- HEADLINES: Low volume choppy trade awaiting private US crop estimates; ISM Index shows weakening US manufacturing sector; Dow rallies 600 points.
- Chicago futures reversed overnight price trends with the grains weaker while soy futures rallied. The US$ declined which offered a bid to US equity values while crude oil futures held with gains of over $3/barrel. Bloomberg estimated that world investors have lost $37 trillion in wealth since January 1, the largest 9-month loss in history. Such massive losses is having a real impact on demand which may provide Central Bank pauses in raising rates. The 10-year US Treasury note yield has fallen to 3.6% after trading above 4.0% last week. The fall in rates has provided bullish heart back into a host of asset classes this morning, including raw materials. We doubt that corn/wheat can fall too much further amid tightening end stocks and limited farmer selling. However, we also doubt that January soybeans can rise too far above $14-14.25 on building US end stocks and favourable S American weather. A mostly higher close is expected as investment managers tentatively return to adding risk in their portfolios.
- Chicago brokers estimate that fund managers have sold 3,200 contracts of corn, while buying a net 2,100 contracts of wheat and 2,900 contracts of soybeans. In the soy products, funds have bought 4,500 contracts of soyoil while selling 200 contracts of soymeal.
- USDA FGIS weekly grain inspections for the week ending September 29 were; 26.0 million bu of corn, 21.1 million bu of soybeans, and 24.5 million bu of wheat. For their respective crop years to date the US has exported 92.8 million bu of corn (up 4 million or 4.3%), 65.4 million bu of soybeans (down 2.1 million or 3%), with wheat exports at 313 million bu (up 8 million or 2%). The US export season is following the 2021/22 crop year, with one important difference in that China is slow in securing US corn and Brazil is unlikely to have back-to-back droughts.
- The USDA confirmed that the US has sold 110,000 mt of US soybeans to an unknown destination. The buyer is rumoured to be the EU, Mexico, or S Korea.
- The ISM’s manufacturing/factory index dropped to 50.9 in September, its lowest reading since May of 2022, the height of the pandemic. The extremely slow pace of manufacturing growth confirms a rather dramatic slowing in the US economy. The slowing manufacturing rate will cause a rise in layoffs heading into the end of the year, especially if the US Central Bank raises its lending rate by another 1-1.25% heading into 2023. The US stock market rallied sharply on the theme of bad economic news is bullish. The DOW is up over 600 points, and some traders argue that the S&P index is nearing a tradable bottom.
- River basis bids continue to decline as water levels are in retreat. The December/March corn spread has widened out to a 7 cent March premium. The weather forecasts stay arid for the Central US and water levels will be restricted.
- A progressive weather pattern will hold with a shot of cold Canadian air pushed southward into the Central US during late week and the weekend. A frost/freeze looks likely across the N Plains and the NC Midwest. A warming trend follows with limited rainfall into mid-October. The US corn and soybean harvest will rush ahead. There are hints of some rain in the 11–15-day period, but in amounts that are far below what is needed to help the Mississippi River. Drought and dryness concerns will continue to plague the Central US well into late October.
- The grain markets will be unable to sustain bearish trends without a bearish supply surprise from USDA on October 12. US corn/wheat stocks are just too tight. However, soy rallies will fail amid larger US supplies and the favourable seeding forecast for Brazil. StoneX will be out with their US corn/soybean yields on Tuesday with the Markit Group on Thursday. We see price risk to the downside following ending of the US harvest.