- HEADLINES: This morning saw rising global energy values, which should add support to ag commodities; Russian wheat values rise for 11th consecutive week; Corn rallies to best daily gains since early August; China buys additional US soybeans; Golden Week Holiday.
- Sharply higher corn with wheat/soy values following are the Chicago market trend. Tightening cash markets (limited farmer selling) along with rumours that China may be looking to make large purchases of US soybeans/corn has lifted values. December corn is testing its 50-day moving average at $5.42 while the 100-day moving average rests at $5.52. November soybeans have tested the psychological $13.00 resistance while KC December wheat runs into selling above $7.25 on wetter weather forecasts for the S and C Plains. The USDA Stocks and Final Seeding report looms, but the thesis appears to be that corn/soy futures have scored their seasonal lows with disappointing harvest yields and limited farm selling offering support.
- China’s Golden Week Holiday starts on the weekend with China out for most of next week. This suggests that Chinese ag buying is likely to be concentrated in the days leading into Thursday’s USDA’s Stocks Report. FAS/USDA reported the sale of 334,000 mt of US soybeans to China in the 2021/22 crop year. This was the largest single purchase in over a month.
- The release of the CFO of Huawei was important in soothing the US/China political relationship. US exporters report that China may return the favour with the purchase of US ag goods including soybeans, meats and even corn. We hear that China did secure another 5-7 cargoes of US soybeans today for November forward. It is nearly impossible to find any fob/cif offers for October as Gulf elevations are sold out. Getting the closed Gulf exporters back online will be key in early October to making sure the US can fulfil the existing sales program.
- US export inspections for the week ending September 23 were; 20.4 million bu of corn, 16.2 million bu of soybeans, and 10.5 million bu of wheat. Slowly and surely the Gulf is coming out its Hurricane Ida mess. However, it will still be a few more weeks before US weekly exports reach back to 80-85% of the pre-Ida normal.
- US farmers are not selling the rally with merchandisers suggesting that it will take $5.50-5.60 December corn and $13.25 plus November soybeans before farmers engage in new cash sales. The lack of cash selling reflects disappointing yield trends with farmers using the market to boost revenue. Normally, in a double-digit corn rally, farmers would price new crop harvest.
- World energy prices are spiking higher (WTI crude oil reaches $75.73 basis November which is causing fertiliser exporters like China/Russia to restrict exports. SOE’s (State Owned Enterprises) in China were told to halt fertiliser (urea/phosphate) exports due to rising costs and tightening supplies. Worry over input costs is rising.
- The midday GFS weather forecast is drier across the W Plains, and wetter for the Midwest compared to the overnight run. The midday GFS forecast indicates that rain would miss the driest wheat areas of the HRW late this week. Above to much above normal temperatures are forecast to persist into mid-October. The Midwest rain come with winds which would cause some toppling of E Midwest corn.
- Someone wants to be long of corn. There is no one fundamental reason why corn is rising, but a host of them including positioning for Thursday’s Stocks report, lower than expected E Midwest corn yields, and the potential for a lower Ukraine corn crop (no larger than 36 million mt compared to the 39 million USDA September estimate). Also, China’s 2020/21 corn imports from all origins will be raised to 29-29.5 million mt with world stocks to decline a like amount. We have no idea on whether China will secure US corn as a payback from the weekend political thawing. A test of $5.45-5.50 December lies ahead with Thursday’s report then determining if the rally accelerates. Wheat and soybeans are trying to follow but lack their own leadership today.