- HEADLINES: Chicago futures mixed in diminished volume; Funds buy wheat on the charts/Russia; Soybeans sag on lack of fresh US demand; Corn caught in between.
- Chicago markets are mixed at midday with wheat firmer, corn and soybean futures being weaker. Soybeans are back pacing the downside as Brazilian farmers push seeding progress with China on its weeklong autumn holiday. US wheat values stay firm on Chicago fund short covering amid the growing speculation that Russia will close Ukraine’s grain export corridor as the 120-day initial contract ends on November 22. Seasonal price trends turn more positive as the US harvest advances but rising US/world interest rates and slowing economic data casts a long dark shadow on demand. World grain trade is sagging on rising US$ denominated values and tightening availability in the budgets of N Africa and SE Asian Governments. We look for a mixed close today with US weekly export sales data being monitored on Thursday morning.
- Chicago brokers report that managed money has sold 2,400 contracts of soybeans while buying 2,400 contracts of corn and 3,100 contracts of wheat. In the products, funds have bought 900 contracts of soyoil while selling 1,200 contracts of soymeal. The oil/meal spread has pushed out to a 44% oil contribution rate in the past day. Profit taking on oil share is being seen.
- OPEC will announce a 2 million barrel production cut but excluding what the Russian production cut is already (estimated at 1.0-1.2 million barrels/day), the net cut is estimated at 900,000-1.1 million barrels/day. OPEC is reflecting on the relative cheapness of crude oil vs natural gas, coal, and other energies. Crude oil looks cheap compared to gas in Europe that is priced at $400/barrel of crude on an energy equivalent basis. We maintain that the US refilling the SPR below $80/barrel and the key heating season ahead, crude oil prices are likely to rise to a new range of $90-110.00 in Q1 2022. US farmers should see current diesel prices as a new buying opportunity. Crude futures have added to their early week gains at midday.
- Russia has announced that its wheat production will grow by 5 million mt annually due to its annexation of Eastern Ukraine. Yet, the world has yet to decide what it will do with Russia’s pilfered wheat/grain in the months ahead. Grain importers will avoid this Russian wheat including Turkey (for now). Ukraine’s military forces are pushing to reduce the area under Russian control with Putin’s reaction to newly captured territory being absent (so far). Farmers in E Ukraine have seeded limited area of wheat amid the war’s impact around them. Russia offered new decrees on its ownership of E Ukraine today.
- The US Labor Dept will be out with key US employment data on Friday, Oct 7. The report should show that the US added 202-212,000 non-farm payroll jobs in September. This is below August and should delineate a slowing jobs market into 2023. In the financial markets, bad news is now good news.
- Tunisia purchased Russian wheat with at least 1 seller providing an option origin contract at a premium for non-Russian suppliers. Russian wheat continues to capture world wheat demand amid its attractive prices. US wheat is overvalued in world wheat trade.
- The midday GFS weather model run like previous runs. Key crop-growing regions of the Midwest/Plains stay in a below normal rainfall trend. Frosty temperatures occur Friday and the weekend with warming next week. An open window persists.
- Seasonal price trends help Chicago grains while soybeans sag on the surging US$. Global cash markets stay weak with trade reduced (to show on Thursday’s USDA sales report) on the slowing world economic outlook. Rising energy prices aid the US biofuel profitability, which will not offset US export losses. We look for corn values to gain into the report.