- HEADLINES: Gulf export woes and steep cash basis fall drop Chicago futures; Corn scores new lows with December at $5.1075; USDA report could cause change.
- If we were writing this earlier today, this morning, the headline might well have read “Chicago recovers on strong Chinese trade data; Hope that several US Gulf exporters get back to business this week”. However, the day moves on as do markets and our earlier headline has been superseded with something less bullish.
- Chicago values are lower at midday as the fund selling pace quickens on Ida related US Gulf export delays and the acute weakness that is being felt in cash basis bids. The Delta harvest is accelerating with test cuttings underway in the Southern and Central Midwest. December corn fell to a fresh low at $5.1075 while wheat/soybean futures followed. Chart trends are down, and fund managers are paring risk ahead of Friday’s USDA September Crop Report. End users are scaling into new purchases on the break, but the Gulf export bids/offers are difficult to come by as damage assessments are ongoing.
- Cash basis bids have fallen sharply as the Gulf stays largely closed. LDC is loading a boat and the waterways are open, but many Gulf exporters are awaiting power to review their own load out status. The Gulf is far from normal in terms of loadout capacity and running normally. That requires time with electricity to return to several US exporters in the next few days. Once the power is restored, a better damage assessment can be completed and there should be some visibility on when export trade can resume.
- Chicago brokers estimate that managed money has sold 16,000 contracts of corn futures, 4,900 contracts of soybeans, and 1,900 contracts of wheat. In the soy products, funds have sold 2,500 contracts of soyoil and 2,800 contracts of soymeal. The fund selling in corn has been active since the morning reopening.
- US exports for the week ending September 2 were 10.8 million bu, soybeans 2.5 million bu and wheat 14.0 million bu for a combined 27.3 million bu, the lowest in years. The closure of the Gulf following Ida had a massive impact on US exports and we expect that next week’s inspections will be similar. This will place the US well below a year ago when export facilities were operating normally.
- It is the production estimate that will determine whether Friday’s USDA report is bullish or bearish to corn/soy. FSA data will be incorporated by NASS, but historically, the changes are often very modest, although the industry makes a big deal about the change beforehand. Based on the record large numbers of US farmers that have responded to FSA on their program acres in August, it is likely that NASS will add 400-700,000 acres to US corn seeding taking it up to 93.1-93.4 million acres. However, we also expect that NASS will find additional abandoned acres in the N Plains due to the dire drought with final US corn harvested acre being in a range of 84.5-84.9 million acres. The point is that unless the 2021 US corn yield is above the 2018 record of 176.6 bushels/acre, it will be difficult for the report to be overly bearish. We do not expect the USDA to adjust US corn/soy exports lower due to Hurricane Ida.
- Corn/soybean cash basis levels have fallen sharply on the Ida Gulf export halt. Delta soy/corn basis has fallen $0.60-0.80/bu while interior Midwest corn basis has dropped by $0.15-0.40/bu. Cash traders are telling the farmer to store as much of their early harvest as possible. And Chinese buyers are anxious to advance their purchases once Gulf cash trade resumes.
- The midday forecast is drier for the Lake States and the Upper Midwest. A high-pressure ridge holds across the West Central US which will produce a warm/dry weather pattern. US corn and soybean crop maturity is being pushed by the warmth. The Midwest harvest will start in earnest sometime next week.
- Argentina has been exporting record tonnages of corn this summer while Russian wheat is being moved offshore due to ever rising export taxes. China’s soybean imports in August argue that the USDA is 2-3 million mt too low on China’s 2020/21 soybean import estimate. World corn, wheat and soybean export trade is record large, it is just not yet being felt in the US. When the Gulf get back on its feet, that demand should be reflected in price.