- Chicago row crop futures sharply lower on harvest selling; Crude oil futures down $4/barrel on easing supply fears; GFS weather forecast dry for the Central US.
- Midday Chicago grain markets are sharply lower with corn/soy futures producing the bearish pull on the advancing Central US harvest. Wheat futures are stable on the recent rise in Russian fob prices back to $235/mt which has acted to underpin breaks. The macro’s rallied Chicago values yesterday on the hope for further rally in the Chinese financial markets which did not occur overnight. Chinese economic malaise is the forecast without massive new stimulus.
- Crude oil futures are down $4.00/barrel on easing supply fears as Israel has not taken an attack on Iranian oil infrastructure, and doubts persist that Israel wants to rile the Biden Administration with a sharp rally in gasoline prices ahead of the November 5 US election. The world energy market is under pressure due to slowing demand and expectation that supplies will be at least steady with Saudi Arabia having additional capacity to bring online should Iran’s crude production falter. The world oil market is adequately supplied with the US being the world’s largest producer. This is a far different outlook from the 1970’s when OPEC held G7 nations hostage to sagging supplies and surging costs. Crude oil futures will struggle to rise above $80/barrel.
- Chicago brokers report that managed money has sold 5,100 contracts of corn and 6,300 contracts of soybeans, 1,300 contracts of soymeal and 6,900 contracts of soyoil. Funds have been on both sides of the wheat market and are estimated to be flat in the day session.
- The USDA announced the sale of 166,000 mt of US soybeans to China. We believe (but cannot confirm) that China also booked a few cargoes of Brazilian soybeans with farmers more willing sellers of old crop soybeans (and corn) as drought breaking rains are forecast by the end of October. We look for Brazil to become a more aggressive corn sellers as it makes room for new crop soybean exports in late January.
- China returned from its weeklong Golden Week Holiday to find its grain markets in a downtrend and scoring new 4-year lows on the advancing harvest. Like the US, Chinese farmers are struggling with profit margins with costs staying elevated as Dalian corn tries to hold $8.00/bu. Internal Chinese soybean prices are also under acute pressure which will cause China to slow their soy import pace and look to boost reserve purchases. A bottom in the Chinese corn and soy markets is not expected until the last half of November when the harvest slowly winds down. A year ago, China purchased and imported 16 million mt of Brazilian corn through January. This year, China has purchased just 1 million mt of Brazilian and limited amounts of US corn. We strongly doubt that China will secure world corn until 2025, which will be a blow to world corn trade. Chinese demand is needed, or spot corn futures will drop to $4.00/bu.
- The midday GFS weather forecast is dry across the entire Central US for the next 11 days. This dry weather will allow for corn to dry down and the gut slot of harvest to emerge. The GFS forecast has backed away from breaking out rain in the 10-15-day period other than a few light monsoonal showers across the Intermountain West. A frost/freeze looks likely across the Central US from October 15-16 which will end the growing season.
- Hurricane Milton is forecast to make landfall early Thursday as a strong cat 3 or a weak cat 4 storm. Milton will hold hurricane status across Florida before it weakens across the Atlantic early in the weekend.
- US farmers are hoping for a bullish report on Friday to add to existing cash sales. Chicago grains ran out of managed money short covering on Monday with soy farmers willing to sell newly harvested beans off the combine. Record yields and the recent rising Chicago was enough for farmers to shed cash length. November soy futures will likely target $10.00 pre report as the Midwest harvest advances. Needed rain fell across Argentina overnight, and the forecast stays wet for N Brazil into late October. Secondary seasonal lows normally form on the Columbus Day holiday.