• HEADLINES: China buys at least 8-10 cargoes of US soybeans, they’re back!; Midday Central US weather forecast drier and further south with rain.

• Chicago futures are slightly higher at midday with KC wheat/Chicago corn offering the upside leadership. Soybean futures rallied initially on the Chinese pricing of 8-10 cargoes of new US soybean buying before futures volume subsided. FAS/USDA announced another 2 cargoes of US soybeans sold to China, which offers additional confirmation that China is back securing US soybeans. Brazilian fob premiums keep rising and strong talk is developing in Brazil that soy crop estimates of 135-136 million mt are too high relative to cash market tightness amid the current export/crush programs. Brazilian farmers are not sitting on many old crop beans, and increasingly talk is likely to build that the 2021 harvest was overstated. Brazilian fob soybeans for September/October have rallied to $1.60 over which means that US soybeans are the cheapest in the world. US corn is about to capture that same crown in a few weeks, so the demand profile of US grain and oilseeds is set to rise into the harvest.

• We look for a higher dose with traders reluctant to take on any new risk ahead of NC Midwest showers this weekend. Traders would rather have the rain in the rear-view mirror with the USDA August crop report ahead. Following the report, private crop tours will try to gauge US corn/soy yield potential.

• We would remind that following the USDA August report, FSA will release their initial insurance program participation data. The trade will try to use the August program data to add or subtract US major cropped acres. Often, the August estimate is not complete enough to produce a definable acreage trend.

• The Goldman roll will be underway at the close as index fund managers roll out of September futures and into December. This has September corn weakening vs December on spreads. We see the weakening as temporary due to China’s ongoing active corn export program.

• Chicago brokers estimate that funds have bought 3,400 contracts of wheat, 4,100 contracts of corn, and 3,100 contracts of soybeans. In the soy products, funds have bought 2,100 contacts of soymeal and 1,200 contracts of soyoil.

• China’s State Planner assured storm ravaged areas that it would release commodities that are essential for livelihood in a timely and targeted manner. The resurgence of Covid and storms have sent the price of a host of commodities including food goods higher. The Government said that it will take measures to assure supply and that price would retreat. The price of corn within interior China is holding well above $10/bu amid record large feedgrain imports that will surpass 50 million mt along with the release of nearly 130 million mt of reserve grain stocks (corn, wheat, rice) in the past year. To keep those reserves steady, China will have to import 30-40 million mt of corn in coming years.

• This might be the reason why Dec 2022 corn futures is trading at $5.13 and November 2022 soybeans at $12.60, prices that exceed producer expectations. As we have previously documented, it is renewable biodiesel and China’s ongoing feedgrain imports which are the “demand drivers” of Chicago values in the years ahead. This is not a time to be selling 2022 or 2023 crops.

• The midday forecast is drier and further south with rain than what the overnight run offered. The forecast offers light to moderate rains of 0.25-1.00″, but as the model has been doing in recent runs, it cut back on the heavier rainfall amounts. We look for 40% of the Midwest to receive 0.25-1.00″ of rain leaving 60% parched with extreme heat returning mid next week (90′s to lower 100′s) across the Plains and the W Midwest. The lack of rain and the coming heat is taking a toll on Plain’s corn/soybeans.

• China’s return for US corn/soybeans adds a new bullish element following the USDA August crop report. Few expect a bullish USDA report next Thursday, which sets up a buy the break mentality for a rally into early 2022. It is the sharp drop in 2021/22 world crop supplies that will boost US corn/soy export demand this autumn.

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