- HEADLINES: Corn rallies on smaller crop potential; Soybeans decline on Chinese demand concern; Wheat follows.
- Chicago grain futures are mixed at midday with corn/wheat higher while soybeans sag on chart-based selling amid a steep fall in soyoil. November soybean futures fell back under $14.00 while December corn rallied to $6.71. The volume of trade has been modest with few traders wanting to add to their risk profile ahead of next Monday’s USDA/NASS September Crop Report.
- The new crop soybean/corn ratio has dropped to 2.08:1, and it will likely fall under 2:1 as the market encourages farmers to consider seeding additional feedgrain acres to offset the crop losses in the US/EU due to adverse weather this past summer. The world needs additional feed supplies. However, there is an abundance of Black Sea feed wheat should export channels stay open.
- And as corn prices rise, it underpins the price of HRW wheat as strong Plains cash premiums for corn make wheat feeding economical. In general, Chicago holds a domestic focus into the USDA September Crop Report. Once the 2022 US corn/soybean crops are determined, the market’s focus will shift to demand. Unfortunately, with the US$ at a multi-decade high and the world/US economy slowing, recent year “bullish demand” for US grain/soy demand is lacking. Russia keeps cutting its offered price of fob wheat and Ukraine of fob corn, which pressures Brazilian fob corn offers. We would argue that US corn, soybean/wheat 2022/23 exports are overstated.
- Chicago brokers estimate that funds have sold 6,500 contracts of soybeans, 3,900 contracts of soymeal and 5,700 contracts of soyoil. In the grains, funds have bought 7,400 contracts of corn and 2,800 contracts of wheat.
- FGIS/USDA export inspections for the week ending September 2 were 20.4 million bu of corn, 18.2 million bu of soybeans, and 17.5 million bu of wheat. All were light compared with expectations. The old crop year has ended for US corn/soybeans sorghum with the Census Trade report out on Wednesday for July. It is now Census export data in July and August that will determine final US 2022/23 exports. We maintain that the USDA is modestly too high on both corn/soybean exports.
- Brazil’s Parana has seeded 22% of its first corn crop with the crop reported to be 99% in good/excellent condition. Initial spring weather conditions have been favourable to early crop establishment. Mato Grosso weather has been more arid, and farmers report that although soybean seeding starts on September 15, they will wait another week for germinating rains to return. Mato Grosso rains occurred in the third week of August, and now the forecast looks arid for the next 10 days.
- China will be on their autumn holiday this weekend and early next week. The holiday will push Chinese buying of US/S American soybeans into late week. Chinese buyers will be on holiday next Monday, the day of the USDA September report. We note that many Chinese will spend “staycations” with travel dramatically restricted by zero covid restrictions across much of China.
- The midday GFS weather forecast has pushed the chance of weekend rains further east into WI/MI and Northern IN with rainfall totals of 0.25-1.50”. The W Midwest and the entire Plains are dry with late season warmth. High temperatures range from the 70’s to the mid 90’s which will quicken crop development. The S Midwest corn harvest will start to gather speed next week. There is no indication of threatening tropical weather or a frosty end of the 2022 growing season through September 20.
- Corn is back testing last week’s high on the ongoing dryness across the W Midwest/Plains while the soy complex sags on sluggish Chinese demand and the potential that the US/Brazil could both harvest record large crops. China’s zero covid policy is causing a deterioration in its economic outlook. China Q3 soymeal use is estimated to be down 5%, with the fear being that such slow domestic meal demand will push into Q4 and 2023. We hear of widening reports of White Mould/Sudden Death Syndrome (SDS) in Midwest soybeans. We would see a push to new highs in corn and a rally above $14.50 November soybeans as setting up a cash sales opportunity. Chicago wheat values look to be sideways on Russia’s massive supply.