Author Archives: simon

22 September 2023

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  • HEADLINES: Chicago steady/higher in thin volume; Soyoil paces recovery; Midday weather forecasts unchanged.
  • Grain and soy futures in Chicago are steady to higher with soyoil pacing the recovery due to growing renewable diesel (RD) demand with end users taking coverage into Q1 2024. The recent soyoil price break raised RD margins with crude oil/petroleum diesel prices rising to yearly highs. The onboarding of new RD plants and rise in the industry operating capacity will be a drain on North American soyoil supplies. The demand pull on RD feedstocks will be sizeable until new US soy crush facilities start to come online.
  • US soy crush capacity will increase sharply in 2023/24 and 2024/25 from existing USDA forecasts. It is the coming RD demand and the need for an additional 5 million acres of soybeans that underpins the complex. The soy/corn ratio will need to push out to 3:1 to encourage farmers to seed 88.5 million acres of soybeans and cut corn acres to 90 million or less. The rapidly expanding US soy crush rate places added importance on the coming S American harvest as US soybean exports must be reduced. We look for a higher close in the complex with the grains to follow. Late day hedge pressure will be modest amid the wet weather forecast for the N Plains and the W Midwest. With rains of 0.4-2.50” it will take a few days before farmers are able to get back into their fields. The US soybean harvest will be 9-11% and corn 18-21% finished through Sunday.
  • Chicago brokers report that money managers have bought 3,400 contracts of corn, 2,900 contracts of wheat, and 3,400 contracts of soybeans. In the products, funds have sold 1,900 contracts of soymeal and bought 4,300 contracts of soyoil.
  • Early yield data continues to point to US corn and soybean yields below last year. There is considerable variability in yields depending on if a corn field received a mid-June rain or a soybean field a late August rain. Fields that received or missed those rains are seeing the yield variance. Next week the soybean harvest will gather additional pace which should help define how far below last year’s yield (49.5 bushels/acre) the yield really is. We peg the US 2023 soybean yield at 49.0 bushels/acre, but actual field data will produce help in defining whether a deeper cut is needed.
  • A week from today, NASS will update final 2022/23 US corn, soybean, and sorghum stocks along with the final small grains report. This report often provides some surprises. Our bet is based on strong cash premiums that lasted into early September is that US corn/soybean stocks are slightly smaller than forecast. Additionally, USDA’s annual 2022/23 corn balance sheet implies a major correction in Jun-Aug feed disappearance. Old crop carryover stocks are still important in defining 2023/24 supply availability. And based on HRS yields that were disappointing, a modest cut in US 2023 all wheat production is forecast, recall spring wheat crops in MT, ND and SD on Aug 27 were rated at just 32-35% good/excellent.
  • The GFS midday weather forecast is slightly wetter in the eastern Dakotas but is otherwise consistent with the morning run. Another few days of active shower activity continues across the N Plains and Upper Midwest, with additional accumulation of 1-4” advertised in SD, ND, MN and WI. A drier and still-warm pattern emerges beyond early next week. Harvest will go largely unobstructed east of the Mississippi River into the first week of October. Summer-like temperatures occur across the S Plains and S/W Midwest. Frost/freeze threats are absent.
  • Weighty chart patterns and the arrival of new N Hemisphere crops have pressured values since mid-September. The replenishment of supply will be digested by early October, and thereafter focus shifts to S Hemisphere weather and whether another year of record Brazilian output occurs. The late arrival of monsoonal rains there is a concern.

21 September 2023

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  • HEADLINES: Speculative selling overwhelms Chicago; Soybeans fall back to early August lows; Wheat tests September crop report low; Negative mentality deepens following US Central bank hawkishness.
  • Grain futures are sharply lower in Chicago as bearish demand fears grip commodities amid the US Central Bank’s hawkish talk against inflation. End users are booking their cash needs on Chicago breaks, but money managers are in long liquidation mode in soybeans/soymeal and soyoil. Liquidation of stale long soy positions has pulled November soybean futures back against key support at $12.80-13.00. This support price was carved out in early August before weeks of hot/dry Central US weather occurred.
  • Soyoil briefly rallied on oil share spreading but unlike recent days, the volume of Chicago soyoil trade is massive with over 70,000 contracts of December soyoil futures changing hands. October soyoil futures has nearly retraced 50% of the summer rally at $59.20. There may be another 1 cent down in soyoil futures, but due to tight US stocks (we believe in the NOPA soyoil stocks data as members reported correctly) and growing US renewable diesel demand, it is time again to be looking at a longer term buy in soyoil futures.
  • Speculators are already short of corn and wheat, but few want to chase a rally until they see improved US export demand, or the market can confirm lower US corn yield trends. The US soybean harvest is estimated to be just 8-9% complete as of today, and additional yield data is needed to confirm the early disappointing yield trends. Additional harvest is needed.
  • Chicago brokers report that money managers have sold 6,500 contracts of soybeans, 3,900 contracts of soyoil, and 4,400 contracts of soymeal. In the grains, funds have sold a net 4,600 contracts of wheat and 6,900 contracts of corn. It is a risk off day as fund managers reduce market exposure. The US DOW has fallen for the third consecutive day as US Treasury yields reach multiyear highs. The yield on the 10-year note has reached 4.5% on the fall in US jobless claims this morning to the lowest levels in decades.
  • US weekly export sales for the week ending September 14 were 11.3 million bu of wheat, 22.4 million bu of corn, and 16.0 million bu of soybeans. Such sales were disappointing and reflecting that Brazil is (still) cutting into US export opportunities. We note that Brazilian fob corn basis had risen to levels that equal the US which now makes the Gulf competitive.
  • For their respective crop years to date, the US has sold 317 million bu of wheat (down 65 million or 17%), 462 million bu of corn (down 30 million or 6%), and 627.5 million bu of soybeans (down 318 million or 33%). Last year the US was an active seller of new crop beans amid Brazil’s drought reduced crop. It is far too early to make any new assessments of future US export trends as it all hinges upon the coming size of the 2023/24 S American crops.
  • The UN did not miss a chance for Chairman Guterres to meet and discuss the Grain Corridor Deal with Russian PM Lavrov in New York. The UN continues to push Russia for a deal, but doubts remain that Russia will return to the pact.
  • The midday GFS weather forecast maintains an active upper air flow pattern across the Central US with rain chances starting tomorrow across IL. Showers blanket the Plains and Western Midwest on the weekend with rain totals of 0.5-1.50” Totals more than 2.00” favour the Dakotas, MN, IA, and WI through early next week. The storm pushes east into the E Midwest mid next week with a new system for the W Midwest late next week. Midwest high temperatures hold the 70’s/80’s into October.
  • The heaviness of the Chicago decline can be felt today with fund managers sellers across the complex. Today’s close will be important to determine Friday’s price direction. A late day bounce would suggest oversold conditions and that the soy complex has liquidated. US soybean fundamentals are bullish, but tight 2023/24 US soybean stocks does not make much difference until disappointing US soy yield trends are confirmed or the harvest is beyond 50%. Chicago wheat is trying to hold the USDA Crop Report low at $5.70 while Paris wheat futures hold well above their late May low. We believe that soyoil/wheat futures are too cheap with rallies due into the end of 2023.

20 September 2023

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  • HEADLINES: GASC wheat tender results awaited; Crowded Chicago spreads get liquidated; GFS midday weather run is drier for E Midwest.
  • Chicago grain futures are higher with soybeans weaker at midday. Spread unwinding of long soy vs short grain and long oil vs short meal have been featured this morning. The long soy vs short grain was a popular spread heading into the September USDA Crop report due to late growing season dryness. The volume of trade remains curtailed due to recent choppiness and the uncertainty surrounding summer row crop yield. Midwest corn yields are variable while early soybean yields are disappointing and below last year. However, it is too early in Midwest soybean harvesting to call a yield trend. Thus, the market is lacking fresh fundamental inspiration. This allows chart patterns to have an overweight influence on price. We look for a mixed Chicago close with the market’s focus shifting over to the Sept 29 Stocks and Final Grain Report.
  • The US Central Bank will announce their September FOMC meeting policy today. No change in rates is expected.
  • Chicago brokers reflect that money managers have bought 2,600 contracts of Chicago wheat and 3,200 contracts of corn, while selling 2,100 contracts of soybeans. In the products, funds have sold 5,100 soyoil and bought 3,200 soymeal.
  • Egypt’s GASC received offers from 17 sellers offering a combination of European and Russian wheat. The GASC tender was payment on sight for November. The cheapest offer to GASC was for Bulgarian fob wheat at $258.77/mt ex Varna with French and Romanian fob wheat offered between $264-270/mt. All Russian fob offers were at $270/mt depending on the Russian port of origination. Freight was offered at $19.68-22.56 on Russian wheat for a CIF price of 289.68-292.56. The French freight was $24/mt while the Romanian and Bulgarian freight was $16.09-18.80/mt making their landed price the cheapest.
  • If GASC buys wheat it will be a combination of Bulgarian/Romanian/French. Rumours have the tender being cancelled. Egypt’s GASC swapped out 500,000 mt of Russian wheat to Bulgaria/Romania in recent days after Moscow blocked the sale due to the contract being below their established fob floor price of $270/mt as we reported a while back. We note that Moscow has been inconsistent on the $270/mt floor wheat floor price, and there are rumours it will be raised to $275/mt in October.
  • The USDA announced that 120,000 mt of US soybeans was sold to China in 2023/24.
  • US weekly ethanol production was up 9% on last year which produced 288 million gallons of ethanol with US ethanol stocks down 4% from last year at 910 million gallons. US gasoline consumption was up 1% on last year at 8.41 billion barrels/day. US crude oil stocks were down 3% from last year.
  • The midday GFS weather forecast maintains an active upper air flow pattern across the Central US with rain chances starting tomorrow across IL. Showers blanket the Plains and Western Midwest on the weekend with rain totals of 0.5-1.50” Totals more than 2.00” totals favour the Dakotas, MN, IA, and WI through early next week. The storm pushes east into the E Midwest mid next week with a new system for the W Midwest late next week. Midwest high temperatures hold the 70’s/80’s into October.
  • Chicago markets are all about managed money flow. The flow has been to exit long soyoil and oil share spreads, while modestly cover short grain positions. US farmers are being tight fisted with their newly harvested corn and putting it into storage. The Midwest soy harvest will get going in earnest next week. Cash basis bids are improving amid strong margins for US soy crushers and ethanol producers. The politics of Black Sea grain are confusing with Moscow wanting a wheat sale’s floor of $270/mt basis FOB while Ukraine argues with Eastern European neighbours. Seasonal lows are forming but these lows take time to confirm.

19 September 2023

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  • HEADLINES: Corn bounces on the lack of farmer sales; Russian spring wheat quality in rapid decline; GFS midday weather forecast wetter for the Midwest.
  • Chicago grain futures have been back and forth today. Fund managers were there to sell an early rally, but the US cash corn/soybean markets are starting to stabilise with basis bids firming amid the lack of cash grain movement.
  • US farmers are harvesting corn, but the movement into the cash market is modest and related to prior contract sales. Producers will not sell open corn across the weighbridge and prefer to place the grain into farm storage. Note that basis levels relative to recent years are far weaker, and farmers fought with low basis offers throughout most of the 2023 crop year. Producers are not willing to sell cash corn at $0.20-0.60 under in the W Midwest or $0.05-0.25 under in the E Midwest. US farmers are hopeful that cash bids stay cheap through October to collect their revenue insurance checks. A cash rally in November would be ideal that allows US farmers to collect on both sides , 1) Revenue insurance and 2) From gains in cash basis and flat price bids. US farmers have a Government put (option) in place in corn at an average of $5.92 on upwards of 85% of their crop. The revenue price for 2023 US soybeans is $13.76 and here too, farmers are unlikely to part with cash beans below this level. As a footnote, the US 2024 wheat insurance revenue price was set at $7.34, down $0.85 or 10.5% from last year. This has US wheat farmers likely seeding fewer acres for 2024.
  • Chicago brokers estimate that managed money has sold 3,200 contracts of wheat and 4,100 contracts of soybeans, while buying a net 2,900 contracts of corn. In the soy products, funds have sold 2,100 contracts of soymeal and a net 800 contracts of soyoil. Cash supplies of US soyoil are exceptionally tight with cash markets trading well above deliverable Chicago values. Renewable and traditional biodiesel margins are strong on surging energy valuations.
  • The US Central Bank is holding their FOMC meeting today and Wednesday. It is expected that the US Central Bank will hold rates steady but talk up the potential for future rate hikes if US inflation returns. Surging energy prices must be monitored for cost push inflation, but the rising cost of gasoline and diesel also act like a tax further hitting demand. There are low odds that the US Central Bank will raise its lending rate in November, and it will await 2024 before making any additional rate hikes to further batter demand and push the inflation target rate down to 2.0%. Higher for longer is the theme for the US Central Bank.
  • Siberian Russian producers are starting to abandon HRS wheat fields due to the ongoing wet weather and low interior prices. HRS wheat is said to be sprouting with disease pressures steadily rising with each day of showers. The forecast has a few days of dryness late this week, but the overall pattern shows a new round of wet weather on the weekend. And it is too dry in SW Russia for winter wheat seeding. Russian weather is something that grain traders need to follow.
  • Results are awaited on the Algerian wheat tender, but the hope is that EU wheat is priced to compete against Russian fob offers. Recent demand from China and North Africa are offering post-harvest support to cash wheat.
  • The midday GFS weather forecast maintains an active upper air flow pattern across the Central US with almost daily rain chances starting late Thursday. The midday forecast is wetter. Showers blanket the Plains and Western Midwest on Friday and the weekend with rain totals of 0.5-2.50” Totals more than 2.00” totals favour the Dakotas, MN, IA, and WI. The storm pushes east into the E Midwest early next week with rain of 0.25-1.25”. A few dry/warm days close out September with a new hurricane forecast for Cuba.
  • Chicago is searching for a seasonal low as traders try to understand corn/soy yield trends. Small soy seed size is dropping actual Midwest soybean yields from producer expectations (and last year). We look for short covering into the Sept 29 NASS Stocks and Final Small Grain Report.  With managed money short, it is the farmer that must sell cash grain to generate new Chicago selling. Don’t sell Chicago breaks!

18 September 2023

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  • HEADLINES: Chicago extends overnight losses; Speedy harvest due in E Midwest.
  • Global ag markets are weaker at midday. US and world grain futures are digesting the increasing movement of Ukrainian origin grains into Black Sea. There is also fear that France may miss out on Tuesday’s Algerian wheat tender amid talk that Russian fob wheat is buyable sub-$250. Russia’s interior cash market has fallen slightly from late June’s high and export margins are high despite a rising export tax. To the best of our knowledge, Russia’s minimum fob floor price for public tenders remains $260/mt, and so the result of Algeria’s wheat purchase this week is important. The EU grains market continues its probe for demand, and this has been a weight on US markets. Chicago soybeans are subject to pre-harvest supply pressure. Nov is targeting its 100-day moving average at $13.04, though we strongly doubt sub-$13.00 can be sustained for any length of time. Soy supply rationing is ultimately needed, and the cash market in the long run is a bull.
  • Weekly export inspections in the week ending Sep 14 included 25 million bu of corn, unchanged from the previous week, 14 million bu of soybeans, also unchanged, and 14 million bu of wheat, vs. 15 million the previous week.
  • For their respective crop years to date, the US has exported 50 million bu of corn, up 10% from last year, 28 million bu of soybeans, down 16%, and 188 million bu of wheat, down 29%. Weekly export disappearance is tepid amid record Brazilian corn loadings and as ship line-up data continues to feature decent soy tonnages. Combined US corn, wheat and soy inspections in the week ending Sep 14 were down 1 million bu from the same week a year ago.
  • El Niño has become structural in nature as a moderate/strong event, which won’t reach its peak until December. Work suggests that only now is El Niño beginning to directly impact climate patterns. This bodes poorly for any meaningful pattern shift in Australia prior to mid/late October, and as mentioned this morning Brazilian weather will be watched more closely as October approaches. Zero rain is offered to Aussie growing areas over the next two weeks. Odds of extreme heat expanding into E Australia are rising. Assuming near-term forecasts, verify, cumulative rain in Mato Grosso Brazil in September will total only 0.80”, vs. 1.75” on average. Brazilian seeding dates are often debated in late Sep/early Oct, but our concern is that long-range Brazilian climate outlooks for month have called for a pattern of below normal precipitation in major producing areas during S America’s summer. The midday GFS weather forecast has extended dryness across Mato Grosso, Goias, Minas Gerais & Bahia into Oct 3.
  • Spot crude is up $0.40 at $91.20/barrel. The Dow is up 100 points. The US dollar index has corrected from morning strength and was unable to find buying above last week’s high.
  • The midday GFS weather forecast is consistent. Active showers blanket the Plains and western Midwest Fri-Sun as a slowing moving frontal system works across the spine of the Central US. Totals in excess of 2” will favour the Dakotas, MN, IA and WI, where it’s most needed to replenish moisture reserves. Warmth and dryness resumes beginning Mon/Tues, and beyond this weekend major disruptions to harvest efforts are unlikely. A yield trend should be known by the first week of October.
  • Ukrainian stocks of corn and wheat are large, but whether sustained maritime shipments develop is highly uncertain. Otherwise, this is the wrong time of year to be bearish of ag markets. Abnormal heat/dryness in Brazil becomes more important if it continues beyond the next 10 days.

15 September 2023

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  • HEADLINES: NOPA report surprises on member soyoil stocks, lowest since October 2017; GFS weather forecast dry next week across the Central US; Wheat rises on massive Chicago short.
  • Chicago futures are mixed at midday with wheat higher while corn/soybeans sag in thin volume trade. The weekend looks open and the harvest is rolling across the Central US, but farmers are not letting go of much new crop corn/soybean supply, outside of filling contracts on prior sales. Yields are variable with disappointment noted in IL/IA/KS/MN while better than expected yields are being reported in OH/IN. For the week, soybean prices are down around 13 cents, corn is down 5 cents, while Chicago wheat values are up 9 cents. The USDA report is behind the market, but traders are cautious about engaging in new length until Midwest corn/soybean yield trends are known. Seasonally, corn futures tend to bottom this week and soybeans next week. Cash soyoil bids stay strong on domestic demand and are trading at a 4.5-6.0 cent premium to October futures. Soyoil futures are weaker as soybeans sag. USDA/FAS did not report any new export sales this morning.
  • Weather forecasters fear that the Australian drought will worsen into November amid the rapidly strengthening El Niño in the equatorial Pacific. Limited rain has fallen in September. WASDE has Australia exporting 19 million mt of wheat with a crop of 26 million mt in 2023/24. A year ago, Australia produced a wheat crop of nearly 40 million mt with exports of 32.5 million. The 2023/24 Aussie production and export drops of 14 million/13.5 million, respectively, are massive. They do not account for additional crop losses if the drought persists. The world exports an average of 17.25 million mt of wheat/month, so with an extension of the Aussie drought into October, Australian annual export losses could equal 1 month of world wheat trade. This is important and finding other suppliers to fill the void as seasonal winter weather considerations slow Russian wheat exports.
  • NOPA members crushed 167.8 million bu of soybeans in August, just below the record and the lowest smallest monthly US crush rate in 11 months. The end of summer normally produces a diminished US crush as plants take seasonal downtime for maintenance ahead of the new crop harvest. Yet, the report surprise was the fall in US soyoil stocks to 1,250 million pounds, the smallest US monthly soyoil stock total since October 2017. The lower stocks argue for record large domestic demand during August and that biofuel consumption was well above food use during August. Analysts had expected that US soyoil stocks would decline to 1,49 million pounds, so the smaller stocks confirm the biofuel demand pull. As new plants come online before the end of the year, and US energy prices surge on tightening crude oil stocks, soyoil futures hold the best bullish story at the Chicago Exchange.
  • The Midwest midday weather forecast is little changed with a line of showers to continue eastward across the E Midwest into the weekend, followed by limited Central US rain over the next 6 days. Thereafter a much wetter weather pattern unfolds across the Central US with near to above normal rainfall into early October. This rain should start a process of refilling the Mississippi River with repeated storms forecast.
  • High temperatures will be in the 70’s and 80’s this weekend and rise back to the mid 70’s to the lower 90’s next week as a ridge of high pressure builds back across the region. Near to below temperatures follow during the last week of September. No Gulf Hurricane prospects are evident into September 25.
  • NOPA August soyoil stocks of just 1,250 million pounds (lowest in 6 years) underscores the massive existing demand from the US biofuel industry. And just a third of the proposed renewable diesel plants are operational today! The EU is expected to allow the ban on Ukraine grain imports to expire, but this won’t stop several border countries from placing their own ban which conflicts with Brussels. US corn ethanol and soybean crush margins are the best in months.
To download our weekly update as a PDF file please click on the link below:

14 September 2023

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  • HEADLINES: Tepid volume as traders measure US yield results; Weekly US export sales as expected; Better rains heading for the Central US in late October.
  • Chicago futures are mixed at midday with soybeans/soyoil higher while wheat futures are slightly lower. Corn is trading either side of unchanged not knowing whether it should follow the rally in soybeans or the fall in wheat.
  • Chicago volume remains constrained with large orders able to push the market in one direction or the other. Soyoil stays our bullish stalwart on the rapid expansion of US renewable diesel demand. The US cannot afford to export any soyoil, due to the coming fight for supply between US food producers and the US biofuel industry. Complicating the fight is the rally in spot crude oil futures above $90.00 with cash diesel prices at a yearly high. As US crude oil refiners switch their operations to heating fuel (less diesel), the need for additional US diesel supply increases. Friday’s NOPA crush report will be key in determining the US off take rate of soyoil for US bio and renewable diesel.
  • Chicago brokers estimate that money managers have sold 2,300 contracts of corn and 4,200 contracts of wheat, while buying 2,200 contracts of soybeans. In the products, funds have bought 1,900 contracts of soymeal while selling 1,200 contracts of soyoil. Meal/oil spreading provided some early pressure on oil.
  • There were early day rumours that Ukraine was preparing to load out 3 large 50,000 mt+ vessels with corn from an Eastern European port and Odessa. Most European cash traders have heard the rumours, with some suggesting that the corn is destined for China. Cash sources cannot confirm that any vessel will be loading at Odessa, but the hint that some vessel owner would be willing to take the risk of loss heading to a Ukraine port post the ending of the Black Sea Grain Corridor pact is intriguing. We will obviously continue to monitor Ukraine and Eastern European port activity for confirmation.
  • US grain export sales for the week ending Sept 7 were 16.1 million bu of wheat, 29.7 million bu of corn, and 25.9 million bu of soybeans. For their respective crop years to date, the US has sold 305.4 million bu of wheat (down 70 million or 19%), 439 million bu of corn (down 45 million or 9%), and 612 million bu of soybeans (down 317 million or 34%). Obviously, the biggest decline to date is in soybeans as Brazil continues to offer soybeans below the US from the Paranagua corridor.
  • Northern Brazilian farmers are getting worried about dry soils and near record heat with the 2023 soybean planting season starting tomorrow. The Lula Government allowed a few large Mato Grosso farmers to start soy seeding a few days early, but the other farmers that planted ahead of Sept 15 are receiving letters and may have to pay a penalty. Normally, Mato Grosso farmers like to have their soybeans seeded by mid-October so that winter corn can be seeded in the closing days of February or early March. Otherwise, winter corn runs into the end of the end of the wet season in late April and yields fall sharply.
  • The Midwest weather forecast is little changed with limited Midwest rain over the next 5-6 days. Any rain will be confined to the Southern Plains. The Midwest/Delta harvest will be accelerating amid the dry/sunny weather trend. High temperatures will be in the 70’s and 80’s and rise back to the mid 70’s to the lower 90’s next week as a ridge of high pressure builds back across the region.
  • Improved rain will fall across the Plains and the W Midwest beyond September 18 with accumulations of 1.50-2.00”. There continues to be signs of improved rain across the entire Midwest in the 11–15-day period which could aid the flow of the Mississippi River. No Gulf Hurricane prospects are witnessed in recent model solutions.
  • September futures go off the Chicago board today. The next Canadian crop production estimates are not released until December. Debate on the Canadian crop size will continue. Canadian harvest results point that WASDE estimates are close to correct. US farmers are starting their harvest of corn and finding that yields are below their hopes. Soybeans are also finding additional disease pressures as the crop rapidly dries down. We remain bullish soyoil followed by soybeans and wheat.

13 September 2023

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  • HEADLINES: Chicago soyoil/wheat values post strong gains at midday; Funds show new interest in Chicago grain; GFS weather forecast wetter beyond September 19.
  • Chicago futures are mixed at midday with soyoil/wheat the upside price leaders with soybean/soymeal futures sagging on oil share spreading. The volume of trade is in recovery with brokers indicating that new investment funds are back looking at the grain markets as the gyrations of the summer weather market have passed. The multi-year low price of corn/wheat are seen as enticing to fund managers with a potential top in the US dollar forming, and S American farmers preparing to seed their next crop under production margin duress. Commodities are seen as an asset class to invest in now that the US Central Bank is nearing an end of rate hike cycle.
  • The USDA defined US 2023 corn, soybean, and the sorghum crop sizes in their September report. The next important set of USDA reports will be released on September 30, final US 2022/23 corn, soybean, and sorghum stocks and the 2023 Final Small Grain Report. Based on the March and June Stocks reports, we forecast that NASS will find larger feed/residual use of corn and a smaller 2022 US soybean harvest (captured in the residual). WASDE awaits September stocks totals before making final adjustments to the 2022/23 US corn and soybean balance sheets. Based on the sheer strength of the Midwest cash markets, we forecast that 2022/23 US corn/soy end stocks were curtailed.
  • The US Labor Department indicated that US August inflation was 3.7%, right at industry estimates. The increase was due to a spike in US gasoline/diesel prices with the US Central Bank likely to see the rise as transitory as US refinery capacity is switched to producing heating oil for the coming cold weather season. US food prices were up 4.3% year on year with food away from home up 6.5%. Frozen vegetable prices were up 14.7% while uncooked beef gained 10.7% and set a record retail monthly price.
  • Chicago brokers report that managed money has bought 5,400 contracts of soyoil and 4,600 contracts of Chicago wheat and a net 3,900 contracts of corn. Managed money has sold 4,300 contracts of soymeal and 4,700 contracts of soybeans.
  • Hungary has joined Poland in signaling a national ban on Ukraine Grain imports starting September 15 to prevent their local cash markets from being swamped with supply. In fact, the EU ag minister is pushing to extend the ban on Ukraine grain and only allow transit of Ukraine grain to African or SE Asian markets through sealed cargoes. Ukraine corn is offered at the EU border today at $2.80/bu. Of course, this does not allow transit cost to the port of Varna or Constanza, or even a Baltic port. Although it is sketchy to work the sale price back to a Ukraine farmer, we calculate that the bid for interior Ukraine new crop corn is below $2.00/bu, which causes massive financial hardship for farmers. Based on this extremely low price, we have concern that Ukraine farmers will just leave their corn stand in the field awaiting a recovery in profitability. It makes little financial sense to harvest the corn!
  • The Central US weather forecast is like the overnight run with limited rainfall across the Midwest over the next 5-6 days. Any rain will be confined to the Southern Plains. The Midwest/Delta harvest will be accelerating in the days ahead. High temperatures will be cooler than normal into the weekend and then warm next week back to the upper 70’s to the lower 90’s. No frost or freeze risk is evident.
  • Improved rainfall will drop across the Plains and the W Midwest beyond September 18 with totals across Iowa/Missouri reaching 1.50-2.00”. This rain will help to increase the flow of the Mississippi River and barge traffic. The storm system should slowly pull through the E Midwest after September 24.
  • Funds are short a near record amount of wheat when Paris and Chicago futures are combined, which adds to the upside risk should the Ukraine war spread to Russian grain loading ports. The non-Black Sea exporter stock/use wheat ratio is historically low. It is Russian wheat price aggression which pressed futures. US soyoil values are rising on record large domestic demand tied to renewable diesel. US diesel prices are rising on tightening stocks. Soyoil is outright bullish on demand!

12 September 2023

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  • HEADLINES: USDA September report slightly bullish for wheat/soybeans; Neutral to slightly bearish for corn on extra acres; Seasonal low forming for world wheat.
  • The September USDA Crop Report was in line with trade expectations. NASS corn and soybean yields came out close to the pre-report private estimates, but Chicago values are lower following the report’s release. It is now up to actual harvest yield and crop quality reports and the late Sept Stocks/Final Small Grain Report to push Chicago valuations. We see a considerable amount of bearish news built into Chicago values ahead of the US harvest. We anticipate US corn/soy yields will fall further in the October NASS report.
  • The US September corn yield was lowered to 173.8 bushels/acre (down 1.3 with harvested corn acres raised 800,000 acres to 87.1 million acres due to FSA data inclusion). The loss of US corn yield and gain in acres added 23 million bu vs August with the 2023 US corn crop pegged at 15,134 million bu. NASS estimated the IL corn yield at 198 bushels/acre, down 16 from last year. The MO corn yield was also down 16 at 145 bushels/acre with MN down 15 at 180 bushels/acre. The IA corn yield came in at 200 bushels/acre, steady with 2022.
  • WASDE forecast 2023/24 world corn stocks at 314 million mt, up 3 million from September and up 14 million mt from last year. The 2023 Brazilian corn crop was raised to 137 million mt with exports at 57 million. China corn imports were raised by 500,000 mt to 18.50 million mt. 2023/24 world corn production is only 14 million mt more than use!
  • NASS lowered their US soybean yield by 0.8 to 50.1 bushels/acre. US soy harvested acres were adjusted up by a meagre 100,000 acres to 82.8 million acres. 2023 US soybean production was dropped by 59 million bu to 4,146 million. Old crop US soybean stocks were trimmed by 10 million to 250 million bu on a hike in exports.
  • 2023/24 US soybean end stocks were forecast at pipeline, 220 million bu.  USDA was forced to cut US 2023/24 soybean exports by 35 million bu and crush by 10 million bu to accommodate such limited stocks. We do not believe that US crush can be cut any more due to hefty margins and the onboarding of new renewable diesel plants. US 2023/24 soyoil stocks are also estimated at pipeline at 1,821 million pounds. We would argue that WASDE is too conservative on its biofuel use of soyoil at 12,500 million pounds which could be 2,000 million pounds too low. The demand led bull market is soyoil with export demand not a factor in the years ahead.
  • WASDE estimated that world 2023/24 soybean end stocks would ease slightly to 119.2 million mt via limited US stocks.
  • Chinese 2022/23 soybean imports were raised to a record 102 million mt with next year’s imports placed at 100 million. Key support rests in November soybeans at $13.25 and a test of contract highs is forecast.
  • WASDE wheat data leans supportive as USDA left its US balance sheet unchanged and trimmed a full 7 million mt from 2023/24 global ending stocks. World end stocks are now projected at 258.6 million mt, the lowest since 2015. Combined major exporter stocks were cut 1.8 million to 54 million mt, with stocks/use pegged at 13.5%, vs. 13.9% in August, the lowest since 2007/08. Crops were cut in Argentina, Australia, and Canada. USDA also lowered EU output another 1 million mt. A hike in Ukrainian production worth 1 million mt was only partially offsetting. Russia will be by far the world’s largest exporter at 49 million mt, but global wheat supplies are not abundant. We would also point out that combined wheat stocks in the US, EU, Australia, Canada, and Argentina will total only 39.5 million mt, also the lowest since 2007. Developing heat in Australia and another two weeks of dryness in Argentina now demands close monitoring.
  • WASDE lowered US HRS exports 10 million and raised HRW exports a like amount. Final US wheat production will be published in NASS’s Small Grains Summary on September 30. Seasonal lows are being formed in world wheat values.
  • Corn/soy markets have reacted negatively to NASS yield/supply data ahead of the harvest. Yet, downward yield revisions in September often foreshadow new cuts in October. We maintain final US corn/soy yield forecasts of 171 and 49 bushels/acre, respectively. The cash soy market will lead Chicago contracts higher as physical supply tightness develops. It remains critical that the wet season in Central Brazil arrives in a timely manner by October. Supply pressure is noted today, but dynamic/volatile markets persist indefinitely. Better sales opportunities occur mid-autumn onward. Actual yield data is key as Brazil sells record tonnages of corn to China.

11 September 2023

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  • HEADLINES: Chicago mixed with new contract lows in Chicago wheat; Paris wheat holds support; China to change contract specs to 13% moisture for soybeans.
  • Chicago futures are mixed at midday with soy futures higher while the grains sag. Traders argue that if NASS/USDA is to come up with any bullish surprises in tomorrow’s USDA crop report they will be focused on the complex. In August, WASDE forecast US 2023/24 corn end stocks above 2.2 billion bu, a sizeable stocks cushion. Yet, US 2023/24 soybean end stocks were forecast by WASDE at a tight 240 million bu in August. Commercials see the bare minimum of US soybean stocks (pipeline supplies) at 200-220 million bu. NASS will not update US 2023 wheat production tomorrow but wait until the 2023 Final Small Grains Report on Sept 30. Any price response of US wheat futures tomorrow will be tied to the US 2023 corn yield or WASDE change in world wheat crops. Chicago and KC wheat values should not have a sizeable reaction to the USDA September report.
  • For summer row crops, the September NASS/WASDE Crop report is one of the most important of the year since NASS pulls ears/pods and incorporates FSA data in estimating US corn/soybean seeded/harvested acres and yield. NASS in their actual field surveys will get directionally close to final 2023 US crop yields. However, in the case of soybeans, pod weights will be updated in October with final harvest results of plots available in October and November crop reports.
  • Chicago brokers estimate that funds have sold 5,900 contracts of Chicago wheat and 3,500 contracts of corn, while buying 1,200 contracts of soybeans. In the products, funds have bought 2,200 contracts of soymeal and sold 1,600 contracts of soyoil.
  • Paris wheat futures have fallen right to key support while Chicago wheat futures have scored new lows at $5.80, the lowest price since December of 2020. It makes no sense to have US wheat trading so cheaply when its stocks are down 39% from the late 2020′s.
  • US export inspections for the week ending September 7 were 24.6 million bu of corn, 11.4 million bu of soybeans, and 14.9 million bu of wheat. This was the first week of the 2023/24 crop year for corn/soybeans. In the wheat crop year to date, the US has exported 174.7 million bu (down 61.2 million or 26% from last year).
  • Disaster continues to build across RGDS in Southern Brazil in terms of widespread/excessive flooding. Additional rain has fallen following last weekend’s initial shot of 4-10.00” of rain which has damaged more than 4,000 Km of roadways and produced flooding across hundreds of thousands of hectares of crops. More heavy rains are in the forecast. Doubts are growing over the size and quality of the Brazilian wheat crop with most expecting that it will be relegated to cattle feed. Brazil was expected to export 4-5 million mt of milling wheat which is now doubtful. Imports of high pro quality wheat from Argentina will need to start by November. The outlook is the 2023 Brazilian wheat crop is becoming dire for domestic millers.
  • China has been floating new soybean moisture specs at 13% due to Brazilian soybeans that are often shipped at 15-17% and won’t store as well for crushers. Brazil would need to dry down their soybeans to reach 13%. Drying would be costly for Brazilian agriculture and would offer the US a quality advantage. This is why China’s reserve soybean buyers only use US soybeans due to lower moisture content and storability. The industry is socialising the change, China has not set a date for moisture contract change.
  • The midday GFS weather forecast is consistent with prior solutions. Another 10 days of below normal rainfall with seasonal temperatures are forecast for the Midwest/Delta. Rain is forecast to drop across the Southern and Central Plains early this week with totals of 0.25- 1.50”. This rain will aid HRW wheat seeding. No frost/freeze risk is indicated for either the US or Canada. The forecast allows the US row crop harvest to start and gain speed in the next few weeks.
  • Low volume and pre report position squaring is ongoing. China is importing massive and important amounts of Brazilian corn which is going unnoticed. Demand for US soyoil for renewable diesel demand stays robust. We are leaning bullish for US corn and soy yields on Tuesday. US SRW Gulf wheat is again the cheapest in the world. The US dollar is sharply lower on the rapidly expanding debt pile and likely pause in US lending rates at the next FOMC meeting.