- Following firm trading overnight, soybeans extended gains on improved export demand. Ahead of the morning open, the USDA announced old crop export sales totaling 132,000 mt to China and another 960,000 mt to unknown, with another 120,000 mt of new crop soybeans also to unknown. Note that announcements have accelerated since Aug 1, with a total of 27 transactions for new crops soybeans, totalling 4.75 million mt. Tuesday’s combined total of 1.21 million mt was the largest since July, which was directly following a Chinese (ceremonial?) frame contract signing ceremony in Des Moines. World demand remains strong, with summer demand figures up 10% over last year. We caution against turning bearish amid US yield uncertainty and the drier start to the S American planting season.
- December corn traded in another 4-cent range, ended modestly higher, and whether the contract can trade through $3.55, and thus break through its 20-day moving average for the first time mid-July, will be watched closely. We note that both chart-based support and resistance levels continue to narrow. Otherwise, the weekly ethanol report was in line with analyst estimates, though amid further losses in US gasoline stocks crude rallied $1/barrel, settling above $50 for the first time in four months. US ethanol production and blending margins remain elevated. Ethanol production last week totalled 304 million gallons, down slightly on the week, but up a hefty 15 million from this week a year ago. More importantly, non-domestic disappearance continues at a record level, in spite of Brazil’s recently passed tariff on imports. Official exports in July totalled 117 million gallons, the second largest on record. What little Midwest harvest data is available has been mixed, the real yield story seems to be in disappointing beans, and moving forward our focus is on rising milling/feed wheat prices and this year’s rather late start to Brazil’s wet season.
- US wheat futures rallied 4-7 cents, with December Chicago posting newer multi-week highs. Limited fresh news is available, but Australia’s crop potential continues to decline and the Black Sea cash market continues to move higher (record demand is found here). Australia’s share of world trade is in retreat, which will bode well for the US market over time. Literally zero rain has fallen across much of New South Wales, Queensland and even pockets of W Australia so far in September. Spotty showers are possible in NSW next week, but needed soaking rain is not indicated over the next two weeks, and a final Aussie crop of 19-20 million mt (vs. the USDA’s 22.5) is most likely. US export sales on Thursday are expected in an uneventful range of 300-450,000 mt, but we maintain that the USDA is too low with its forecast. Gulf wheat is only just more expensive than Russian origin, and Black Sea prices are expected to inch higher into Nov/Dec. Also note that managed funds this evening in Chicago are net short an estimated 86,000 contracts.