• Midday Chicago futures are mixed with new US corn/soybean sales to China providing the early bullishness for the summer row crop futures. The fresh China buying caused bull spreading in Nov/March soybean futures while lifting December corn back futures to resistance at $3.95-4.00. Wheat has spent the morning lower with rain forecast for the Plains and portions of SW Russia.

• Chicago trade volume is diminished at midday with all eyes on the close. An inability of corn/soybean futures to rally off the fresh Chinese buying would suggest that the market is laden with too much speculative length with nearly 60% of the 2020 US corn crop yet to be cut. China is now covering January import needs with Brazilian premiums rising amid seeding delays.

• Chicago brokers estimate that funds have bought 5,700 contracts of soybeans and 4,900 contracts of corn, while selling 1,600 contracts of wheat. In soy products, funds have bought 3,900 contracts of soyoil and 4,800 contracts of meal. We estimate that through Tuesday’s close that funds are holding a net long soybean position of a record large 239,000 contracts of soybeans, 77,000 contracts of meal and 86,000 contracts of soyoil. All combined, fund managers are estimated to be net long a record large 400,000 contracts plus in the soy complex.

• The USDA reported that China secured 420,000 mt of corn said to be for April/May shipment and 264,000 mt of US soybeans. We hear that China has booked an additional 3-4 cargoes of US soybeans for January this morning. The corn business was completed late last week, and no new interest is being shown. China likely secured 2 cargoes of US sorghum at an expensive price of $300/mt.

• Chinese forward crush margins are negative amid massive soy imports. State run Chinese crushers will be running at maximum capacity while other smaller private crushers are worried about the coming oversupply. Chinese livestock herds have dramatically expanded on the year, but ASF exists and is capping growth. Chinese domestic demand for feed is strong, but with the feeding margin negative, caution is being expressed by some of China’s largest livestock producers about chasing corn or soymeal prices higher.

• Russian fob wheat markets are thinning with transparency being lost as bids/offers widen. November 12.5% fob wheat offers rest at $250-252/mt with bids at $245-247/mt. Cash wheat shorts have been the driving bullish wheat fundamental as interior farmers await needed rain for their new crop. Tight fisted Russian farmer selling has limited wheat origination and caused shorts to exit losing positions. Russian farmers want to see rain before selling stored stocks.

• South Korea purchased Brazilian corn overnight at $247.70 CIF for Nov/December shipment. US corn was noncompetitive which was a surprise. Argentine fob corn offers disappear beyond the middle of December.

• The Central US forecast is drier than the overnight run with less rain for the Western Midwest and the Central Plains. The models have extracted 0.25-1.25″ of rain from the west. The GFS forecast continues to place showers across the Lakes and the E Midwest this weekend. Cool to cold temperatures persist with highs ranging from the 50′s/60′s with lows in the 30′s.

• The Brazilian forecast is drier across Mato Grosso/Goias. The overnight EU model was wet with rainfall of 1.50-3.00″. The GFS/EU models are apart in their Brazilian forecasts, a trend that now extends for 5 days. We favour the wetter EU model with spring soy seeding to advance.

• Volatile and wide-ranging Chicago trade is expected. Speculative length is record large in the complex which along with slowing Chinese demand on a seasonal basis will cap future Chicago rallies. Yet, debate persists on the size of China demand for 2020/21 US corn under their TRQ import program which underpins breaks. China’s market volatility is on the rise with interior domestic corn/ meal values starting to relax.

• Midday Chicago futures are mixed in a reversal of Monday, corn and soybean futures are higher with wheat slightly lower. The volume of trade has declined from prior days as traders exhale trying to try to understand S American weather against firm world cash markets. We look for a mixed Chicago close as US farmers sell corn/soy off the combine while strong world cash basis bids offers support. The bulls and bears are likely to watch the markets thrash back and forth in market consolidation.

• Chicago brokers estimate that funds have bought 4,300 contracts of soybeans and 4,900 contracts of corn, while selling 1,400 contracts of wheat. In soy products, funds have bought 2,300 contracts of soyoil and 2,800 contracts of soymeal. Fund managers have been much less active this morning.

• The USDA reported that 110,000 mt of US corn was sold to Mexico. There were no new US sales reported to China. We hear that China has booked another 3-4 boats of US soybeans with 2 boats being sold off the PNW for January. Rumours remain that China has interest in US Gulf corn, but no new purchases can be confirmed. Everyone has a different take on a China corn TRQ rumour.

• US export inspections for the week ending October 8 were; 24.9 million bu of corn, 79.2 million bu of soybeans, and 18.9 million bu of wheat. China shipped out 59 million bu of US soybeans or 75% of the total. In corn, China took 1 cargo of US corn off the Gulf, not as much as expected.

• For their respective crop years to date, the US has shipped out 170.0 million bu of corn (up 71.3 million or 72%), 334.2 million bu of soybeans (up 144.5 million or 76%), and 383.5 million bu of wheat (up 34 million or 11%). The US wheat export pace has started to lag while US soybean loadings during October/November are expected to be record large. China is now covering December/January soybean import needs and a grain (either corn or wheat) has to take over the demand pace leadership if the demand bull market is to persist.

• Russian 12.5% wheat is offered for November/December at $247/mt or $6.72/bu which is steadier than prior days. French wheat is cheaper at $244/mt while US HRW Gulf wheat is offered at $268/mt, a new 5 year high. And China domestic wheat prices continue to rise following their holiday and rests at a new yearly high close to $11.00. The point is that US wheat traders are rightly focused on the SW Russian weather forecast where rain is needed for seed germination. Yet, world wheat prices are not backing off with Russian interior flour prices at new record high. It will be difficult to break US wheat futures prices until world wheat prices seasonally peak and start to retreat.

• Midwest farmers will finish their 2020 soy harvest during the weekend. We estimate that 62-65% of the US soybean crop and 44-47% of the US corn harvest is completed through Sunday. The Northern Plains farmer is cultivating fields that are harvested or have been in the Prevent Plant program for the past 2 years. The autumn setup is favourable for expanded 2021 US seeded acres.

• The Central US forecast is drier than the overnight run with less rain for the Central and Eastern Midwest. The models have extracted 0.25-0.75″ of rain. Cool to cold temperatures will flow southward with highs retreating to the 50′s/60′s with lows in the 30′s. The chill/dry weather will quickly advance the remaining harvest.

• Volatile and wide-ranging Chicago trade is expected in coming weeks as the bulls look for a grain (either corn/wheat) to become a new demand driver as China’s soybean purchase origin shifts to S America. Brazilian and Russian weather forecasts are important to price and less certain at midday.

• The October USDA report was mildly bullish with NASS trimming both planted and harvested acres for US corn and soybeans. NASS pegged 2020 US corn planted acres at 91.0 million acres with harvested at 82.5 million acres, both were down 1 million acres. In soybeans, NASS pegged US soybean seeding at 83.1 million acres/harvested at 82.3 million acres, both were down 700,000 acres. Combined, US corn and soybean seedings fell 1.7 million acres from the June 30 report based on FSA farm program participation data. The change in acres was the big difference in supply.

• NASS held the US soybean yield steady at 51.9 bushels/acre while corn as pegged at 178.4 bushels/acre, down 0.1 bushels/acre from September.

• The 2020 US corn crop was 14,722 million bu, up 1,100 million from last year while soybeans were up 750 million bu. The 2020 US corn crop is second largest on record, while the US soybean crop is the fourth largest on record. 2020 US corn and soybean crops are adequate. NASS has processed 93% of their operational test plots in corn, so a further big yield decline/gain is unlikely. In soybeans, 64% of their plots were cut, much above the 5 year average of 48%.

• US 2020/21 corn end stocks were forecast at 2,167 million bu with exports holding steady at 2,325 million bu. We note that WASDE left China’s corn imports at 7.0 million mt, but their US corn export estimate reflects that China will take 14.0 million mt of US corn. Chinese demand is well reflected in the WASDE corn export estimate. WASDE cut US 2020/21 US corn ethanol demand to 5,050 million bu while feed/residual was pegged at a record large 5,775 million bu. The lower residual is based on the confidence that NASS has in its October corn crop estimate. The average farmgate corn price was raised $0.10 to $3.60/bu.

• US 2020/21 soybean end stocks were pegged at a tight 290 million bu with exports raised to 2,200 million bu, up 75 million from September. No other demand forecasts were made with China to import 100 million mt in 2020/21. China took 97.4 million mt of world soybeans last year, so the current estimate is a bump of 2.6 million mt. This is well below the gain from 2018/19 to 2019/20 of 15.0 million mt. 290 million bu of 2020/21 soybean end stocks models out to Chicago futures range of $9.70-11.00/bu.

• 2020/21 World corn end stocks were lowered by 5.9 million mt to 300.8 million while soybean stocks declined to 88.7 million mt, with wheat at a record large 321.4 million mt.

• The Russian 2020 wheat crop was increased 5.0 million mt to 83.0 million with exports raised to the old record 41 million mt. Russia will have a hefty 11 million mt left over in carryover to help itself endure the drought if rain fails to materialise. World grain stocks did not fall as much as feared.

• US 2020/21 wheat end stocks were lowered to 883 million bu, down 42 million from September on a diminished 2020 crop and carry-in. US 2020/21 wheat exports were left unchanged at 975 million bu while on a class basis, HRW wheat stocks fell to 334 million bu (down 51 million) with SRW stocks at 102 million bu (down 6 million) with HRS stocks off 5 million bu to 288 million. KC wheat should continue to gain on Chicago based on tightening US hard wheat stocks/supplies.

• Current wheat supplies are not a concern, except in the UK, where planting the new crop is the issue. The world is definitely upside down when Australia has the only wheat crop without a problem.

• Funds rushed in with fresh buying following the October USDA report. Their huge speculative demand pushed December corn against $4.00 psychological resistance while November soybeans bumped up against chart resistance at $10.80. Chicago wheat futures fell as the market lacks a bull story with 2020 Russian production the second largest on record and exports forecast above 40 million mt, with light rains forecast to start across European Russia after October 20. Wheat should be the downside price leader.

• Chicago has digested considerable bullish news and a price top depends on when fund buying slows. S American, Russian and US Plains weather along with any future Chinese demand will direct Chicago values into November.

• The 2020 US corn/soybean crop is now “known”. The US corn yield could rise or fall 1 bushels/acre or soybeans 0.5 bushels/acre in January, but that is not a driver today.

• Demand bulls need to be fed every day and that depends on future China purchases. The US soybean export program is massive which will keep bull spreads tight, but flat price may not have to rise much more unless S American or Russian wheat weather worsens. This looks like a buy the rumour/sell the fact type of marketplace.

• One final thought, Ag markets are alone in this rally. This isn’t driven by a comprehensive commodity rally or inflation hedge. Be careful.

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Weekend summary 9 October 2020

• Chicago futures are lower at midday following an early round of fund buying. Wheat futures paced the morning decline which pulled corn/soy futures lower into midday. Chicago grains are on a big run to the upside and traders are anxious to book profits ahead of the key USDA October Crop Report due Friday. Funds are long a record amount of soybeans estimated at 280,000 contacts.

• Extreme volatility will mark the post report trade with end users hoping for a bearish report to buy. World traders (including China) will be gone for the weekend with their buying or selling not evident until Sunday afternoon. The real reaction to the USDA report won’t be known until midday Monday.

• Funds were large opening buyers, but then turned sellers with their net position being sellers of 7,000 contracts of wheat, 2,500 contracts of soybeans, and 4,000 contracts of soymeal. Funds are flat in corn while buying 1,500 contracts of soyoil.

• There is a cargo of US DDGs that is in the export line up that has a listed destination of China. Research cannot confirm that China has ended its anti-dumping duty against US DDGs, which makes the nomination suspect.

• US DDGs would be a more economic feed ingredient into China than corn. There are also rumours that China has purchased a cargo of US ethanol which cannot be confirmed. The trade is closely watching to see if US ethanol and DDGs are starting to flow to China under the Phase One Deal. Both would be a new avenue of demand for the US corn market.

• US corn/soybean export sales as of October 1 were; 19.5 million bu of wheat, 48.3 million bu of corn, and 95.2 million bu of soybeans. All were above trade estimates. For their respective crop years to date, the US has sold 533 million bu of wheat (up 40 million or 8%), 1,018 million bu of corn (up 625 million or 158%), with soybean sales at 1,496 million bu (up 899 million or 150%). US soybean sales as of October 1 are record large with corn near a record.

• The US wheat market has forged a reversal from 5-year highs as traders are having difficulty dealing with the loss of a crop that won’t be harvested until next July. WASDE is likely to raise 2020 Russian wheat production in Friday’s WASDE by 2-4 million mt. There is no shortage of world wheat today, it is the prospect of the world’s largest exporter cutting their exports by 10-15 million mt in 2021/22.

• The midday GFS weather forecast is mild/dry for the next 10 days. Limited rainfall is evident into October 18 (likely longer) with harvest operations to strongly advance. Hurricane Delta makes landfall in WC LA and turn north and northeast on the weekend. The storm is a slower mover across LA which produces flooding rains of 4-6.00″. No rain is forecast for the Plains through the 11-15 day period. Moisture is needed to germinate a newly seeded winter wheat crop.

• Funds are holding a record net long position in soybeans which will increase market volatility going forward. Funds have added to their length in corn/wheat this week. A demand led bull market with weather issues in SW Russia is the catalyst for the 7 week bull Chicago market. 5 year high prices in Chicago wheat with soybeans at $10.50 have digested a considerable amount of bullish news. Buy the rumour and sell the fact trading could evolve on Friday. Unless S American crop problems develop in coming weeks, March corn above $4.10 or January soybeans above $10.85 appear overdone. Be prepared for a wide ranging Chicago trade.

• Chicago futures are strong at midday with only a moderate decline from the opening high. Volume and fund buying are active with corn, soybeans and wheat each scoring a new rally high. November soybean futures have reached $10.5975, December corn $3.92, with December Chicago wheat at $6.115. In the case of wheat, this is the best level for a spot CME wheat future since 2015.

• The big question for traders is whether USDA’s October Crop Report will offer fresh bullish data to accelerate the bull run. The unknown of a major monthly crop report will likely cause some profit taking into Friday. Some selling near the close is expected, but it is important to point out that Chicago corn/soy have been able to rally this week during the heart of the 2020 harvest.

• Chicago market volatility will stay elevated for months to come. The declining US soybean stocks profile for 2020/21 along with the SW Russian drought has changed the landscape. Funds are holding a record or near record long US ag futures position which amid a world energy market that is over supplied looks to produce big rallies/big declines leading up into 2021. We should be prepared for a wild swinging marketplace for weeks to come.

• Chicago brokers estimate that funds have bought 9,000 contracts of corn, 9,300 contracts of soybeans, and 6,100 contracts of wheat. In the products, funds have bought 1,200 contracts of soyoil and 5,500 contracts of soymeal. We calculate that funds hold a 280,000 net long soybean position which is 30,000 contracts above the prior record set in 2012 amid a dire Midwest drought. Futures peaked in late August just below $18.00/bu.

• We understand that China booked 8 cargoes of US soybeans for Dec-Jan overnight. There are no offers of new crop soybeans from Brazil until February. The China normally takes 6.5-8.0 million mt of soybeans in January, so additional booking of US soybeans is why we raised our 2020/21 US soybean export estimate by 100 million bu to 2,275 million bu. This has dropped US 2020/21 soybean end stocks to 280 million bu which makes Friday’s report critical.

• US weekly ethanol production rose to 271 million gallons vs 259 million last week. The 4% decline in production is in line with the WASDE annual forecast. US ethanol stocks fell to 826 million gallons, down 1 million from the prior week and the lowest stock level in over 8 years. Stocks in the Gulf fell sharply but rebounded in the East Coast and Midwest. US blender demand remains soft on negative margins vs unleaded gasoline.

• The midday weather forecast is like the overnight run. Limited rainfall is evident for the next 10 days (likely longer) with harvest operations to continue aggressively. Hurricane Delta makes landfall in WC LA and turn north and northeast on the weekend. Thankfully, the forecast is less wet than the overnight with rains of 1-3.50″. This rain will cause a 3-4 day slowdown in Delta harvest operations. No rain is forecast for the Plains with the 11-15 day period maintain this dry trend. The EU model is wetter for the Plains, but the US and Canadian models are not offering confirmation. Rains is needed across the Plains to germinate a newly seeded winter wheat crop.

• Funds are adding to existing net long positions in size. The money keeps coming and Chicago keeps pushing higher. However, we expect that there will be a pause in the flow of funds ahead of the USDA report. The one thing that is certain is with Chicago funds holding a record large net long and Chicago open interest being record large that market volatility is going to be extreme. This produces opportunity. Russian and S American weather determine when a top forms.

• Chicago values are sharply higher at midday with rumours of fresh Chinese soybean purchases and another round of massive fund buying. The sharp Chicago rally comes as a surprise with the USDA October Crop Report due out on Friday. Normally in the gut slot of harvest, the marketplace would be more passive as cash pipelines are refilled as farmers sell soybeans off the combine. Yet, the record large US soybean open interest at over 1,015,000 contracts has everyone discussing another tranche of soybean demand from Chinese crushers that missed the September rally. These crushers need to cover December/January import needs. This is one reason why we have increased our 2020/21 soybean export estimate to 2,275 million bu.

• A record large US soybean loadout program in the Gulf along with a Cat 3 Hurricane in the Gulf that is targeting LA has the bears nervous. The storm could disrupt loadings for a few days and cause Delta farmers concern on what corn and soybeans remains to be cut. The US Gulf export program is record large and everything needs to work like clockwork to make sure that purchases are fulfilled. Traders will be closely watching the storm for signs that it could target NOLA on the weekend.

• Chicago brokers estimate that funds have bought 14,000 contracts of corn, 10,400 contracts of soybeans, and 7,400 contracts of wheat. In the products, funds have bought 6,200 contracts of soyoil and 6,700 contracts of soymeal. We calculate that funds are close to a 240,000 net long soybean position which is only 12,000 contracts from the 2012 Midwest drought high.

• Spot Chicago wheat futures (December) were able to rise above $6.00/bu for the first time since June of 2015, some 5 years ago. The rally is being spurred by ongoing dryness across European Russia which could cause farmers to slow or halt their winter wheat seeding effort. The world has a record supply of wheat, but the market is concerned about 2021 Black Sea wheat supplies and a shift in world trade to the EU and the US. The USDA is expected to increase their 2020 Russian wheat crop by 3-4 million mt to 81-82 million based on actual harvest data. USDA will not offer an estimate of 2021 Russian wheat production until May of 2021, some months into the future.

• The big unknown is what will Russian farmers do if they cannot plant winter wheat due to drought that extends into mid or late November. Sunseed, corn, and spring wheat appear to be the main options. Russian farmers are ready to give up on winter wheat with a few more weeks before cold temperatures slow germination. Our guess according to farm sources in the area is that Russian farmers will turn to sunseeds and corn as cropping alternatives. Thankfully, winter wheat planting is advancing in the Ukraine and Europe which could help fill the void of 5-15 million mt of lost production.

• US farmers are selling cash corn/soybeans on the rally with November soybean futures priced at an 8-cent premium to March. There is no financial reason why producers should store soybeans. A long call or futures position is cheaper than paying monthly storage.

• The USDA announced that 154,000 mt of soybeans was sold to unknown destination. The rumoured buyer is said to be Europe.

• Delta looks to become a dangerous Cat 4 or 5 hurricane in the Gulf that could wreak havoc across LA depending on where it makes landfall. The remains of the storm will carry up across the Delta with heavy rains of 2.5-5.00″. The Midwest weather forecast is devoid of rain through Monday. Showers are then forecast for NE/E KS and MO as a cold front sags southward boosting rain chance.

• Funds are adding to existing net long positions in the hope that China will return with new purchase orders following their weeklong holiday. The potential of China demand amid USDA October Crop Report and a dangerous Cat 4 or 5 Gulf hurricane pushed corn, wheat and soybeans to new rally highs, which triggered new chart-based buying. December corn is near resistance at $3.90 while SW Russian dryness has lifted Chicago wheat to $6.00. The next upside target in Nov soybeans is the early 2018 high at $10.71.

• Chicago wheat values are higher at midday with KC leading the advance. The world wheat market has pushed into a more dynamic bull phase based on SW Russian dryness (forecast to persist for 2 weeks). In weather bull markets, premium is added early and late in the week with a normal midweek sag.

• Summer Chicago row crop futures are sagging on the ongoing Midwest harvest and rumours that Argentina is being more aggressive in offering fob soymeal for export. US farmers report variable yields, but better than expected totals. Traders are deeply aware that funds are holding a massive net long position and that the market could drop sharply with any bad fundamental news. Friday’s USDA Crop Report looms and the trade worries that USDA could come out with yield totals that are little changed from September.

• Chicago has a bullish tone in wheat, but rallies in wheat/soybeans will be fleeting into the close. Key support rests at Friday’s low in December corn at $3.7825 and $10.14 in November soybeans.

• Chicago brokers report that funds have bought 5,900 contracts of wheat, while selling 3,200 contracts of soybeans and 4,200 contracts of corn. In soy products, funds have sold 5,400 contracts of soymeal while buying 3,900 soyoil.

• Monthly EU weather model forecasts were released this morning. The forecast calls for increasing rain for N and C Brazil while more normal rainfall is also offered for the drier areas of the Black Sea. Whether the EU model has it correct has to be witnessed, but the data suggests that traders need to be alert for improved Brazilian and Black Sea rainfall during the last week of October and throughout November.

• US export inspections for the week ending October 1 were 34.0 million bu of corn, 61.2 million bu of soybeans, and 23.6 million bu of wheat. The soybean export total was larger than expected and included 44 million bu of US soybeans to China or 72% of the total. China also shipped out 14.2 million bu of us corn.

• For their respective crop years to date, the US has exported 144.4 million bu of corn (up 64 million or 81%), 242 million bu of soybeans (up 88 million or 56%) and 363 million bu of wheat (up 33 million or 9%).

• Mato Grosso has planted just 2% of its soybean crop based on ongoing dry weather conditions. Plantings look to expand later this week as rains are forecast to fall, but since the Mato Grosso has delayed soy seeding, the new crop soybean harvest will be limited until late January with exports seasonally increasing in February, about 3 weeks later than normal.

• Accordingly, we have raised our 2020/21 US soybean export estimate to 2,275 million bu as China will likely secure another 3-3.5 million mt of US soybeans to fill the January void offered by the Brazilian soybean seeding delay. The additional demand has dropped US 2020/21 soybean end stocks to 320 million bu.

• The midday GFS weather forecast offers generally dry and warming weather conditions over the next 10 days. The Central US soybean and corn harvest will accelerate through the weekend. A likely hurricane will trek northward into LA and MS on Friday/Saturday which is like the EU model. This storm looks to trek into the Delta and produce heavy rainfall of 4-7.00″. This could cause issues for any remaining harvest next week. There is a chance for Central Plains rain, but totals of 0.25-2.00″ look to be focused on ENE and C and E KS. Any rainfall is welcome for the Plains for HRW wheat.

• Chicago has lots of uncertainty ahead of it this week including Friday’s USDA October Crop report, a potential Gulf Hurricane, Brazilian and Russian weather, China’s return from a week long holiday, and US politics and whether another Covid-19 aid package can be cobbled together. Amid funds that are heavily long, the trade will be sensitive to bearish news, but it is a buy any sharp break until big S American soy/corn harvests are confirmed in early 2021. Market volatility will be lasting.

• Chicago midday values are mixed with wheat lower, while soybeans/corn are slightly higher. Technical and fund buying has been evident in the summer row crops, while wheat sags on stable world wheat prices. French wheat futures are struggling against $197 €uro/mt while trade talk has Chinese crushers booking a few US soybean cargoes for November. Chicago has a firm undertone at midday, but increased farm selling is capping rallies. The market is likely to find harvest hedge pressure on Friday which will act to cap rallies. Research argues for a range in nearby corn of $3.40-3.90 with the 2020 US corn and FSA acreage data the last ingredients needed to formulate long term Chicago price direction.

• Chicago brokers estimate that funds have bought 10,000 contracts of corn and 1,700 contracts of soybeans while selling 3,400 contracts of Chicago wheat. In soy products, funds have bought 4,300 contracts of soymeal while selling 3,200 contracts of soymeal. The funds are adding to an already large net long position in soybeans/soyoil and trying to get longer of wheat and corn. We note that corn is scoring a weekly technical reversal on the charts.

• US crude oil futures have fallen $2.00/barrel which has pressured soyoil and corn futures at midday. We calculate that the 2-day corn rally is producing negative margins for US ethanol producers and blenders. US ethanol producers cannot withstand much higher corn prices are they will be forced to slow/close operations once again. The rise of corn and fall of oil along with 8% fewer miles driven is costing US ethanol producers.

• As reported on Tuesday, Argentina is temporarily planning to reduce export taxes by 3% to 30% until year end. The cuts are hoped to stimulate farm sales of stored soybeans to help raise Government revenue. Many Argentine farmers hoard soybeans as a hedge against currency and inflation. The Argentine Peso is sitting at record low of 76:1 US$ and forecast to fall farther by the ROFEX Exchange. Although some farmers will sell stored supply due to cash flow demands ahead of planting, the overall sales pace is not expected to change significantly.

• The August Crush report will be released this afternoon with traders looking for 175.7 million bu. This is the lowest crush rate in 6 months with soyoil stocks forecast at 1,950-2,020 Mil pounds. The report is not expected to be a big driver of price.

• Private estimates for 2020 US corn and soybean yields and production will start to come out early next week.

• The midday GFS forecast is wetter across the Central Midwest Oct 13-17 but is otherwise unchanged from prior estimates. Wetter weather in mid/late act would act to eliminate drought conditions across the SRW Belt, but confidence so far out is low.

• Complete dryness is forecast over the next 10 days. Any Gulf storm activity through the period will stay confined to the Caribbean. A speedy harvest is anticipated.

• World ag markets have been re-set in the last 45 days. US balance sheets have shifted from ultra-bearish to requiring favourable weather in S America over the next 100 days. NASS’s Oct yield data will be scrutinised but big picture market changes will hinge more upon whether S American surpluses rise or fall in early 2021. Wheat will be volatile as the trade is rightfully uncertain how to forecast 2021 Russian production. Our only nearby concern is that the speculative community has quickly digested changes in balance sheet by piling into sizeable long positions. We estimate that managed funds are net long 218,000 contracts of beans, the largest since 2012.

• The September USDA Stocks in all Positions and Final 2020 US Small Grains report was bullish with US corn stocks falling to 1,995 million bu while US wheat 2020 production was trimmed to 1,825 million bu. Chicago futures soared on the news as S American and Russian weather condition become more important going forward. December corn and December wheat are at new rally highs while soybeans are 10 cents short of their September peak.

• The USDA estimated 2019/20 US corn end stocks at 1,995 million bu with the June-August feed residual use being a new record high of 928 million bu. This unexpectedly large feed use implied fourth quarter US corn demand rose to a record 3,028 million bu. This demand was 800 million bu larger than last year, despite a sizeable fall in US ethanol consumption. Compared to the September WASDE, such stocks are 233 million bu lower with a good portion of the stock loss occurring in Illinois.

• NASS estimated the 2019 US corn crop at 13,619 million bu, up by 2 million bu from the final with a yield of 167.5 million acres.

• US 2019/20 soybean stocks were pegged at 523.5 million bu, down 52 million from the September WASDE report. The loss of 52 million bu of US soybeans due to the residual factor was one of the largest in years. The loss of the old crop will tighten 2020/21 US soybean end stocks close to 400 million bu without a change in US soybean export demand or the loss of yield through early September dryness. The US soybean balance sheet is tightening with future Chinese demand and Brazilian weather becoming more important.

• NASS estimated the 2019 US soybean crop at 3,551 million bu with a yield of 47.4 bushels/acre. This is down 1 bushel/acre from their final estimate with the vast major of the stocks loss to be explained through the residual figure. WASDE had indicated a negative residual of -45 million bu in prior monthly balance tables, but the residual ended up being a positive 8 million bu. This was the first positive fourth quarter residual in 25 years and goes against prior NASS quarterly soybean stocks data.

• US wheat production was lowered to 1,825 million bu, a drop of 13 million. The decline was anticipated by the industry. The US winter wheat crop was lowered to 1,171 million bu (down 27 million bu), while the spring wheat crop was raised 9 million bu to 586 million. The US white wheat crop was raised 20 million bu with cuts in US HRW to 659 million bu and 266 million bu for 2020 US SRW production.

• US Q1 wheat feed/residual is estimated at 215 million bu which if included with corn, accounts for record feed use of US feed grains. This is the largest US feeding of wheat since 2016 when 266 million bu were fed. The adjustment in US corn stocks derives from the feed/residual category. It is shocking that US livestock feeders fed a record 928 million bu of US corn in Q4 of the 2019/20 crop year.

• US September 1 wheat stocks came in at 2,159 million bu, the lowest since 2015. Such stocks are down 187 million bu from last year and continue a declining stocks trend that now goes back to 2018. The lower US wheat stocks amplifies the dryness that is occurring throughout much of SW Russia for the second consecutive year. Rains will be needed to aid the next exportable Russian wheat crop.

• NASS Quarterly Stocks estimates are one of the most volatile data sets for US agriculture. Low confidence has been expressed in prior and recent data. Yet at face value, there was nothing bearish about the Sept estimates released today. The fall in old crop com/soybean and wheat stocks places a larger burden on US 2020 com/soybean production and the coming growing seasons in Latin America and SW Russia. Yet, the data leaves more questions than answers.

• Fund managers will pile into an even larger net long Chicago grain/soy position heading into the October WASDE and Crop Production report. The midday weather forecast maintains the chance of rain for N and C Brazil after October 9 with limited precipitation for SW Russia in the next 2 weeks.

• Chicago markets will be volatile in the weeks and months ahead. Chinese demand becomes more important and whether they return with new buy orders following their week long holiday will be closely monitored. This is no place to make new purchases, but support will be found on any corrections until large 2021 S American crops are known in early 2021. Daily highs are likely in place with brokers reporting an increase in US producer selling at midday.

• Chicago prices are lower at midday with corn, soybean and wheat futures weaker on fund liquidation heading into the end of the month. China did not show up as a buyer of US soybeans or corn overnight. Increasingly, traders believe that China has most of their September-January purchase book in place (85-90%). Chinese crushers may have some coverage to be fulfilled, but with China having secured some 24.5-25.5 million mt of US soybeans early 2021, the coming purchase pace will be from private buyers and not the ongoing large state run purchases that have occurred in recent weeks.

• Research looks for a mixed close. We expect that any moderate Chicago rally will be sold by US farmers looking to part with some new crop harvest. Yield reports from producer clients continue to surprise on the upside with traders no longer certain that NASS will be cutting their yield estimates in October.

• Technically, December corn futures is back to testing its 200 moving average at $3.6075, while wheat tries to hold yesterday’s low at $4.695 December KC while November soybeans have fallen below their 20-day moving average at $9.94. Fund managers are closing out positions into the end of the quarter.

• Chicago traders estimate that funds have bought; 2,700 contracts of Chicago wheat while selling 6,000 contracts of corn and 4,200 contracts of soybeans. In soy products, funds have sold 3,000 soymeal and 4,500 contracts of soyoil. Fund selling is expected into the close on long profit taking.

• There are rumours that the Argentine Government is preparing to relax its export tax on soybeans to raise domestic soybean prices to farmers and facilitate a larger old crop export program. Argentine farmers are hoarding soybeans amid inflationary and continued currency devaluation fears into mid 2021. The ROFEX currency/grain exchange is trading the Peso at 107 for next July, a depreciation of 40% vs today’s trading level at 76 Pesos:1 US$. Argy farmers will see the coming depreciation as greater than a relaxation of the current export tax. However, any additional availability of Argentine soybeans is seen as slightly bearish on more than adequate G3 (US/Argentina and Brazilian stocks) as of January 1.

• The midday GFS weather model has less rain for Northern and Central Brazil beyond October 9. The model has 0.5-1.25″ which is not enough to saturate soils for soybean germination. The models are going to struggle with the dryness that is offered over the next 10 days and the prospect for monsoonal flow from the Amazon thereafter. Traders will watch Brazilian weather forecasts more closely following the purchase run of China for US soybeans. Rains will be required after October 10. The midday Brazilian forecast leans less favourable for 2020 timely Brazilian soybean seeding.

• The midday GFS weather forecast maintains blocking pattern aloft across SE Russia. This will deepen moisture deficits. The EU/Ukraine will see soaking rainfall, it is the Russian wheat areas that will hold in an exceptionally dry pattern.

• The forecast has limited Central US rainfall for the next 2 weeks with a ridge/trough pattern prevailing this week while the ridge progresses east into the Central US next week. No real weather threat to the harvest is offered with temperatures to be variable. Notice that Gulf storminess should be monitored for development. The Midwest corn and soybean harvest will speed quickly ahead.

• Russian wheat and N Brazilian soybean dryness are the supply stories to keep the bulls engaged. However, the US harvest will be pushing ahead strongly. We doubt that any Chicago rallies can be sustained. A bullish September Stocks report is likely to be sold with fund length in soybeans/soy products at decade highs. We doubt that N Brazilian dryness can be sustained beyond mid-October, but Russian dryness needs to be closely followed.