- HEADLINES: Chicago dull, choppy at midday; US dollar scores new rally high.
- Chicago ag markets continue to do very little ahead of the release of NASS stocks data. Final US wheat, barley and oat production will also be published as well as a revision to final 2022 US soy production. The market is aware that feed/residual is difficult or nearly impossible to measure on a quarterly basis, and so surprises are possible. We note the USDA’s call that US corn feed/residual collapsed in the Jun-Aug period. We doubt corn data leans bearish on Friday.
- Adverse weather battling risk-off in macro markets best defines the morning session. The US dollar index at midday has scored a newer 9-month high, with currencies in Russia, Brazil, and Australia weaker by varying degrees. The Dow is down 270 points and has lost 2.4% so far in September. Macro weight and the lull of the global crop calendar, US weather is becoming irrelevant, S American weather’s importance increases in October, continue to limit market participation. Breaking news today is absent. Milling wheat and corn futures in Paris are flat.
- Yet, traders must be mindful of ongoing weather abnormalities. We note that rainfall in E Australia next week is projected to be more scattered in nature. There is no indication that a pattern shift to wetter weather occurs in eastern Ukraine and Southern/Central Russia prior to Oct 6. Drought in Argentina worsens over the next 10 days, with first-crop corn and soy planting typically beginning in October. Weather patterns become a bigger deal beyond the next 1-2 weeks.
- Soyoil futures have recovered as WTI crude stays resilient at/above $90 per barrel. Weekly EIA data on Wednesday morning is expected to show crude and motor gasoline stocks steady to slightly lower week on week. Energy supplies are not abundant. Ethanol production margins remain massively profitable. Renewable diesel margins have improved since mid-Sep on soy oil’s break.
- Board crush margins at $2.00+/bu and crush margins in the cash market at $3.00+ since July are working to maintain a sizeable expansion in US crush capacity, which is a big deal in the long run, and places even more important on yield performance in S America this winter.
- The midday GFS weather forecast is wetter across the Upper Midwest in the 11–15-day period, with rainfall totals of 2-4” forecast Oct 8-10 in IA, MN and WI. However, confidence in forecast details is low. Otherwise, light/moderate showers will linger in the eastern Midwest into Thursday. Dryness and abnormal warmth then blanket the whole of the Central US during the opening week of October, with high temperatures advertised in the 80s and 90s across the S and C Plains. Highs are projected to reach the 70s and 80s elsewhere. Rapid harvesting is anticipated, but the need for a rejuvenation of river levels is growing. A wet late autumn/winter is hoped for.
- Both the bulls and bears are struggling for leverage. We are increasingly recommending sourcing supply coverage on weakness. Positive seasonal trends are known. Ongoing S American weather adversity or the loss of just 0.5 bushels/acre of US soy yield mandate the addition of premium.