- HEADLINES: Chicago sinks following chaotic US weekly export sales report; Macroeconomics in play on Friday; Wetter midday GFS forecast.
- It has been morning of anxiety/uncertainty with USDA/FAS changing websites to release their weekly export sales report. The initial weekly FAS sales data was delayed, then incorrect data was released, and then corrected at 9:30 local time with supposed correct totals. Chicago grain traders are still untrustful of the data arguing that the US could not have sold 4.7 million mt of new crop soybeans without larger daily sales being reported. Whether it is a mathematical error or incorrect reporting, the US selling a whopping 172 million bu of 2022/23 soybeans all within one week seems odd. US corn/wheat and other grain sales look right, but US new crop soybean export sales are now resting right below the prior record for the third week of August.
- The massive weekly soy sale has the bulls crying that something is wrong as Chicago futures should be sharply higher. However, the explanation is that the big buyer (China/unknown destinations) could have switched purchases on the books of COFCO to Sinograin. Remember that COFCO is a domestic US grain merchant and does not have to report cash purchases until it shifts over to the export category of Sinograin. This means that the 172 million bu of soybeans could have been purchased over weeks/months leading into today.
- The switch is nothing more than a paper shuffle with China having purchased 12.2 million mt of US soybeans (known) with another 5.7 million in the unknown category. We estimate that 70% (4 million mt) of the US unknown soybean sales are to China. This suggests that China has booked 16.2 million mt of US new crop soybeans with another 1 million to be rolled over from old crop with total US soybean sales to China pegged at 17.5 million mt or 60% of China’s estimated US soybean imports in 2022/23 at 29 million mt. Assuming a record large Brazilian soybean crop of 150-154 million mt, China will source most of their soybean imports from S America from late January onward.
- Chicago brokers estimate that funds have sold 1,900 contracts of wheat, 2,600 contracts of corn, and 4,900 contracts of soybeans. In soy products, funds have sold 3,200 contracts of soymeal and 1,200 contracts of soyoil.
- A Ukraine fob corn market has developed with offers well below the US Gulf for shipment in the next several months. Today, Ukraine fob corn is offered at $0.35 over December Chicago for delivery into late October. This is $1.00/bu cheaper than the US Gulf. We note that freight costs via the corridor will be substantially higher, but Ukraine exporters are trying to push out some of their massive old crop corn stocks into the world market. The cheapness of the Ukraine corn offers has some EU importers trying to sell back Brazilian corn purchases. The EU would be the primary market for Ukraine corn on a geographic/logistical perspective. Ukraine corn and the weakness in Brazilian corn basis are the reason for selling in Chicago.
- Cheap Russian wheat and now Ukraine corn fob offers has received the attention major world grain importers. A two-tiered world grain market is developing which could cause a pull/push market in French/US futures markets. Rallies and breaks look to be difficult to sustain with the US harvest ahead.
- US weekly export sales for the week ending August 18 were 15.0 million bu of wheat, 12.6 million bu of old and 6.1 million bu of new crop corn, and 18.5 million bu of old and 172.4 million bu of new crop soybeans. The US sold a massive 190.9 million bu of soybeans last week, one of the largest weeks on record. China and unknown were the big buyers. For their respective crop years to date, the US has sold 339 million bu of wheat (up 3 million or 1%), 2,412 million bu of old crop corn (down 356 million or 13%), and 2,207 million bu of old crop soybeans (down 77 million or 3%).
- The midday GFS weather forecast is wetter than the overnight run with 0.5-2.50” of rainfall for Iowa/Illinois and the E Midwest into September 4. The rains are further east than when compared to the overnight EU weather model solution. Also, the midday forecast offers additional heavy rainfall for the Gulf corn/soybean harvest which could pose harvest and quality issues. A much more active tropical storm path is forecast across the Atlantic with 3 storms being monitored. Based on the new tropical storm activity looks to be brewing, Central US weather forecasts will be changeable.
- Chicago values formed a trading peak yesterday with the coming harvest to pressure values into mid-September. Black Sea corn/wheat fob offers are weak while Brazilian corn basis is soft. We see corn as being supported on breaks while the start of Brazilian soy seeding in a few weeks caps rallies amid the prospect of a record large harvest. Wheat is caught in between corn and soy. We see a wide-ranging Chicago market without a much of a trend in the coming weeks.