- HEADLINES: Soybeans rise on intercrop spread unwinding; Traders expect further fall in corn/soy conditions: Russia to fill Saudi wheat tender?
- Chicago futures are mixed at midday with soybeans higher while the grains sag. The market opened lower on liquidation and new selling tied to easing world equity markets and a stronger US$. It is a week where the US Central Bank will be raising rates, and risk off is the trading mentality to start. Wheat values are down as Russia looks to fulfil much of the Saudi wheat sale.
- However, Chicago values came off their low as the dollar dropped and the DOW rallied. Traders are trying to assess the right amount of risk heading in the US Central Bank rate hike. The next US Central Bank Meeting is November 2-3 with another in mid-December. We (and many others) look for a 0.75% hike in their fed funds rate on Wednesday, followed by another 0.75% in November and 0.25% in December. By year end, US fed funds should be 4-4.25% in FMOC’s war against inflation. This lofty rate will draw fresh interest from world investors that secure additional US$. We see the US$ holding strong into Q4. A mixed Chicago settlement is expected today soybeans firming on the unwind of the long grain vs. short soybean spread that was so popular during late July and August.
- Chicago brokers estimate that funds have sold 5,600 contracts of wheat and 2,900 contracts of corn, while buying 3,200 contracts of soybeans. In soy products, funds were buyers of 4,300 contracts of soymeal and 1,200 contracts of soyoil.
- US export inspections for the week ending September 15 were 21.6 million bu of corn, 19.0 million bu of soybeans, and 29.0 million bu of wheat. For their respective crop years to date, the US has exported 45.1 million bu of corn (up 20.6 million or 46%), 33.5 million bu of US soybeans (up 15 million or 83%), and 264 million bu of wheat (down 20 million or 7.5%). The early season US corn/soybean export pace is surprising to the upside which is slowing the refilling of the cash pipeline and supporting cash basis bids. US farmers are not showing a great willingness to part with additional new crop supply until more is known on yield prospects
- Saudi (SAGO) purchased optional origin wheat cheaply in a weekend tender. Exporters work the price back to $320-325/FOB based on elevated costs and the $8/mt which is required to go through the Suez Canal. Such cheap FOB wheat can only be supplied by the Russians amid their need to shed large stocks, and drop price offers. Questions abound on Russia’s ability to store record large 2022 wheat/corn crops, as they will not miss a tender to move supply into the world marketplace. We look for the final Russian wheat crop to end up at 100 million mt or more, a monster, which acts as a bearish peg on world wheat values. A 2-tiered marketplace will develop as the Russian’s hold prices low, while other origins shed supply. Russia needs to export additional wheat into the world market, it is all a question of price relative to existing sanctions.
- The US harvest is gaining speed with producers opening fields to gauge seed moisture and the readiness of the crop to be cut. We look for corn to be concentrated on this week with a shift to beans in the closing days of September. Soybean cutting will be active during the first 10 days of October.
- There was limited change in the GFS weather forecast with below normal rain/warmth across the Central US into Sept 29. A cold front will produce showers/storms late week across NE/IA and into IL with totals of 0.25-0.75”. Thereafter, the pattern turns cooler/drier through the weekend. 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 soybeans holding on soymeal strength. Amid Argentina selling 50+ cargoes of soybeans from their 7 million mt of farm sales which has cut into domestic soymeal production. Argentine soyoil is priced at $0.14/lb under Chicago or $20/lb less vs. the US Gulf. Meal/oil spread unwinding is ongoing. Corn/soybeans holding on expectations for new falls in US crop ratings this afternoon.