- US Central Bank interest rate decision awaited; French wheat protein levels disappointing; US weekly ethanol grind holds strong.
- Chicago grain futures opened higher on macroeconomic expectations that the US Central Bank will start a new rate cutting cycle this afternoon. A weaker US dollar, lower borrowing costs amid a more balanced labour market contributed to a broad commodity index rally. The 2-year period of rate hikes in the US Central Bank’s battle against inflation is ending. Traders are hoping for a 0.5% cut in the US’s Fed funds lending rate this afternoon and a broadening raw material rally. It is the reaction of the financial markets to the Fed’s rate cut, not the rate cut itself, which has been telegraphed.
- Managed money has been cutting back their net short grain positions for nearly a month as price reached downside targets. Managed money was let out of their net shorts without much market disruption as US farmers made old crop cash sales into the managed money profit taking. Now the US farmer is expected to store as much of their new crop harvest as possible with the cash bids being well below breakeven. US farmers see corn as having more upside price potential vs soybeans. We could agree with this assessment as S American farmers prepare to seed record large soybean acres. The longer-term bearish price risk rests in soybean values if Brazilian farmers harvest a record large soybean crop in early 2025.
- FAS’s daily reporting system was void of new US export sales. China has been on a 2-day holiday and is expected to get back to securing US soybeans for November/December on weakness.
- Just 41% of the French wheat crop had a protein level greater than 11.5%, which meets milling standard for most of the EU. In a normal year, nearly 60% of the French soft wheat crop reaches 11.5%. Excessive rainfall has produced a greater share of the French wheat crop being classified as feed. The smaller exportable share of French milling wheat has produced record demand/exports for Russian wheat.
- Weekly US ethanol production at 308 million gallons was down 10 million gallons from the prior week, but up 4% from last year. US ethanol stocks at 999 million gallons were up 3 million gallons from last week, but up 10% from last year. US ethanol production margins are positive with the grind record large in the first couple of weeks of the crop year. Pace analysis will be closely followed with 2024/25 production likely to exceed last year. The US crude oil stock fell to 418 million gallons, down 1 million gallons on the week. The Biden Administration is using the price break to add supply to the US Petroleum Reserve. December crude oil has support at $63-65/barrel.
- US Deputy Sec of State Kurt Campbell indicated to the US House of Foreign Affairs Committee that challenges posed by China now exceed those of the cold war. Beijing’s support for the Russian defence industry have come directly from the top Chinese leaders. America needs to dramatically to improve its naval capacities to counter the new partnership of Russia/China. The growing political stress between the US and China/Russia offer a challenging future.
- The midday weather forecast run is little changed from the overnight solution, except that a tropical storm is forecast to develop in the Gulf of Mexico and make landfall around September 26 in the Florida Panhandle. Look for the tropical activity in the Gulf of Mexico to produce run to run forecast uncertainty beyond the next 5-6 days.
- Traders will await the US Central Bank’s interest rate decision early this afternoon. A US longshoreman strike remains a risk on October 1 to US ag exports from the Gulf and Eastern US ports. And the US Government could shut down without a continuing budget resolution that is tied to non-citizen voting in the November election. Early US corn and soybean yield data is impressive, but it is too early to call for a trend vs USDA. We expect that rallies and breaks will fail into October.