- HEADLINES: Chicago mixed in thin volume; Funds shed length in soyoil; S American weather forecast too dry.
- Chicago ag markets are mixed but little changed in thin volume. It is clear few want to add to existing positions or boost participation ahead of key NASS data on Friday. A clearer row crop yield trend will also be known in the next 10 days, and today there is just nothing for fund managers to sink their teeth in. Our belief is that a bullish final 2022/23 US corn stocks surprise is possible and as USDA’s annual corn feed/residual number implies a dramatic contraction in disappearance in the Jun-Aug period. Otherwise, low volume/choppy trade is anticipated into Friday morning. US dollar strength has capped new buying. Attacks in the Black Sea from both Ukraine and Russia are intensifying, but interior Russian wheat markets have shed premium on large current stock levels.
- We would note that typical Chicago soy seasonals imply a market bottom in the first half of October, a bit after corn, and importantly crush margins have held up well in recent week. The spot futures-based margin on Monday sits at $2.18/bu, vs. $2.20-2.25 last week. Margins are better yet in the cash market, and crush capacity expansion will be a feature of the N American soy/oilseed markets into 2025.
- We believe today’s sharp correction in nearby soyoil is short sighted, and in the long run we are unsure show US soy supply and demand will be balanced if national yield is trimmed even slightly. A US soy yield in USDA’s Oct WASDE below 50.0 bushels/acre is bullish of cash prices into spring 2024. USDA will be reluctant to raise its 2023/24 US soy consumption forecast as end stocks of 200-220 million bu reflect pipeline minimum stocks. Rather the market must sort out how much export demand is deferred or eliminated altogether.
- US export inspection in the week ending Sep 21 included 26 million bu of corn, vs. 27 million the previous week, 18 million bu of soybeans, vs. 16 million the previous week, and 17 million bu of wheat, vs. 16 million the prior week. In the respective crop years to date, exporters have inspected 77 million bu of corn, 16% above last year, 47 million bu of soybeans, up 6%, and 206 million bu of wheat, down 28% from mid-Sep 2022.
- Other breaking news is lacking. Into the middle or latter part of autumn we expect the replenishment of physical supplies across the Northern Hemisphere to battle worrisome global climate patterns. Changes in patterns are not indicated in Argentina, Northern Brazil, Australia or much of the Black Sea region in the next 10 days. The midday GFS weather forecast keeps rainfall in Mato Grosso do Sul, Mato Grosso, Goias and Bahia confined to very light/scattered amounts, which does nothing for soil moisture amid abnormal heat. Rainfall in E Australia has been pushed into the 11–15-day period. Developing dryness in E Ukraine/S Russia needs closer monitoring in October.
- History shows that autumn precipitation/soil moisture in Russia has a noticeable impact on yield potential the following spring.
- The GFS weather forecast in the US is wetter across the Southern Plains HRW Belt Oct 2-5, with accumulation in the TX, OK panhandles and SE CO pegged at 1-3+”. A few showers disrupt harvest efforts across the NW Corn Belt & IL/IN in the next 48 hours, but major delays are absent. Abnormal warmth will be featured Central US-wide into Oct 10. Frost/freeze dates across the N Plains/Upper Midwest will be much later than normal.
- Chicago markets are adrift awaiting final clarity on US production/supply. Abnormal S American weather is not yet directly impacting productivity, but weather in Brazil especially becomes more important in the next 10 days. Normally some 40-70% of soybeans in Mato Grosso are planted in the first three weeks of October. Rain is needed. Mexico this morning purchased 41 million bu of US corn from 2023/24 delivery, and US corn on a fob basis is competitive with Brazilian origin.