contracts. We estimate combined soy length held by managed and index funds this morning at 432,000 contracts, a new all-time record. Even simple profit-taking could force a quick and intense correction during the throes of harvest.
- The S American weather pattern is beginning to show signs that seasonal rains arrive next week. The EU and GFS models are in broad agreement that rainfall of 0.50-2.00″ will impact Central Argentina Sep 25-28. Light rain across Mato Grosso, Goias and Minas Gerais will allow seeding to begin there.
- The USDA’s second round of Covid-inspired farm aid, also worth $14 billion, will include three tiers of commodities. Corn, soy and all classes of wheat will be available for assistance of $15 per acre at a minimum. Sign-ups will begin on Monday and run through December 11.
- Outside markets at midday are mixed. Spot WTI crude is unchanged. The Dow is down 130 points. EU milling wheat futures are up €3.00/mt ($.07/bu).
- The midday GFS weather forecast is wetter across the E Plains and Midwest beyond Sep 27 as a pronounced ridge/trough upper air pattern develops. The jet stream will sink as far south as AR/TN Sep 28-Oct 1. The GFS forecast advertises rainfall of 1-2″ during this period across E KS, MO, IL, IN, OH and Ml, along with a cooling of temperatures. Confidence in forecast detail is low beyond 10 days, but a wetter/cooler pattern is probable at the tail-end of the month.
- New sales are on hold as markets digest potential further tightening of the US soybean balance sheet and the real need for soaking rainfall across Ukraine and Southern Russia. Whether end users and importers chase the rally will be key in the days ahead, but market trends today are pointing up.
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