- HEADLINES: Bearish macro-economic fears pull Chicago values lower; Ukraine ag minister hopes to double exports in October; GFS weather forecast dry.
- Midday Chicago grain/soy futures are lower with soybeans finding consumptive demand under $14.10 November. Corn/wheat futures are sagging on profit taking amid the macro-economic weakness across a host of financial markets. Rising US/world interest rates will cause a contraction in a host of asset valuations with hedge fund managers being extremely cautious with new investments until after the next FMOC meeting on Sept 20-21. Until then, fund managers will look to sell commodity rallies based on the prospect of a 0.75% interest rate hike. US Central Bank Chairman Powell was resolute in his call to break the back of inflationary expectations with US interest rates staying higher for longer. This dramatically increased the chance for a US recession in 2023.
- Commodity traders are fearful of the potential for softer demand and are unwilling to chase strong rallies. This is a far different economic landscape from recent years, and the cash market must now lead rallies on tightening stocks in the last half of the crop year. It makes more sense to store corn than soybeans amid rising rates and the lack of carry. Brazilian farmers will be active selling March forward soybean futures to lock down heady margins.
- Chicago brokers estimate that funds have sold 3,900 contracts of wheat and 7,300 contracts of corn, and 4,300 contracts of soybeans. In the products, funds have sold 3,400 contracts of soymeal and 2,300 contracts of soyoil.
- The USDA announced the sale of 264,000 mt of US soybeans to unknown destination for 2022/23. The announcement helps confirm that although USDA will not be providing weekly totals, that the daily export sales report still works perfectly fine. Congress called for any seller of more than 100,000 mt to announce sales with 48 hours of completion. The daily report helps provide some comfort that China (other importers) are not making large purchases that are being missed by others.
- The Ukraine Ag minister forecasts that their October grain exports would reach 6-6.5 million mt, double the volume of recent months as 3 SE Ukraine sea ports fully reopen. Such talk is optimistic with the cost of transiting corn/wheat from the interior of Ukraine to port estimated at $4-5.40/bu. Ukraine farmers are reluctant to pay such huge premium for transit due to war and high fuel costs. This would slow the flow of grain internally. Also, concern is building that Russia may not want to extend the 120-day grain corridor export pact beyond early November. The Russian military strategy is to wear down the Ukrainians and the world over time. We were surprised that Russia would allow a Ukraine grain export corridor but taking it away as a new corn/sunflower harvest arrived would be depressing. The outlook for world wheat/corn changes dramatically with or without an export corridor. Its closure would send corn/wheat values on a bullish rampage.
- The Sept/November soybean spread has collapsed from $1.45/bu premium on Friday to $0.83/bu at midday. The day and a half collapse has been sizeable and offers a glimpse of the new crop harvest which will refill the cash pipeline. Delta and S Midwest farmers are working hard to cut beans early to capture the premium.
- The midday GFS weather forecast is little changed from the overnight run with a dryness to prevail for the next 10 days. Temperatures will average near to above normal with the warmest readings in the Plains. Midwest highs will range from the 70’s to the upper 80’s. The extended period of warm/dry weather will push crop maturity with tropical activity picking up in the E Pacific. The GFS forecast has a tropical system impacting the Baja with leftover moisture providing considerable rain for S Texas. Other Gulf States are drier with the harvest expanding.
- It is complex push and pull market with a trading top formed early in the week. Chicago weakness is forecast into midweek. We look for late week rally as traders will not take a position home into a 3-day US holiday weekend. This is not a place to be making new sales. Corn will likely gain on soybeans/wheat. Pre harvest Chicago rallies offer new sales opportunities .