- HEADLINES: Wheat rises on demand talk while corn jumps on new fund cash inflows based on the cheapness of ethanol/crude oil values vs. coal/natural gas.
- Early selling uncovered consumer buying in corn/soyoil which has rallied Chicago values into the midday hour. Funds appear to be better buyers as chart patterns slowly start to turn to the upside. Wheat has been the upside leader amid rumours of Chinese buying of US wheat (told 1-3 cargoes) while US farmers have not been parting with much cash corn with an estimated 20% of the harvest completed through Friday. US farmers are making fast time in harvest, it is just that they are not willing to make new cash sales. Merchandisers report that farmers are targeting the $5.50 level basis December corn and $13.00 level in November soybeans for new sales. The lack of farm selling, and end user pricing has lifted Chicago values from early day lows.
- Goldman Sachs noted that they did not expect the US Central Bank to raise interest rates in 2022 and that its commodity head forecast $80 crude this winter with a chance of reaching $90 if the US winter was particularly cold. Natural gas, coal and a host of other energy products are soaring on a global basis. Chinese thermal coal prices have rallied sharply amid the political slowing of Australian coal due to their purchase of a nuclear submarine from the US. The US$ fell sharply on the “lower for longer” US interest rate outlook.
- Amid rising energy and wage values, and steady US interest rate outlook, the winds of inflation are blowing which will entice managed money to consider commodities into the beginning of 2022. Remember that Chicago open interest is at the lowest level since 2017 in terms of corn, soybeans, and wheat. The stage is set for additional managed money to look at Chicago as energy values are set to rise even more. Crude oil is the cheap energy today and stocks are expected to fall sharply in the weeks to come. This will make ethanol and corn look cheap on a comparative basis.
- The US sales in the week ending September 16 were 13.1 million bu of wheat, 14.7 million bu of corn, and 33.2 million bu of soybeans. This was the third week in a row that US corn sales were disappointing. For their crop years to date, the US has sold 396 million bu of wheat (down 99 million or 20%), 982 million bu of corn (up 93 million or 11%) and 852 million bu of soybeans (down 449 million or 34%). US corn export sales are the second largest on record, while US soybean sales are down and falling behind even more (relative to last year).
- The rise in world energy values should not be overlooked heading into winter. Chinese coal or EU gas prices are sitting at record highs, this will speed the story for renewables during 2022 to helping to balance out the supply chain. Chinese crushers worry that their power will be cut while hog producers are concerned about future meal supplies. Our point is that the energy bull story makes next week’s US September corn stocks and the October NASS corn yield estimate more important. There is no room for US corn supplies to fall.
- The midday GFS weather forecast is wetter across the N Plains, compared to the overnight run. The GFS forecast has added rain for late September and early October which would be ideal for planting Plains wheat. The EU model also hinted at increasing showers for the Plains but was less specific on amounts. Above to much above normal temperatures are forecast to continue into mid-October.
- New money appears to be coming at Chicago from hedge fund players as the sharp rise in natural gas, coal, fertiliser prices has attracted the attention of investors. The flow is just starting, but corn ethanol and crude oil are the cheap energy sources today. This is a big reversal of prior years and energy costs through winter will further hike the monetary demands of workers (wages). World wheat values are rising on tightening world supplies, but should needed rain fall across the Plains, a correction could ensue. Russian winter wheat areas have received some nice rains in the past week. We maintain that it is the September Stocks report that will determine the speed of the post harvest recovery.