- HEADLINES: Chicago steady/higher in thin volume; Soyoil paces recovery; Midday weather forecasts unchanged.
- Grain and soy futures in Chicago are steady to higher with soyoil pacing the recovery due to growing renewable diesel (RD) demand with end users taking coverage into Q1 2024. The recent soyoil price break raised RD margins with crude oil/petroleum diesel prices rising to yearly highs. The onboarding of new RD plants and rise in the industry operating capacity will be a drain on North American soyoil supplies. The demand pull on RD feedstocks will be sizeable until new US soy crush facilities start to come online.
- US soy crush capacity will increase sharply in 2023/24 and 2024/25 from existing USDA forecasts. It is the coming RD demand and the need for an additional 5 million acres of soybeans that underpins the complex. The soy/corn ratio will need to push out to 3:1 to encourage farmers to seed 88.5 million acres of soybeans and cut corn acres to 90 million or less. The rapidly expanding US soy crush rate places added importance on the coming S American harvest as US soybean exports must be reduced. We look for a higher close in the complex with the grains to follow. Late day hedge pressure will be modest amid the wet weather forecast for the N Plains and the W Midwest. With rains of 0.4-2.50” it will take a few days before farmers are able to get back into their fields. The US soybean harvest will be 9-11% and corn 18-21% finished through Sunday.
- Chicago brokers report that money managers have bought 3,400 contracts of corn, 2,900 contracts of wheat, and 3,400 contracts of soybeans. In the products, funds have sold 1,900 contracts of soymeal and bought 4,300 contracts of soyoil.
- Early yield data continues to point to US corn and soybean yields below last year. There is considerable variability in yields depending on if a corn field received a mid-June rain or a soybean field a late August rain. Fields that received or missed those rains are seeing the yield variance. Next week the soybean harvest will gather additional pace which should help define how far below last year’s yield (49.5 bushels/acre) the yield really is. We peg the US 2023 soybean yield at 49.0 bushels/acre, but actual field data will produce help in defining whether a deeper cut is needed.
- A week from today, NASS will update final 2022/23 US corn, soybean, and sorghum stocks along with the final small grains report. This report often provides some surprises. Our bet is based on strong cash premiums that lasted into early September is that US corn/soybean stocks are slightly smaller than forecast. Additionally, USDA’s annual 2022/23 corn balance sheet implies a major correction in Jun-Aug feed disappearance. Old crop carryover stocks are still important in defining 2023/24 supply availability. And based on HRS yields that were disappointing, a modest cut in US 2023 all wheat production is forecast, recall spring wheat crops in MT, ND and SD on Aug 27 were rated at just 32-35% good/excellent.
- The GFS midday weather forecast is slightly wetter in the eastern Dakotas but is otherwise consistent with the morning run. Another few days of active shower activity continues across the N Plains and Upper Midwest, with additional accumulation of 1-4” advertised in SD, ND, MN and WI. A drier and still-warm pattern emerges beyond early next week. Harvest will go largely unobstructed east of the Mississippi River into the first week of October. Summer-like temperatures occur across the S Plains and S/W Midwest. Frost/freeze threats are absent.
- Weighty chart patterns and the arrival of new N Hemisphere crops have pressured values since mid-September. The replenishment of supply will be digested by early October, and thereafter focus shifts to S Hemisphere weather and whether another year of record Brazilian output occurs. The late arrival of monsoonal rains there is a concern.