- HEADLINES: Wheat bounces as Putin says nothing has changed with war plans; GFS calls for dry/warm weather; US stock market falls hard on week.
- Chicago futures are mixed at midday with corn, soybean, and wheat futures trading either side of unchanged on the pending ramp up of the Midwest harvest. Hedge pressure will be felt on the close with producers reporting that corn seed moisture is in fast decline while the soy crop is quickly yellowing/dropping leaves. The warm/dry weather of the first half of September has really helped to push crop maturity. Early corn and soybean yields are variable and below last year in most reports. How much of the yield decline was caught in the September Crop Report is something that traders will debate up into Oct 12, the next NASS report. The early harvest is finding its way into cash market and starting to refill the pipeline. Producers are hoping that Mother Nature stays kind with ongoing dry weather to help offset the high cost of drying.
- We look for a mixed Chicago close with hedge pressure felt going home for the weekend. Spot cash basis levels are in slow retreat, and it will take time to refill the cash pipeline. Rally efforts are unlikely to hold.
- We note the growing influence that US/world financial markets are having on Chicago/CME ag prices. These are macro, not micro ag markets, with the US Central Bank to raise interest rates on Wednesday September 21 by at least 0.75%. The war against inflation is real and is causing deflation in a host of asset prices. Already, the US stock market has lost an estimated $7 trillion in value, with real estate and raw material values in retreat. The message is that World Central Banks must punish asset values to control inflation and force demand destruction. The Fed’s mandate is 1) Stable prices and 2) Full employment. The mandate says nothing about lasting bull markets in equities, real estate, bitcoin, or commodities. We see a tradable bottom in US equity/commodity markets following the FOMC fed fund rate hike next week.
- World corn/wheat and vegoil markets are all posting massive skews on FOB offers to importers. Ukraine corn is said to be offered at $0.20/bu under Chicago for October, while Argentine October corn is $0.35 over, Brazilian at $0.65 over and US October Gulf corn at $1.35 over. US corn is $1.00/bu more expensive than Argentine corn offers. In wheat, Russian 12.5% wheat is offered at $320/mt, with French wheat at $340/mt and US HRW wheat $428/mt and US SRW wheat at $375/mt. US wheat is overpriced relative to the world market with only residual demand expected going forward. US HRW wheat is $108/mt $2.95/bu more expensive vs. Russian and US SRW wheat is $0.95 more expensive vs. French.
- And finally, US soybeans are more expensive than October offers of Brazilian and Argentine soybeans with Argentine soyoil being $0.19/pound cheaper and Brazilian soymeal being $19-21/mt cheaper. US export interest stays slow.
- Chicago traders are focused on the value of the US$ and as the dollar came off its early highs, soy/grain prices bounced. Carefully monitor whether the US$ can score a new high following the hike from the Central US bank next week. The Brazilian Real has reached 5.29:$1.00 aiding their farm profitability as soybean the first crop corn seeding gathers steam.
- There was limited change in the GFS weather forecast with below normal rainfall/warmth across the Central US into Sept 26. Showers will fall across IA/MO/MN on the weekend with totals of 0.1-0.8”. There is no sign of a frost/freeze or a Gulf Hurricane into Sept 27. The warm/dry open harvest weather bodes well for corn/soybean crop quality.
- Chicago values are mixed at midday with summer row crop futures sagging. The 100-day moving average crosses at $14.51 in November soybeans and a close below this level would be bearish. We hold a bearish short term Chicago view with initial downside price targets of; $14.20-14.40 Nov soybeans and $6.60-6.70 Dec corn. Wheat seasonal price trends are positive with Russian President Putin suggesting that the recent pushback from Ukraine has not changed his war stance. This hints at an extended conflict. We look for short term tradable lows late next week on FOMC rate hike.
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