• HEADLINES: Low volume choppy trade awaiting private US crop estimates; ISM Index shows weakening US manufacturing sector; Dow rallies 600 points.

• Chicago futures reversed overnight price trends with the grains weaker while soy futures rallied. The US$ declined which offered a bid to US equity values while crude oil futures held with gains of over $3/barrel. Bloomberg estimated that world investors have lost $37 trillion in wealth since January 1, the largest 9-month loss in history. Such massive losses is having a real impact on demand which may provide Central Bank pauses in raising rates. The 10-year US Treasury note yield has fallen to 3.6% after trading above 4.0% last week. The fall in rates has provided bullish heart back into a host of asset classes this morning, including raw materials. We doubt that corn/wheat can fall too much further amid tightening end stocks and limited farmer selling. However, we also doubt that January soybeans can rise too far above $14-14.25 on building US end stocks and favourable S American weather. A mostly higher close is expected as investment managers tentatively return to adding risk in their portfolios.

• Chicago brokers estimate that fund managers have sold 3,200 contracts of corn, while buying a net 2,100 contracts of wheat and 2,900 contracts of soybeans. In the soy products, funds have bought 4,500 contracts of soyoil while selling 200 contracts of soymeal.

• USDA FGIS weekly grain inspections for the week ending September 29 were; 26.0 million bu of corn, 21.1 million bu of soybeans, and 24.5 million bu of wheat. For their respective crop years to date the US has exported 92.8 million bu of corn (up 4 million or 4.3%), 65.4 million bu of soybeans (down 2.1 million or 3%), with wheat exports at 313 million bu (up 8 million or 2%). The US export season is following the 2021/22 crop year, with one important difference in that China is slow in securing US corn and Brazil is unlikely to have back-to-back droughts.

• The USDA confirmed that the US has sold 110,000 mt of US soybeans to an unknown destination. The buyer is rumoured to be the EU, Mexico, or S Korea.

• The ISM’s manufacturing/factory index dropped to 50.9 in September, its lowest reading since May of 2022, the height of the pandemic. The extremely slow pace of manufacturing growth confirms a rather dramatic slowing in the US economy. The slowing manufacturing rate will cause a rise in layoffs heading into the end of the year, especially if the US Central Bank raises its lending rate by another 1-1.25% heading into 2023. The US stock market rallied sharply on the theme of bad economic news is bullish. The DOW is up over 600 points, and some traders argue that the S&P index is nearing a tradable bottom.

• River basis bids continue to decline as water levels are in retreat. The December/March corn spread has widened out to a 7 cent March premium. The weather forecasts stay arid for the Central US and water levels will be restricted.

• A progressive weather pattern will hold with a shot of cold Canadian air pushed southward into the Central US during late week and the weekend. A frost/freeze looks likely across the N Plains and the NC Midwest. A warming trend follows with limited rainfall into mid-October. The US corn and soybean harvest will rush ahead. There are hints of some rain in the 11–15-day period, but in amounts that are far below what is needed to help the Mississippi River. Drought and dryness concerns will continue to plague the Central US well into late October.

• The grain markets will be unable to sustain bearish trends without a bearish supply surprise from USDA on October 12. US corn/wheat stocks are just too tight. However, soy rallies will fail amid larger US supplies and the favourable seeding forecast for Brazil.  StoneX will be out with their US corn/soybean yields on Tuesday with the Markit Group on Thursday. We see price risk to the downside following ending of the US harvest.

• HEADLINES: NASS report loses corn and finds soybeans; Wheat stocks as expected but US all wheat production declines.

Sep 1 US Stocks (million bu)

            2020        2021        2022

Corn            1,919        1,235        1,377

Soybeans        525        257        274

Wheat            2,158        1,774        1,776

• The USDA September 1 Stocks Report was bullish of corn and slightly bearish of soybeans. US wheat stocks were right at last year and viewed as neutral.

• Chicago is adjusting to the elevated risk of 2022/23 corn stocks declining near pipeline levels of 1,000 million bu with any drop in the US 2022 corn yield near or below 171 bushels/acre. Wheat/corn hold upside price risk as spot Chicago soybeans will struggle to rise above $14.50/bu. Beans have downside price risk to $13.00.

• The USDA estimated 2022/23 corn end stocks at 1,377 million bu, down 148 million from the WASDE September forecast due to larger feed/residual use. 2022/23 US corn stocks are 142 million bu larger than last year, but a smaller 2022 harvest threatens 2023 US supply availability.

• WASDE/USDA will raise their annual feed/residual corn use to 5,706 million bu as wheat feeding slumped and new crop sorghum supplies were limited. NASS did adjust the US 2021 corn harvest by edging yield and harvested acres lower. The 2022 corn crop was cut 41 million bu to 15,074 million.

• The 148 million bu drop in old crop corn stocks will pull 2022/23 corn end stocks down to 1,071 million bu without any change in yield (172.5 bushels/acre) or demand. The cut in old crop corn stocks produces an historically low stocks/use ratio of 7.5%, and growing odds that corn prices will rise above $7.00 at some point.

• We note that US farmers held 509 million bu of corn, a 29% increase from last year. It is difficult to understand why farmers held so much corn amid the cash premiums that were being offered. We look for corn prices to add upside premium to price just in case the US 2022 corn yield slides below 170 bushels/acre.

• The 2021 US soybean crop was raised 30 million to 4,465 million bu with end stocks raised 34 million to 274 million bu. The larger old crop stocks were seen as bearish punishing Chicago values. Both yield and harvested acres were adjusted slightly higher. A year ago, US soybean end stocks were 257 million bu.

• US 2022/23 soybean stocks will be raised by 34 million bu to due to the larger old crop supplies. The extra old crop supplies would raise 2022/23 WASDE soybean stocks to 234 million bu if yield (50.5 bushels/acre) and demand held steady. The extra soybean supplies would allow for new crop yield to slide near 50.0 bushels/acre without changing their current end stocks estimate of 200 million bu.

• We see the extra old crop soybean stocks as slightly bearish on price and pressuring the July/November 2023 soybean spread. Rallies in spot Chicago soybeans will be capped.

• NASS wheat data leans bullish. Final US wheat production in 2022 was lowered a surprising 133 million bu to 1,650 million, with winter wheat output down 94 million, spring wheat down 30 million and durum down 10 million relative to NASS’s early August estimates. US all wheat production will be near unchanged from last year, and this coupled with crop concerns in Argentina will keep the non-Black Sea exporter balance sheet extremely tight.

• However, Sep 1 US wheat stocks totalled 1,776 million bu, right at the average guess, unchanged from last year. This implies Jun-Aug wheat feed disappearance of 109 million bu, vs. 254 million last year and the lowest on record.  USDA in its Oct WASDE is expected to cut annual wheat feed/residual 30-40 million to just 40-50 million bu. End stocks will be cut to 520-530 million bu, but like corn and beans, the issue for the market is whether current prices are adequately rationing supplies. This largely hinges upon Black Sea geopolitics and grain flows, and whether importer demand is forced to the US during the winter and spring. Newer highs are probable, but rallies should be rewarded.

• Larger than expected US soy supplies are colliding with a slowing of export demand and mostly favourable weather in Brazil. Corn/wheat stay supportive amid escalating Black Sea risks and as the market must know final US corn yield before it knows whether $6.75-6.95 is properly slowing consumption.   Soybeans will be the ag market’s bearish laggard amid recent Argentine sales and non-threatening Brazilian weather. Corn is the bullish stalwart.

• HEADLINES: Algeria books mostly Russian wheat; Big spread trade in Dec/March corn and Nov/Jan soybeans; Central US weather stays dry.

• Position squaring has been featured in early Chicago trade with soybeans/soyoil the upside leaders (reversal of yesterday) while wheat sags, and corn is (again) in the middle. Chicago grains are holding relatively well compared to the other financial markets with the DOW down over 500 points with the US$ unable to rally. The bearishness is overwhelming in the equity market to a degree that it feels like a tradable bottom could be forming.

• We note that in the overnight and daily trade there has been massive spreading of Dec/March corn (over 20,000 contracts) and November/January (over 28,000 contracts) soybeans amid low Miss River water levels and sagging basis in the interior as the harvest hits a higher gear. The Dec-March corn spread has pushed out to 6.50 cent March premium with January soybeans gaining 3 cents to November at 10 cents over. Bear spreading has been featured amid the weakening interior cash market. US farmers are not active sellers of the newly cut corn/soybean crops.

• Chicago brokers estimate that funds have bought 2,300 contracts of wheat, while selling 2,000 corn and 3,500 contracts of soybeans. In the products, funds have sold 1,700 contracts of soymeal while buying 3,600 contracts of soyoil.

• We understand that Algeria has purchased mostly Russian wheat in their latest tender with tonnages mentioned in the range of 350-450,000 mt at a price of $369-372/mb basis CIF. The news that Russia had filled the tender caused a quick retreat in EU fob basis of several €uro/mt according to exporters. The EU wheat was priced some $14-16/mt above the Russian offers to Algeria. We note that Russia will continue to be active offering wheat amid their massively large crop/stockpile. The Russian’s will not miss many future wheat tenders.

• Russian President Putin is expected to annex far eastern areas of Ukraine that is under Russian military control on either Friday/Saturday under decree. The key unknown is how the sham annexation of Ukraine territory will change the war or said more correctly, what will the weekend headlines be if Ukraine troops now cross into the new Russia. There is headline risk this weekend and early next week as the world financial markets try to understand on how Russia will act when attacked on what they see as their own land.

• US export sales for the week ending Sept 22 were 10.3 million bu of wheat, 20.2 million bu of corn, and 36.9 million bu of soybeans. For their respective crop years to date, US wheat sales are off 14 million bu (-3%) while corn is off 485 million bu (-49%), with soybean sales up 93 million bu (10%). The export side of the equation will disappoint unless a S American weather problem develops later this year.

• Dry/cool weather conditions will prevail across the Central US into October 9. The Central US harvest rapidly advance amid the dry weather. The only meaningful North American rain falls from the remains of Ian across the SE US into Sunday. A progressive pattern follows in the 10–15-day period with a deep trough of low pressure establishing itself across Eastern North America. This trough shoves the jet stream south and allows for improved Midwest showers. Dryness for the Plains remains the biggest crop concern as a new HRW wheat crop is being seeded.

• The US$ is unable to rally which should be monitored closely. Amid the DOW falling over 500 points, Chicago grain values are holding firm. The NASS/USDA crop report will be released Friday 11am CT. We look for near steady soybean stocks, but a decline in corn. In wheat, little wheat was fed in Q1 of the crop year due to high prices. The Brazilian soy crop is going in quickly under mostly favourable conditions. World Central Banks are in a war against inflation and world economic activity is in decline.

• HEADLINES: US weekly ethanol grind disappoints; US$ forms key reversal on the charts; Mississippi river level getting low.

• It has been a mixed morning in Chicago with wheat sharply higher and soybeans/soyoil sharply lower with corn caught in between. The selling in the soy complex has been tied to low Mississippi River levels (soaring barge costs) while traders are becoming confident that Russia will not renew the Ukraine export corridor in late November, which has bulled wheat.

• Spreaders are unwinding long soybean/short wheat and long corn/short wheat spreads. Seasonally, wheat prices tend to rise into Q4 before peaking. Key resistance rests above $9.25 basis December Chicago wheat. The US harvest is gaining speed across the Midwest with varied reports of yields being offered by producers. Amid the Bank of England that went back and added liquidity via new bond purchases to stabilise £Stg/equity markets, doubt is starting to develop whether the FED will need to raise rates too much beyond December. If true, this could produce a tradeable low in US/world equity markets.

• Chicago brokers estimate that funds have bought 4,600 contracts of wheat and 5,900 contracts of corn, while selling 2,400 contracts of soybeans. In the products, funds have sold 4,200 soyoil and 1,400 contracts of meal.

• We have noted that the Mississippi River flow is in sharp decline due to the ongoing dryness impacting the Missouri/Tennessee Valley Basins. Rain is needed to improve water flows, but the forecast offers limited rain into mid-October. As barge rates soar on demand due to lower draft levels (and the additional barges needed) to carry the same supply, the worry is that basis levels in the interior will be pressured. To assist the movement of grain to New Orleans, rail will take on additional tonnage, but there is a limit. We suggest watching barge rates and Mississippi River flows closely.

• The US weekly ethanol grind continued to decline on poor margins and weaker US gasoline demand. Last week the US produced 251 million gallons of ethanol, down 6% from last year and down 14 million gallons from last week. Weekly US gasoline consumption fell 6% vs. last year, a concerning trend. Seasonally, the US ethanol grind should start to increase in early October. We would maintain that WASDE is too high in its 2022/23 ethanol grind forecast by 50-75 million bu.

• The midday GFS weather forecast is consistent with Hurricane Ian to come ashore as a strong category 4 storm with wind gusts over 150 MPH. Ian then slows its forward progress as it dumps flooding rain of 12-24” across Central Florida. Ian will re-emerge in the Atlantic as a tropical storm on Friday. Soaking rainfall of 5-10+” impacts the SE US with wind gusts of 30-40 MPH. The rain could cause lodging of any mature/unharvested crops.

• The Central US holds in a dry weather trend with warming temperatures after another night of cool temperatures and frosty low 30’s across the Upper Lake States. We do not see a good chance of rain for the next 10 days. Corn/soy harvests will go uninterrupted into mid-October.

• The US$ has formed a reversal high which is helping to rally US financial markets. The DOW is up 430 points with crude oil up nearly $3.00/barrel. The NASS September Stocks/Small Grain Report will be released on Friday with the industry looking for only a modest decline in stocks from the September WASDE forecast. November soybeans have nearly reached our downside price target while December corn should hold support at $6.60. The closing of the Ukraine export corridor should be more bullish of corn than wheat.

• HEADLINES: Russia threatens nuclear potential (again) following sham referendum; Brazilian soy seeding accelerating; Choppiness into Chicago close.

• Chicago futures are in the green with corn, soybean, and wheat futures higher at midday. Short covering amid the strength of the macro financial markets has been theme of the day. The DOW continues to be volatile with an early day rally of 350 points and a midday swoon of 250 points for a range of 600 points. The worry of a deepening US/World recession will not leave the minds of traders which appears to be capping rallies. We look for a higher Chicago close with additional short covering likely heading into the NASS September Stocks/Final 2022 Small Grains Report. Neither rallies nor breaks are likely to carry through until after Friday’s key report.

• Chicago brokers estimate that funds have bought 6,600 contracts of wheat, 5,900 contracts of corn, and4,400 contracts of soybeans. In the products, funds have bought 2,100 contracts of soyoil and sold 2,000 contracts of soymeal.

• Russia issued another nuclear threat following the end of their sham referendum. Diplomats doubt that Russia will use their nuclear option, but Russia continues to rattle the nuclear sabre to make sure that the world retards its involvement with Ukraine and does not see Russia as militarily lame. The calling up of 300,000 reservists within Russia continues to produce protests and challenges for President Putin. The Russian nuclear threat helped produce the setback in the financial markets.

• Brazilian farmers are starting to seed their new soybean crop more rapidly. Rains are falling in greater abundance than recent years with farmers optimistic about producing at least trendline soybean/corn yields in 2023. We note that it would be historically unprecedented for Brazil to have back-to-back droughts of their first crops. Such a drought is unlikely in 2022. And due to faster than normal seeding, a 5% yield bump in their soybean yield would produce a record soybean crop of 158 million mt. The sheer size of Brazil’s soybean planting campaign should not be dismissed. Brazil is expected to seed 104.5-105 million acres of soybeans, or 17 million more than the US. Future expansion makes weather/yield changes far more important in Brazil than either the US or Argentina.

• The Mississippi River is in decline which is raising barge freight rates which will harm interior basis bids beyond the initial pull to restock the pipeline. Already, barge companies are cutting their loads/drafts and moving extra supply to the rail due to soaring barge rates. Rain is needed for the river.

• The midday GFS weather forecast is consistent with the morning release, with even the path of Hurricane Ian unchanged. Ian works across FL and into the Southeastern Coast over the next 4-5 days. Soaking rainfall of 5-10+” impacts this region, while the arrival of Ian will work to sustain near complete dryness elsewhere. Temperatures reach normal/above normal levels by the weekend. Drought expansion continues across the Plains. Corn/soy harvests will go uninterrupted into mid-October. We also note that 16-30 day guidance features high odds of warmth and dryness throughout October.

• Whether it is corn, wheat, soy or even ethanol, export demand is lagging. Our concern is that demand contraction is structural in nature due to China’s soy buying habits and Brazil’s record surplus of corn. Markets stay complex amid pipeline minimum grain stocks in Europe and uncertainty over Russia’s next move in Ukraine. Our mentality of selling strong rallies is intact. US soybean crush margins are the only bright demand spot.

• HEADLINES: Morning rally fails as US$ scores newer high.

• Chicago futures are lower at midday as an early rally effort failed to find any bullish heart as the Midwest harvest shifts into a higher gear. Corn, soybean, and wheat futures are all lower at midday with investment funds staying on the short side of the marketplace. US equity markets tried to rally and then failed amid the bearish impact of last week’s US Central Bank interest rate hike. The worry remains one of a future recession and its impact on demand. Chicago remains very focussed on the value of the US$ and the cost that it imposes on world importers in their own currency. We look for a weak Chicago close with the macro financial trends in a bearish price trend.

• Chicago brokers estimate that funds have sold 3,200 contracts of wheat, 4,300 contracts of corn, and 4,900 contracts of soybeans. In the products, funds have sold 3,100 contracts of soyoil and 1,200 contracts of soymeal.

• US export inspections for the week ending September 22 were 18.0 million bu of corn, 9.4 million bu of soybeans and 19.1 million bu of wheat. All were below trade expectations.

• For their crop years to date, the US has exported 63.2 million bu of corn (up 11 million or 17%), 43.0 million bu of soybeans (up 6 million or 14%) and 395 million bu of wheat (up 2 million or 1%). It is far too early to make any crop year export conclusions, but new crop export pace is steady with last year.

• World trade in corn, soybean and wheat trade is down due to high prices and budgetary struggles. Some countries will need new IMF loans to boost import demand. The rising US$ is causing struggles to repay dollar denominated loans and pay for the rising cost of imported goods. In developing nations, the rising US$ adds to inflationary woes. This is the worry of economists in that the sharp rise in US interest rates only boosts inflationary pressures outside of the US, thereby making the Fed’s fight more difficult. Stagflation is a word that will get discussed more and more acutely.

• China will start its week-long autumn holiday on Saturday. Any fresh soybean demand during the holiday week will be limited. And Brazilian voters will be heading to the polls in early October to vote for Bolsonaro or Lula in their presidential vote. The Brazilian election will have a big impact on the value of the Real, and the future profits of farmers. Besides the ongoing war by Russia against Ukraine, world grain markets have much to monitor and discuss.

• The midday GFS weather forecast is wetter in the eastern Midwest Oct 5-7 but is otherwise similar to the morning run. Hurricane Ian makes landfall in FL on Thursday, and then travels north-eastward across Southeast/Southeast Coast through the weekend. Little/no rain is offered to the Central US in the next 10 days, with better rain chances offered to IN, OH and PA thereafter. The GFS forecast maintains a warmer temperature profile following the arrival of hurricane Ian. Harvest threats are lacking into the first full week of October.

• The sheer strength of the US$ index is impressive and unfortunately reflects a lack of confidence in emerging market economies due to inflation. While early, major crop trade data to date does imply some measure of demand contraction. There is no doubt global grain stocks will again be tight in 2022/23, but our thesis is cantered on the fact that further downward revisions to stocks are being offset by weak US exports. Supply-driven rallies into mid-autumn provide selling opportunities.

• HEADLINES: Soaring US$ weighs heavily on raw materials; Crude down $5/barrel; Midwest rain absent next two weeks.

• Chicago futures are sharply lower this morning amid pronounced weakness in financial and energy markets. Crude oil has extended overnight losses considerably and is down $5.00/barrel at $78.50, a new 8-month low, with the Dow down 440 points. Concern over a slowing economy is cited, and weakness in the macroeconomic landscape is beginning to spill into physical ag markets as evidenced the pace of US grain and soybean export demand. FAS’s daily reporting system was void of new sales this morning, and key is whether China opts to extend autumn/winter supply coverage on this break early next week. Note that China’s Golden Week holiday occurs Oct 1-7 and relative quiet is anticipated from China during this period.

• RBOB gasoline’s fall t0 $2.35 will act as a weight on cash ethanol prices. The cash ethanol market has been rather resilient until now, but as Midwest ethanol prices are unlikely to break $2.50/gallon, it remains that production margins tighten above $7.10, Dec Chicago. Broadly, the collapse in crude since mid-summer has on balance been a negative for biofuel production growth worldwide.

• The US$ index’s surge to a newer 20-year high has pulled currencies in importing countries like Nigeria and Turkey to record lows. Once again, the market must contend with currencies’ impact on both demand (reduced purchasing power) and supply (profitability in S America). It is a risk-off day in Chicago.

• A rapid filling of the US cash pipeline lies ahead, with producers actively gathering crops as far north as IA/IL.

• Recent and current basis strength is noted, elevators in IA are paying $0.50-0.65 over for spot delivery, but this has provided the incentive to sell corn/soy supplies right off the combine. A relatively seamless transition from the farm to end user is imminent. Additionally, we note that the EU and GFS weather models are in better agreement with respect to the season’s first tropical storm late next week. Damage is unfortunately probable across FL and the South-eastern Coast, but the risk to energy and ags has been diminished based on updated model guidance. Near complete dryness is scheduled for the Plains and Midwest into Oct 5.

• Paris milling wheat futures are down €2.50/mt ($0.07/bu) and relative stability is noted there amid a falling €uro and as drone stocks have been reported near Odesa Ukraine. Black Sea supply/military risks remain intact, but the best proxy for measuring adjustments to grain flows will be weekly US/European export commitment data. Both have been lacklustre through this week.

• The midday GFS weather forecast pulls next week’s tropical storm into GA and the mid-Atlantic but otherwise the outlook into Oct 3 is unchanged from the morning release. A lengthy period of dryness lies ahead and still there is no indication of even moderate Midwest rainfall into Oct 5. Cool temperatures fade beyond the middle of next week as low pressure currently aloft the Great Lakes is pushed northward. High temperatures in the 70s and 80s resume in the 7-15 day period.

• The market can’t yet prove/disprove US corn and soy supply loss, but we maintain that the burden of lasting rallies is being more heavily weighted toward future NASS yield reductions. Supply driven rallies will be used to price a majority of corn and soy production between now and mid-autumn. Economic outlooks are troubling. Initial support lies at $14.20, Nov Chicago soy, and $6.65, Dec corn.

• HEADLINES: Row crops correct on lack of fresh demand, Turnaround in crude.

• Chicago futures are mixed at midday, with US/European wheat values able to sustain overnight strength while row crops languish amid a lack of fresh demand news. We see the biggest threat to recent escalating Black Sea tensions as cantered on Russian wheat shipments, due to sanctions/logistical issues, but it remains that the US market must see and feel an adjustment in global grain flows. This has not yet been the case in corn and soybeans as S American and Ukrainian basis trades steady to lower week on week.

• Ukrainian corn for Oct-Nov delivery remains offered at/below Chicago futures, with Brazilian fob bids down $0.10/bu from mid-September. In fact, the spread between US and S American corn has widened slightly this week and Thursday’s export sales will be lacklustre across the board. We note that corn sales must average 35 million bu over the next 12 months to meet the USDA’s target.

• US soybean sales must average 33-36 million bu prior the arrival of Brazil’s harvest in early February. Fresh demand was absent from FAS’s daily reporting system this morning.

• The US$ index has rallied another 800 points to a new 20-year high. Slowing economic growth is being exacerbated by rising costs of grain/oilseed in importers’ domestic currencies. Assuming the Fed raises benchmark rates another 1-2 times after today, capital will continue to flow into the US$.

• US ethanol production through the week ending Sep 16 totalled 265 million gallons, vs. 283 million the previous week and down 3% from the same week a year ago. It is far too early to measure weekly output against the USDA’s annual projected grind, but amid eroding gasoline use and large ethanol stocks, the urgency to boost production is far less than it was a year ago. US gasoline disappearance last week was 8.32 million barrels per day, the lowest since early July and down 6% year on year. Additionally, the US released yet another 7 million barrels of crude from the strategic reserve, with crude stocks outside the reserve up 4% from last year. Spot WTI crude at midday is flat and $3.40/barrel off morning highs. The US must eventually replace reserve crude stocks, but amid offsetting weakness in demand, we doubt spot crude trades outside of a range of $80-90/barrel into winter.

• The midday GFS weather forecast is slightly further west with a Gulf tropical storm Sep 30-Oct 3. Assuming the forecast is correct, flooding rainfall will impact AL and the Southeast in the 11–15-day period. Confidence in details so far out is low, but the arrival of the season’s first major tropical event is probable, and the path of this storm must be monitored closely. The GFS forecast today implies ag/energy will be spared but that the model has shifted this storm increasingly westward is noteworthy.

• Otherwise, cooler temperatures but a near complete lack of rainfall are offered to the Plains and Midwest throughout the next 10 days. Harvest accelerates next week.

• Corrections will find support in the near term as important questions surrounding US yield and Black Sea grain availability will go unanswered until early/mid-October. Rallies will be rewarded as negative macro input is beginning to spill into physical ag supply and demand. We reiterate that the key difference between this market and that of 2020-2021 is the lack of major demand driver.

• HEADLINES: Ag markets soar amid escalating Black Sea conflict; Russia aims to annex Russian-controlled portions of E Ukraine.

• Chicago futures are sharply higher at midday as ag markets worldwide add Black Sea weather premium. Ukraine’s recently military successes had markets prepped for some kind of Russian retaliation. Today Russia will facilitate referendums in four Russian-controlled Oblasts in eastern Ukraine to officially annex those territories. The general perception is that conflict in the Black Sea has the potential to ramp up massively, and most important to markets elsewhere is the willingness of vessel owners and insurance companies to sail into the region. Already we hear that sourcing freight in Russia has become more difficult in recent days. Increased military action will serve to slow the movement of grain passing through the Black Sea considerably.

• How the conflict evolves is unknowable but there is little/no room for further Black Sea supply disruptions given record low non-Black Sea exporter wheat stocks/use and very tight combined US and S American corn stocks/use. Reports suggests Putin may speak to address these referendums and general military strategy at some point today.

• We note that prior to today’s news, Russia’s interior wheat market has stabilised at $220/mt. This will keep Russian fob offers in a range of $320-330/mt, which is cheap, but the possible need to ration supplies in Europe means the spread between Russian-EU origin must widen. Dec Paris milling wheat at midday is up €13.5/mt ($0.35/bu). EU corn is again testing $8.40/bu.

• There is also confusion surrounding the Argentine farmer’s ability to capitalise on the special 200:1 Peso-USD exchange rate. Argentina’s Central banks moved to restrict access to this rate, but we believe that soybeans sold by individuals will not be included in this restriction. And recall some 50 cargoes of Argentine beans have been sold into the world market since early September, and so already this has disrupted autumn export demand in the US.

• The bigger issue in Argentina is whether fading La Niña in late 2022 allows for a normal pattern of rainfall in Dec-Feb. The S American forecast at midday is favourably wet in Brazil but remains arid in Argentina into Oct 5-6. Subsoil moisture is completely absent in Cordoba and western Buenos Aires.

• Macro financial markets have turned lower following flat overnight trade. The Dow is down 330 points as this month’s Fed meeting commences. Spot WTI crude oil is down $1.80 at $84/barrel. The US$ has shrugged off recent weakness and at midday is testing last week’s high.

• The Central US GFS weather forecast remains consistent into Sep 30, with the season’s first tropical storm/hurricane forecast to impact the eastern Gulf/East Coast during the opening days of October. Overnight low temperatures drop into the mid/upper 30s across ND/MN Thurs-Sat, but otherwise near zero rain and abnormal warmth is offered to the entirety of the US over the next 10 days.

• The pattern thereafter hinges upon the tropics. The midday GFS forecast maintains that a tropical storm produces soaking rainfall across FL and the Southeast Oct 1-3, but if realised this will work to sustain warmth/dryness elsewhere.

• Volatility continues! Our strategy of rewarding strong supply-driven rallies is unchanged. War in Ukraine is unlikely to materially impact global soybean supply and demand, while the US corn market must contend with Brazil’s surge in market share and normal rainfall across a majority of Brazil’s first-crop corn belt.

• HEADLINES: Soybeans rise on intercrop spread unwinding; Traders expect further fall in corn/soy conditions: Russia to fill Saudi wheat tender?

• Chicago futures are mixed at midday with soybeans higher while the grains sag. The market opened lower on liquidation and new selling tied to easing world equity markets and a stronger US$. It is a week where the US Central Bank will be raising rates, and risk off is the trading mentality to start. Wheat values are down as Russia looks to fulfil much of the Saudi wheat sale.

• However, Chicago values came off their low as the dollar dropped and the DOW rallied. Traders are trying to assess the right amount of risk heading in the US Central Bank rate hike. The next US Central Bank Meeting is November 2-3 with another in mid-December. We (and many others) look for a 0.75% hike in their fed funds rate on Wednesday, followed by another 0.75% in November and 0.25% in December. By year end, US fed funds should be 4-4.25% in FMOC’s war against inflation. This lofty rate will draw fresh interest from world investors that secure additional US$. We see the US$ holding strong into Q4. A mixed Chicago settlement is expected today soybeans firming on the unwind of the long grain vs. short soybean spread that was so popular during late July and August.

• Chicago brokers estimate that funds have sold 5,600 contracts of wheat and 2,900 contracts of corn, while buying 3,200 contracts of soybeans. In soy products, funds were buyers of 4,300 contracts of soymeal and 1,200 contracts of soyoil.

• US export inspections for the week ending September 15 were 21.6 million bu of corn, 19.0 million bu of soybeans, and 29.0 million bu of wheat. For their respective crop years to date, the US has exported 45.1 million bu of corn (up 20.6 million or 46%), 33.5 million bu of US soybeans (up 15 million or 83%), and 264 million bu of wheat (down 20 million or 7.5%). The early season US corn/soybean export pace is surprising to the upside which is slowing the refilling of the cash pipeline and supporting cash basis bids. US farmers are not showing a great willingness to part with additional new crop supply until more is known on yield prospects

• Saudi (SAGO) purchased optional origin wheat cheaply in a weekend tender. Exporters work the price back to $320-325/FOB based on elevated costs and the $8/mt which is required to go through the Suez Canal. Such cheap FOB wheat can only be supplied by the Russians amid their need to shed large stocks, and drop price offers. Questions abound on Russia’s ability to store record large 2022 wheat/corn crops, as they will not miss a tender to move supply into the world marketplace. We look for the final Russian wheat crop to end up at 100 million mt or more, a monster, which acts as a bearish peg on world wheat values. A 2-tiered marketplace will develop as the Russian’s hold prices low, while other origins shed supply. Russia needs to export additional wheat into the world market, it is all a question of price relative to existing sanctions.

• The US harvest is gaining speed with producers opening fields to gauge seed moisture and the readiness of the crop to be cut. We look for corn to be concentrated on this week with a shift to beans in the closing days of September. Soybean cutting will be active during the first 10 days of October.

• There was limited change in the GFS weather forecast with below normal rain/warmth across the Central US into Sept 29. A cold front will produce showers/storms late week across NE/IA and into IL with totals of 0.25-0.75”. Thereafter, the pattern turns cooler/drier through the weekend. There is no sign of a frost/freeze or a Gulf Hurricane into Sept 27. The warm/dry open harvest weather bodes well for corn/soybean crop quality.

• Chicago values are mixed at midday with soybeans holding on soymeal strength. Amid Argentina selling 50+ cargoes of soybeans from their 7 million mt of farm sales which has cut into domestic soymeal production. Argentine soyoil is priced at $0.14/lb under Chicago or $20/lb less vs. the US Gulf. Meal/oil spread unwinding is ongoing. Corn/soybeans holding on expectations for new falls in US crop ratings this afternoon.