- Soybean futures regained all of their September Crop Report losses and poked above the early September rally high at $9.77½ November futures closed above its 50 day moving average at $9.735 with the next upside price target is a weekly downtrend line that crosses just under $10.00. Strong and record large world soybean demand has prevented spot Chicago futures from falling below $9.00-9.20 support since early 2016, and we see no reason for such a break now with US farmers initially finding disappointing yield trends. Just a few fields are being cut in Central IL and Southern IA with results 4-11 bushels/acre below last year. Small bean size and fewer four pod beans are being tagged as the reason for the early yield drag. Traders will listen to the combines in the weeks just ahead to decide on whether the NASS 49.9 bushels/acre yield is correct. Our bet is a yield of 47 bushels/acre.
- Corn futures ended slightly higher, as actual yield data is just weeks away. Following the flood of bearish news since early August, combine reports must confirm NASS’s expectation to renew any bearish sentiment. Crude is again approaching $50/barrel, and a push to produce elevated levels of gasoline lies in the offing following two devastating hurricanes. US gasoline stocks through the week ending Sep 8th were down a hefty 8.4 million barrels to 218.3 million, a new 1½ year low. US ethanol production and blending margins remain firm. However, US corn export demand continues to suffer, particularly to traditional destinations such as Mexico. Reduced yield prospects continue to battle against the loss of export demand, and we are maintaining a more neutral outlook. Seasonal lows have likely been scored. Fundamentally, the next bear leg will hinge upon favorable S American crop establishment, which is far from certain. Argentine planting progress is delayed amid ongoing rain.
- Wheat futures ended mixed in the US (additional profit taking is noted in Minneapolis), and higher in Europe, although London was hit by a stronger Sterling due to expectation of an interest rate hike, and so far seasonal trends seem to be intact. In spite of record production in Russia, the fob market there is up $6/mt from early September, and in each year since 2012 a fairly noticeable recovery has occurred in value in the Sep-Nov quarter. S Hemisphere production is also gaining importance, and weather in Argentina and Australia is far from ideal. Note that we would expect the second half of the crop year to be very different from the first in terms of US export demand, and following the recent break in KC futures, only Russian origin is cheaper than Gulf HRW through November. The EU market is losing its share of world trade. Still no rain is offered to Australia through the next ten days. Fortunately excessive heat is absent, but a pattern shift is needed very quickly to salvage yield potential. Vegetation health continues to erode across NSW and Queensland (which account for 35% of total Aussie production), and without rainfall by late September, an Aussie crop below 20 million mt becomes much more likely. Too much rain has fallen in Argentina, and the Buenos Aires Grain Exchange is now indicating declining crop conditions and lost acreage there. Sustained rallies will be rather difficult as there’s just too much wheat in the Black Sea. However, we do maintain that seasonal lows have been scored.