- HEADLINES: Chicago boosted by international markets; US crude oil stocks still very tight.
- Chicago ag markets are higher at midday as macro financial markets provide support. More importantly, international, and minor ag markets continue to provide bullish guidance for US corn, wheat and soybeans. It is clear an intense battle for acreage lies ahead, in the US and elsewhere, and this makes coming USDA data all the more important. There will be little tolerance for reduced US carryover or 2021 yields. Corn and soy futures today are trading fair value as determined by USDA balance sheets, but major changes are possible in the next 30 days. Disappointing US and Ukrainian corn yield data lingers in the background.
- Canadian and European rapeseed/canola markets are up sharply, with spot EU rapeseed finding new contract highs at $750 per ton. EU rapeseed has rallied a full 10% in the last 30 days and is now valued at a premium of $280 per ton (60%!) to spot Chicago soybeans. We maintain that world rapeseed and rapeseed oil users must simply go without supply this year due to crippling drought in Canada. Dec Chicago oats remain perched above $5.80, with Dec cotton finding a new 10-year high at $1.02 per pound.
- And Europe’s corn market has been one of the better performers during the month of September, with Nov MATIF corn finding newer contract highs this morning. Unwanted soaking rainfall of 2-4″ will impact France and western Germany Sun-Wed. This region accounts for roughly 30% of total EU corn production. Harvest in France is unlikely to surpass 10% complete in the next 10 days. Europe’s grain supply issue will stay intact until corn harvest is complete in November. A pattern of lingering rainfall is also being monitored across China’s Central Corn Belt. Rainfall there of 3-7″ over the next 10 days will at the least delay harvest.
- US ethanol production through the week ending Sep 24 totalled 269 million gallons, vs. 272 million the previous week. The lack of available old crop corn supplies has kept weekly grind rather deflated since late August. Yet, there remains a sizeable need for elevated production amid tight ethanol stocks. US gasoline disappearance last week was 9.4 million gallons per day, up 10% from the same week in 2019 and up 3% from 2019. Recall that work suggests gasoline use at/near pre-Covid levels requires an annual corn grind of 5.30 billion bushels, vs. USDA’s currently projected 5.35 billion. Corn’s demand outlook is bright.
- US crude oil stocks last Friday totalled 419 million barrels, up slightly on the previous week but down 15% from a year ago. Spot WTI crude at midday is up $0.05 per barrel at $75.30. Spot RBOB gasoline is now quoted at a $0.02 per gallon premium to Chicago ethanol. US ethanol also maintains a modest discount to Brazilian origin in the world marketplace.
- The midday GFS weather forecast is drier in IA and across the far Upper Midwest but is otherwise unchanged. Needed rainfall of 0.25-1.75″ will be spread across much of the US HRW Belt Thurs-Sun. This system expands into Delta region and eastern Midwest early next week. A temporary slowing of harvest occurs across the Delta, KY, TN, IL and IN but lasting delays are not indicated. A pattern of Central US warmth and dryness resumes Oct 5-10. Max temperatures today and tomorrow across the Plains and Western Midwest will reach into the low/mid-80s.
- Amid rapid harvesting in the US, final old crop corn and soy stocks and new crop production will be largely known in the next 10-15 days. Downside risk now hinges entirely upon NASS yield estimate, as otherwise seasonal price trends point upward, and international cash markets better reflect global stocks tightness. Any post-USDA weakness should be used to boost supply coverage further.