3 September 2021

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  • HEADLINES: Soybeans charge higher on China pricing in futures; Russian spring wheat yield disappoints; China to switch out barley for corn via price?
  • Chicago values are mixed at midday with corn mixed, while soybean/wheat futures are slightly higher. The volume of trade is thinning out as traders head out for a long weekend. We look for short covering rally into the weekend as hope continues to build that the Gulf mess produced by Ida will slowly be resolved in the next few weeks. We are uncertain when normality will return, but as the Mississippi River channel is reopened in the next 3-4 days, modest amounts of cash trade could resume next week. We hear that China is anxious to secure US cash soybeans at these prices which has end users securing futures, and then coming back to set cash basis once Gulf trade resumes.
  • FAS/USDA announced that China booked 126,000 mt of US soybeans for 2021/22. The export program from the Gulf/PNW during October/November/December is going to be massive. A demand pull on the cash market will develop during harvest.
  • Chicago brokers report that funds have sold 4,600 contracts of corn but bought 2,900 contracts of soybeans and 2,200 contracts of wheat. In the soy products, funds have bought 2,300 soyoil and 900 contracts of soymeal.
  • Brazilian Sept/October soybeans are bid at 220 over vs offers at 240. The massive rise in basis with just a few cargoes sold for export in recent days suggests that Brazil is nearly sold out of old crop beans. Basis bids are above last year. Either Brazilian farmers are sitting on cash supply or somehow last year’s crop is overestimated. It would appear that Mato Grosso farmers have some modest old crop soybean tonnages that have yet to move. The point is that Chinese crushers are not going to pay such high premiums for old crop soybeans when one US Gulf exporter could be returning to loading next week. They will wait for soybeans off the PNW or in the Gulf.
  • Russian spring wheat yields continue to disappoint which has some discussing the potential that the final crop could be 1-2 million mt smaller than the USDA/WASDE estimate of 72 million mt. A crop of just 70-71 million mt would put pressure on the Putin Administration to limit Russian exports (quota) which is called for under the current tax program. Next week, the Russian export tax will rise $7/mt ($46/mt) which is prohibitive on Russian wheat exports. The July/August export programs were larger than expected as commercials moved Russian wheat offshore to fulfil existing sales contracts. We are starting to wonder if 2021/22 Russian wheat exports will surpass 30 million mt, which is 5 million below the August USDA forecast of 35 million mt. The Russian export tax will exceed $70/mt by early October based on current prices.
  • China maybe washing out of 5 cargoes of feed barley purchase contracts as the premium of feed barley/wheat rise to $10-20/mt more than US corn. And corn offers a greater feeding value than barley. A rotation from barley to corn is underway via price and feeding values not only in China but across the world. China’s expected record large corn harvest will help refill their cash pipeline, but feed imports are needed to satisfy domestic feed demand. China does not allow the feeding of food waste to help control the spread of ASF. The loss of 30-34 million mt of food waste use must be  replaced with corn imports. We estimate that China will take 55-60 million mt of world feed grain in 2021/22.
  • IHS Markit estimated the 2021 US corn yield at 175.4 bushels/acre and soybeans at so bushels/acre while sharply reducing spring wheat harvested acres on abandonment.
  • The wrath of Hurricane Ida has produced a rough week for Chicago futures. It is hoped that there will be improvement in Gulf operations next week. And ongoing is the industry discussion on whether FSA data from August should produce a 1 million acre plus gain in US corn acres. Our response is no. NASS is willing to incorporate the FSA data in the September report amid the record farm program participation rate. This fact limits corn/soy seeded acre gains. The US demand outlook for corn/soy is massive.
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