22 October 2021

Posted on by
  • HEADLINES: KC and Paris wheat futures score new contract highs; Brazilian Real weakens on political worry; Daily US soybean sales to China lacking.
  • Chicago futures are mixed at midday with KC wheat futures pushing to new contract highs while soybeans sag on the weakness in soyoil. Corn is caught in between. Early Chicago volume totals were active, but they have been sliding at midday as Europe/Asia head into their weekends.
  • World wheat futures are the bullish stalwart while soybeans are bearish anchor on rising US end stocks and growing concern of lacklustre China demand. China has been booking US soybeans this week, just not at a pace that allows USDA’s 2021/22 annual US export estimate to be correct.
  • The Brazilian Real has been sliding on rumours that Brazil’s commerce minister would soon resign. The Real is trading at 5.7:1 with currency analysts forecasting a further Real decline to 6:1 amid the political uncertainty. A sliding Real pressures Chicago values as Brazilian farm margins expand, and the premium paid by exporters declines. It is expected that Brazil will be offering fob soybeans for export at even money with the Chicago March futures for February compared to US Gulf premiums that rest at $0.90 or more over.
  • FAS did not announce any new US soybean export sales to China which was a disappointment. The US needs to be dramatically ramping up sales to China with the pace off 591 million bu from last year. The USDA is likely to cut their 2021/22 US soybean export estimate by 50-75 million bu in their November report.  The sluggish US soybean export sales pace caps Chicago rallies above $12.50 without a  American weather threat.
  • ADM cancelled 1,314 deliverable KC wheat receipts overnight which started the KC wheat futures rally. Why ADM cancelled the receipts is unknown, but the move was considered bullish by wheat traders as the KC/Chicago premium widened and KC futures pushed to fresh contract highs at $7.745 basis December. The EU is exporting wheat too quickly, while Russian export taxes are rising. The US could export additional protein wheat in the last quarter of the 2021/22 crop year. Minneapolis wheat pushed above $10/bu for the first time since July 2012. US HRS/HRW wheat supplies will continue to tighten well into mid-2022.
  • US and world fertiliser prices continued to rise on tightening supplies and additional export scrutiny provided by China. The rise in planting costs has US farmers wondering about their cropping options in 2022. Less ammonia nitrogen will be laid down this autumn as farmers cultivate their fields to plant either corn or soybeans next spring, depending on fertiliser cost and availability. US farmers need to understand that just because they have priced a fertiliser does not assure that it will be available for planting in April.
  • The midday GFS weather forecast stays wet for the E and C Midwest over the next 10 days. Harvest delaying precipitation of 2-4.00” will impact IL, IN, WI, and MI. The hardest hit area will be N IN where rain totals exceed 4.00”. The coming cold front will slow harvest and down corn amid saturated fields. The extended forecast looks to continue the wet trend into November.
  • In S America, the GFS forecast has added rain for Buenos Aries in Argentina while other areas stay arid into November 1. Daily high temperatures look to range from the 70’s to the mid 80’s. Confidence in the SE Brazilian November 1 rain is low since it occurs on the tenth day of the forecast. We fear that a deepening drought lies ahead for Argentina into early 2022. The weather trend for the next 3 weeks will be key.
  • Rising energy prices and inflationary concern underpins Chicago breaks, but better corn/soy export demand is needed for a sustained rally.  We stay bullish of wheat, but one must be careful about buying new contract highs. The old saying is that bull markets always let you in applies here. Paris wheat must be the upside leader and values are sitting right at historical resistance at $280/mt. We are bullish of wheat/corn on breaks with Nov soybean futures holding support below $12.00.
To download our weekly update as a PDF file please click on the link below: