- HEADLINES: Macro weakness spills into ag markets; EPA uncertainty persists; Midwest weather forecast trends wetter.
- Chicago values are weaker at midday with corn, soybean and wheat futures failing on an early rally attempt. The soybean market has been the downside leader as China did not show up with fresh US purchases. US exporters have 48 hours to report sales, but the lack of sales sparked a round of early selling amid the advancing Midwest harvest.
- And crude oil futures turned lower (and corn appeared to follow crude to the downside). The DOW is off 500 points as worry over the US Government shutdown and debt limit hike rattles traders. The US 10-year note traded as high as 1.56% as Fed Chairman Powell indicated that Central Bank Bond purchases could be tapered as soon as November. The inflation bar has been reached for the Fed to start cutting back on its bond buying program. This rallied the US$ with the December futures contract at a new contract high. The financial headwinds and the coming September USDA report sparked Monday’s buyers to be Tuesday’s Chicago sellers. Support is offered in December corn below $5.31 while November soybean at $12.70, while KC December wheat should uncover demand below $7.05.
- The USDA reported the sale of 150,000 mt of US corn to Mexico. No Chinese soybean sales were noted, even with US exporters reporting fresh demand on Monday. We are hearing fresh interest from China on today’s weakness.
- Democratic Senators are calling on the Biden Administration to reverse their EPA position on cutting biofuel mandates from 2020-2022 as they argue that it would threaten the US farm economy. The OMB is scoring the cuts, with an announcement expected in October. The Senators argue that the cuts would undermine Biden Climate Change Initiative. The democratic House and Senate need to hold together in their vision for there to be any chance on passing the stack of legislation that is pending. Biden’s EPA may choose to further delay any announcement until after several key legislative votes occur.
- Argentina has approved Bioceres’ HB4 GMO wheat back in October of 2020 for production. However, as the harvest of the Argentine winter crop nears, importers and end users are objecting, with Argentina’s biggest wheat importer, Brazilian millers, claiming that they will not secure the GMO wheat. Other key world importers including North African countries are also reviewing their import policy knowing that a very small portion of the Argentine crop could contain GMO seed. USDA has Argentina exporting 13 million mt of wheat, so the countries that allow or reject GMO wheat seed will be important. We have no way of knowing how this all falls out, but it is something that everyone must follow. The world does not have the availability for widespread switching in 2021/22 amid tightening protein supplies in the EU and Black Sea.
- The midday GFS weather forecast has again shifted near-term rainfall eastward into the Central Plains and bulk of the Midwest. A pattern of moderate but lingering rainfall impacts this area Thurs-Sun, with accumulation pegged at 0.25-2.00″. Favoured areas will include the eastern Plains, AR, MO, IA and IL. The pace of corn/soy harvest slows in the near-term, but widespread dryness resumes Oct 4-8. Summer-like temperatures will be ongoing, with max highs to reach into the low 90s across the Plains today and tomorrow. Unfortunately, coming rainfall does not extend into E CO, W KS and W NE, but a majority of the US HRW Belt sees a rejuvenation in topsoil moisture.
- Potentially large adjustments to 2021/22 US corn and soy carryover, along with final US wheat production, are due in just 48 hours. Choppy, mediocre-volume trading occurs in the meantime. Work suggests odds are high that final 2021/22 stocks are trimmed, which along with positive seasonal price trends keeps our strategy of buying breaks intact.