- HEADLINES: Markets find bullish enthusiasm; Crude boosts global oilseed markets.
- Chicago ag markets have extended their overnight rallies in decent volume. Last week’s lack of meaningful crop improvement in the Dakotas despite weekend rainfall has kept the US row crop yield debate alive, while updated model guidance features an acceleration in soil moisture loss across the eastern Midwest. Max high temperatures into the weekend east of the MS River will reach into the upper 80s and low/mid-90s. Our primary concern over US supply is that of rapidly declining water availability during the tail end of the growing season, with pod and ear weights to be capped as plants are rushed toward maturity.
- Spot WTI crude oil this morning is up another $2.00 per barrel, and crude’s $6 rally from Monday’s low has given life to vegoil-based oilseed markets and their longer-term use as biofuel feedstock. November canola is up $14 per ton, with European rapeseed and rapeseed oil markets following. In fact, EU rapeseed oil is nearing all-time highs scored in early June.
- Stats Can next Monday will confirm that Canada’s exportable surplus will be cut in half year on year, and equally important is Stats Can’s July 31 stocks report due on Sep 6. Stats Can canola stocks data all year has confirmed that USDA is understating disappearance. Final Canadian canola stocks are likely to fall to 500-750,000 tons, vs. USDA’s projected 1.1 million tons. This will quicken the need to ration supplies there. The bullish global veg oil story remains intact.
- FAS’s daily reporting system featured additional US corn sales to Mexico worth 125,000 tons. China bought 132,000 tons of US soybeans. Importers have been only willing to pick at supply needs amid elevated prices, but our US export thesis remains cantered on rising international markets and a lack of alternatives to US origin supply.
- Brazilian corn prices have held support at $7.55 per bushel, basis November. S American soyoil basis continues its rally, while the US becomes the only supplier of soybeans October onward. Even US HRW wheat’s premium to comparable German origin has fallen to just $4 per ton on a fob basis. This compares to $30 per ton three weeks ago. There is no doubt US crop demand will be large, but until crop size is known, we expect broadly neutral seasonal trends to hold into mid-September.
- Corn yield data out of the Delta region has largely matched expectation but results there are down noticeably from last year. Yield data will be available from the mid-South on or just after Labor Day. And Plains and Midwest yields will be known some two weeks earlier than normal due to early seeding in the east and heat/dryness in the west.
- General consensus on US corn and soy yields should be available prior to the release of NASS’s October report.
- The midday GFS weather forecast is wetter in TX compared to its morning solution but slightly drier elsewhere into Sep 3. Yet, confidence in forecast details beyond early next week is low as the major forecasting models are forced to handle elevated tropical activity. The GFS forecast features a rather strong storm impacting TX/LA next Tuesday and hints at another Gulf storm Sep 3-5. In the near-term, heavy rainfall stays isolated to SD, MN and WI. A lack of precipitation and abnormal warmth persist across the Central Plains and principal Midwest.
- The size and volatility of these markets will not relax until current stocks and stocks/use issues are solved. Chicago corn and soy bottoming in second half of August was routine prior to 2020. We continue to maintain that nearby weakness provides the opportunity to extend forward supply coverage.