- HEADLINES: White House expects Ukraine export corridor to stay open; EIA ethanol grind starts new crop year robustly; GFS weather forecast adds rain for IA/E NE.
- Grain futures are lower at noon with selling noted across Chicago. News from the White House that it did not see the Ukraine Grain Export Corridor deal unravelling helped sink values. This White House Statement was contrary to recent comments from Russian President Putin and Turkish President Erdogan, which suggested that Ukraine grain was not feeding the world’s impoverished with grain flowing to rich western nations like the EU.
- Whether the Ukraine Export Corridor stays open or closed is a big deal to the longer-term outlook of Chicago grain values. Putin seems to be taking aim at both EU energy/feed supplies. And Russia is back to demanding that NATO drop all economic sanctions so that Russian grain exports can move unfettered. We do not believe that such a Russian demand will be fulfilled or even considered.
- Our guess is that Russia will not renew the 120-day Ukraine Grain Corridor Pact in November. Moreover, vessel owners will not be willing to place their ships at risk of a long costly period of demurrage if Putin decides to quickly close down Ukraine exports. The growing political uncertainty that surrounds Ukraine will act to slow corridor grain trade. Corn should be the most bullish world grain should the corridor be closed once again. Ukraine desperately needs to export old crop corn to free up storage for the new crop harvest.
- Chicago brokers estimate that funds have sold 5,000 contracts of wheat, corn, and soybeans (each). And have sold 3,500 contracts of soymeal, while being flat in soyoil. Managed money is on the sell side of the marketplace.
- China has used the recent Chicago move to add to their forward coverage with new November/December purchases of 5-7 cargoes of US soybeans. China is a buyer of US soybeans on scale down basis, but they have also booked at least 8 cargoes of Brazilian soybeans for February/March at the same time. Look for FAS to announce daily sales of US soybeans to unknown or China on Friday/Monday.
- USDA/FAS will restart their export sales reporting a week from today on the 15 September. 3 weeks of sales will be offered in what will be seen as a “data dump” which will help the industry measure demand since the last week of August.
- Weekly US ethanol production started the new crop year off strongly with a gain of 6 million gallons from last week and up 7% from last year. Seasonally, US ethanol production should ramp up into November. However, US gasoline consumption was down 9% from last year, which continues to be a bearish demand surprise with US ethanol stocks up 13% year on year. The US needs to see gasoline consumption expanding.
- Argentine cash soybean selling has slowed following 2 days of active sales with the total reaching just over 3.00 million mt. Commercials report that sales today will be closer to 600-700,000 mt. The movement has helped refill the pipeline with China rumoured to have bought 4-5 cargoes for October shipment.
- The midday GFS weather forecast is wetter than the morning run across Iowa/Minnesota and E Nebraska but is otherwise unchanged. Light/moderate rain will move across the far Plains and Midwest Sun-Monday as low pressure sinks south into the Midwest. Rain totals of 0.25-1.50” are offered to WI, N IL and portions of IA/MN. Temperatures stay abnormally warm this weekend then fall to more seasonal levels next week. The Southeast US will be wet amid an active flow of Gulf moisture, but there is no indication of Gulf/Atlantic hurricane activity.
- The USDA September Crop Report looms on Monday, and a sizeable market reaction is expected. We would see rallies near or above $6.90-7.20 December corn and $14.40 or above in November soybeans as offering cash selling opportunities. Our future concern is US export demand if Brazil harvests record large corn/soy crops in 2023. Wheat price direction hinges on the corridor and whether it stays open or closed.