• NASS surprised Chicago traders with a 2019 US October corn yield above September. Traders/farmers were anticipating that objective yield analysis would reflect a 2-4 bushels/acre decline. The net result is that US 2019 corn production held steady (with September) at 13,779 million bu due to a modest fall in harvested acres due to new and updated FSA data.

• The NASS October soybean yield/stocks data was supportive with diminished production, but it is always corn that rules the day with many (including us) suspecting that WASDE is at least 5-7 million mt too high with China 2019/20 soybean imports due to the ongoing expansion of ASF within their pig herd.

• The battle between supply bulls and the demand bears has been won by the bears. US corn, soybean and wheat export forecasts are likely to fall even further with time. We had been hopeful for a positive NASS report.

• Longer term, if the nearly 20 million acres of corn/soybeans (prevent plant) were seeded equally to each crop, US farmers would have produced another 2.2 billion bu of crops. This is the problem for US ag markets longer term. The return of 19.4 million acres to Midwest production and trendline yields would substantially add to US stocks without additional export demand.

• The October USDA report confirmed what now seems to be a secondary top in corn. The soybean market may still have 10-25 cents of upside price potential, but a US/China ag trade deal or dire S American weather is needed to alter directional bearish Chicago price trends.

• USDA corn data is bearish relative to Dec Chicago at $3.95. Yield was pegged at 168.4 bushels/acre, up marginally from September and 1.5 bu above the market’s expectation. Even accounting for the loss of old crop carry-in supplies, new crop US corn stocks were put at 1,929 million bu. Total 2019/20 US corn disappearance was lowered 90 million bu. Exports were lowered 150 million, with ethanol’s demand draw down 50 million. This was partially offset by higher projected feed use.

• We currently see a US corn yield of 166 bushels/acre, with just 29% of NASS samples rated as mature. This compares to 80% a year ago in Oct. Additional ear weight loss is expected across the E Corn Belt. However, USDA’s ethanol and export forecasts remain overstated in our opinion. US corn export commitments through early Oct are down 52% from last year, with the USDA’s Ukrainian production forecast still 2 million mt too low. Enlarged export competition persists into early 2020.

• Following tight US corn stocks estimates early in the summer, a relative loosening of the US balance thereafter and now a drop in final 2018 end stocks, major exporter corn stocks/use is unchanged on the year. Note that Ukrainian yields are up 1% from last year with 40% of the crop gathered. The USDA projects Ukrainian corn yield to decline 6% year-over-year. A drop in US yield of 1 bushels/acre in Nov will be offset completely by higher Black Sea production. Projected world corn trade in 2019/20 was 166.6 million mt and now sits 11 million below last year. With world wheat stocks record large, there is no shortage of global grain supply. Only widespread adverse S American weather can change the oversupply.

• Our primary concern for the US market is sheer lack of US export demand, even from W Hemisphere countries. Dec Chicago is fairly priced between $3.65-3.95.

• The October Crop Production and WASDE reports were viewed as supportive for Chicago soy markets as balance sheets tightened.

• In the 2018/19 balance sheet, production was reduced to match NASS’s estimate from the September Grain Stocks Report. Imports were lowered to match Census Bureau trade data, and the net result was a 119 million bu decline in total supply. Crush increased by 7 million bu to 2,092 million, and exports were increased by 3 million bu to 1,748 million bu. Last year’s US carryout was lowered to 913 million bu.

• In the new crop balance sheet, NASS lowered planted/harvested acres by 240,000 acres. Yield declined 1 bu to 46.9 bushels/acre.

• US production fell by 83 million bu, and total supply dropped by 175 million bu. Exports were raised 5 million, and end stocks were projected 180 million bu less at 460 million. The average farm-gate price forecast was raised $.50 to $9.00/bu.

• Yields were lower in 18 of the 29 states that NASS estimates. In the Midwest States, the largest decline of 2 bushels/acre was in IL, MO, and NE. All other states were lowered by 1 bushels/acre, except MI, which was increased 1 bushels/acre. The largest yield declines were in Delta and Southern states, where the GA and SC yields were down 5 bushels/acre, while AL and KY yields were lowered 4 bushels/acre.

• In objective yield data, the 7-state pod count increased 3% from the September report. Despite the modest increase in the October count, it is still the second largest year-over-year decline in counts, behind the 2012 drought and the lowest pod population since 2013. NASS’s yield estimates implied a 5% decline in pod weights, but the implied figure is still 9% more than a year ago and record large.

• NASS’s yield estimates assume normal weather which would not account for the N Plains and N Midwest blizzard. Yields in those states will decline, but losses will not be fully accounted until after harvest (January report).

• In the global balance sheet, the 2019/20 world soybean production forecast declined by 2 million mt from September and remained at a 4-year low of 341 million mt. Nearly all the decline in global production was due to the smaller US soybean crop estimate.

• Argentine production was unchanged at 53 million mt, and Brazilian production held steady at 123 million mt. Ahead of the USDA forecast, Brazil’s crop forecast agency CONAB estimated a soybean crop of 120.4 million mt. The USDA is expected to maintain its larger crop production forecast later in the year when more is known about early season weather.

• Typically, the USDA begins following CONAB’s guidance in the December and January reports.

• The October reports did not hold a bearish surprise and were generally supportive. However, it was the bearish corn estimates that pulled soybeans down.

• Our long-held price targets of $9.30 were reached this week and we are generally bearish of any post report rallies. A China trade deal is needed to support a trade over $9.50 November.

• The USDA raised US wheat ending stocks 29 million bu to 1,046 million. WASDE adopted NASS’s final production as well as disappointing implied Jun-Aug feed disappearance. USDA also lowered 2019/20 exports 25 million bu amid ongoing US premiums to other comparable origins and another reduction in total world wheat trade. Note that US HRW stocks were raised to 491 million bu, vs 462 million in Sep. Steep KC discounts to other markets will continue.

• Wheat lacks a fundamental story. Seasonal trends in world cash values have turned positive, yet EU and Black Sea origins are offered at levels equivalent to $3.95, basis Dec KC. Note that US 2020 end stocks will stay above 950 million bu even assuming another 400,000-acre cut in seedings. Supply fear will remain lacking amid lofty end stocks. Any lasting rally in wheat will be tied to potential corn supply losses in S America should a dire summer drought develop. Wheat looks to be range bound.

• And the world wheat balance sheet continues to loosen. Total world end stocks were raised 1.3 million mt to 287.8, a record high, on a minor revision to domestic use and another 1.1 million mt cut to world trade. World trade wheat trade is now pegged at 179.7 million mt, vs. 185.4 million in June.

• Australian production was lowered 1 million mt to 18 million. This was offset by larger EU production. And we would still anticipate a 3-4 million mt hike in Russian production within the USDA’s Nov release. Major exporter stocks/use is pegged at 16.1%, vs. 15.6% in September. Major exporter stocks are not overly bearish, but it is clear that steep competition for export demand persists from Europe and the Black Sea.

• World wheat stocks will rise another 8-10 million mt in 2020 with normal weather. It is the trend of ever-higher world stocks that will cap price rallies as world wheat trade stagnates.

• Chicago trade is mixed at midday with corn futures lower while soybeans are higher with wheat caught in between. The volume of trade has been moderate to active as traders adjust positions ahead of the USDA October Crop Report and US/China trade negotiations that will start on Thursday. And traders await details of China’s offer to secure US ag goods and the response of the Trump Administration. Few, if any, have confidence on what President Trump will do.

• The uncertainty of Trump and USDA is causing traders to reduce trade risk and get to the sidelines. We agree with this risk reduction thinking but hope for a post report rally. Beyond S American weather woes, it is difficult to see how Chicago can sustain a recovery beyond the current fund short covering. US corn and wheat are not competitive in world markets and US 2019/20 exports need to be adjusted downwards. We see little or no evidence of a new demand driver that would create a bullish trend outside of loss of S American crop supplies due to weather.

• Chicago brokers estimate that funds have bought 6,300 contracts of soybeans, 3,200 contracts of corn and 1,200 contracts of wheat. In soy products, funds have bought 1,400 soymeal and sold 3,100 contracts of soyoil. If there is a supply worry over N Midwest cold weather, soyoil would be rising amid the reduced oil content and number of green beans in the crush mix. The overall loss of supply is due to Dakota snows, not the ending of the growing season that appears to be the driving fundamental force in recent days.

• Private estimates surrounding the coming cold/snowy weather has a crop loss range of; 10-25 million bu soybeans and 75-240 million bu of corn. The difficult aspect of assessing the N Plains and NW Midwest crop losses is will the extended growing season in the Central and E Midwest make up for some of the N Plains US yield reduction. No one will ever know, but the point is that the coming cold will not reduce the US crop enough to ignite a new bullish trend.  And the loss estimates depend on the longevity of the snows and when combines can get back to harvesting.

• US weekly ethanol production was 963,000 barrels per day or 283 million gallons for the week. This compares to 282 million gallons for last week. The production is the lowest of the past 3 years and below WASDE average needed for the first 5 weeks of the crop year. However, US ethanol stocks fell 891 million gallons vs 975 million gallons in the week prior, down 12%. The data is viewed as mixed, but we are concerned by the overall meagre grind rate for US ethanol producers.

• The midday GFS weather forecast is like the morning run but has lowered projected snowfall in ND and parts of SD to over 4-18”. Based on ground temperatures when the snows fall, we suspect that totals will be even less. A strong cold frontal pass will drop temperatures to 28-34 degrees across much of the Northern Plains and the NW Midwest. The growing season will end here, but unless temperatures decline to 24 degrees or below, crops will keep maturing for another 6-10 days. A drying and warmer weather pattern follows in the 8-15 day period that should allow for snowmelt and the harvest to resume. The rest of the Midwest will be frost free into October 18.

• This would not appear to be a point at which to turn bullish of corn and soybeans. We would see any post report rally as selling opportunities.  December corn will struggle on rallies to $4.00-4.10 while November soybeans struggle on rallies above $9.40.  If one wants to be more bullish it must be based on a S American drought in November or December. We see this Chicago rally as corrective.

• Green has been the colour in Chicago this morning as new buying emerged at the traditional 9:30 start time. We suspect overnight snow forecasts are the catalyst, but Monday’s Crop Progress report did lean positive amid upcoming challenging Central US weather. A close above $3.92, basis Dec 19 corn, will reflect a new 20-day high. This in turn likely attracts additional buying/short covering ahead of Thursday’s USDA reports.

• The midday US weather forecast is in line with morning output in that snow accumulation of 15-25″ will be widespread across the Dakotas. Regional accumulation upwards of 30-40″ are possible in eastern ND. The sheer amount of snow, and all within a 4-day time period, will cause massive logistical issues as well as widespread lodging and quality loss. Cooler temperatures next week will delay row crop harvesting in SD, ND and far western MN until late October. Interior US cash basis levels will stay supported at multi-year highs.

• It is estimated that managed funds this morning were short a net 112,000 contracts of corn, vs. 106,000 last Tuesday. Funds are also estimated to have been short 24,000 contracts of Chicago wheat, vs. 21,500 last Tuesday, and 9,000 contracts of beans, vs. 8,700 a week ago. Funds are covering as the 2019 US growing season will be challenged from start to finish.

• Egypt’s GASC has secured 295,000 mt of Russian and Ukrainian wheat for mid-November arrival. No other details are available yet, but the cheapest offer made this morning was Ukrainian origin at $201.90/mt, which compares to an average purchase price last week of $199.10.

• The midday S American forecast contains a much more normal pattern of rainfall across the whole of Argentina. Cumulative totals of 1-3″ will be widespread across Cordoba, Buenos Aires and Santa Fe over the next 12-14 days. These three provinces combine 70% of Argentine row crop production. However, dryness resumes across Central Brazil beyond the weekend. There is no sign that widespread rain returns to Central Brazil into Oct 23. It is tough to establish drought in Brazil during the winter months, but longer-term climate forecasts suggest a meaningful pattern change will be delayed until early November. Further cuts to US soy production will raise the burden on trend/above trend Brazilian soy yield.

• The midday GFS weather forecast is similar to the morning run but has raised projected snowfall in ND and parts of SD to over 30″. Otherwise, the frontal system along with heavy snow cover will funnel much cooler temperatures into the Central US. Overnight lows near/ below freezing will be widespread this weekend across the Plains and Upper Midwest, including IA and WI. Corn in IA as of Sunday had reached 52% mature, with WI at just 30%. A much drier pattern is projected Oct 13-20, but drying will be slowed amid cooler than normal temperatures. US harvest stays well behind average.

• Supply premium is being added amid blizzard conditions in the North and as more rain is needed in Brazil by early November. Additional net premium should be added into NASS’s Oct report. Next resistance lies at $4.01, Dec corn, $5.05, Dec Chicago wheat, and $9.25,Nov beans.

• It has been a mostly firm session to start the week, though meaningful interest in trade ahead of this week’s USDA reports is lacking. The end of the row crop growing season is due later this week via heavy snow across the Northern Plains and Upper Midwest, including pockets of northern IA. The arrival of snow cover will usher in a cooler temperature profile across the whole of the Central US thereafter. Yet, the market expects only modest downward revisions to US corn and soy production. Russian wheat production will likely be raised 1-2 million mt. Black Sea corn yields also remain well above last year.

• We note that rising non-US production estimates will keep export demand potential limited into early 2020. It is surprising that S American corn is offered at discounts of $0.10-0.30/bu to US Gulf corn into February. Whether Brazil’s 2018/19 corn crop is being understated is unknown, but it is clear the world cash markets continue to signal adequate global supply.

• We would also mention that a Russian wheat production hike of 2 million mt will nearly offset projected further losses in Argentina and Australia. Total wheat supply in the Southern Hemisphere will be up slightly on last year amid lofty Argentine carry-in stocks of 1.9 million mt, vs. just 539,000 mt the prior year. The message remains that new supply-driven fear is needed to sustain rallies beyond the Oct 10 US crop report.

• Weekly US export inspections through the week ending Oct 3 included 18.4 million bu of corn, vs. 16.6 million the prior week; 14.2 million bu of wheat, vs. 18.5 million the prior week; and 38.2 million bu beans, vs. 36 million the prior week. Note that an average weekly corn shipment pace of 38 million bu is needed to meet the USDA’s forecast, and we remain concerned over US corn export potential longer term with normal S American weather.

• For their respective crop years to date, the US has shipped just 79 million bu of corn, down 66% from a yeara go; 327 million bu of wheat, up 21%; and 154 million bu of soybeans, up 17% from this week a year ago.

• FAS this morning announced that 198,000 mt of US beans were sold to China for 2019/20 delivery, with another240,000 mt sold to unknown destinations. Recent Chinese purchases have helped the pace of shipments, but this week’s US-Chinese trade talks are critical if US beans are to compete into China beyond Jan/Feb. On a known basis, China as of today has secured 4.65 million mt of US soy. This is nearing private estimates of 5 million mt.

• The midday S American forecast is similar to morning model output. Additional rain will fall across key areas of Mato Grosso, Goias and Minas Gerais in Central Brazil over the next 72 hours. A drier pattern returns thereafter into Oct 20. Nov-Dec rain is critical to soy yield determination, but this year’s slow transition to the wet season is being watched closely.

• The midday GFS weather forecast includes heavy snowfall worth 9-15″ that will impact the Dakotas, NE and MN Thurs-Sun. Lesser totals of 2-3″ will reach into northern IA and northern KS. Cooler than normal temperatures will then expand across the entirety of the Midwest Oct 12-18. Low readings in the 30s and 40s will be common next week. A much drier pattern is projected beyond this weekend, but slowed evaporation rates will keep soils saturated. Harvest into late Oct will remain challenged.

• The supply bulls await bullish NASS/harvest data. The demand bears highlight rather weak ethanol production to date and aggressive non-US cash prices into the end of winter 2020. This leaves Chicago choppy into harvest. Longer term S American climate forecasts feature a much more normal pattern of rainfall in November.

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Weekend summary 4 October 2019

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Fund positions disaggregated data

• Ag futures at midday have traded both sides of unchanged in mediocre volume. Macro markets are stabilising following Wednesday’s lashing, while concern over US yields and S American precipitation in October have kept new meaningful selling limited. Choppy trade lies into NASS’s Oct 10 report, as neither the supply bulls nor the demand bears will hold leverage to move the market significantly. Actual corn harvest won’t reach 50% complete until the first of November. Precise US supply estimates await NASS’s Nov report.

• US export sales through the week ending Sep 26 were disappointing for corn and wheat but better than expected in soybeans. Corn sales through the period totalled 22 million bu, vs. 19 million the prior week. A pace of 34 million bu/week is needed to meet the USDA’s forecast. Wheat sales totalled 12 million, vs. 10 million the prior week. Net durum sales cancellations of 2.3 million bu were recorded.

• US soybean sales totalled a sizeable 76 million bu, vs. 38 million the prior week. Sales made to China totalled 57 million bu. FAS this morning also announced new soybean sales to China worth 225,000 mt.

• For their respective crop years to date, the US has sold 382 million bu of corn, down 51% from last year, 525 million bu of soybeans, down 29%, and 474 million bu of wheat, up 14% from late Sep 2018. Corn exports will struggle with non-US origin offered measurably cheaper than the US into early 2020. Soybean exports need more than just goodwill Chinese purchases, or adverse S American weather. US wheat sales are on track to meet the USDA’s 975 million bu forecast.

• Another 10 days of complete dryness is offered to most of Australia’s wheat belt. Any pattern shift hereafter will have a limited impact on wheat yield potential. 60-day rainfall in New South Wales and Queensland, which combine for 35% of total Aussie wheat production, sits at 5-30% of normal. Aussie crop estimates are drifting closer to last year’s 17.3 million mt, vs. USDA’s projected 19.0 million. Aussie wheat futures in US$ have rallied 10% since late August.

• The midday GFS weather forecast maintains needed soaking rainfall across wheat areas of Buenos Aires Oct 10-12 but has trended drier in Central Brazil. High pressure ridging is forecast to return to C Brazil beyond the middle of next week. A pattern of Brazilian dryness resumes Oct 11-17. Long range climate guidance maintains below normal precipitation in Central Brazil into the end of October. Soaking rain will be needed soon thereafter.

• The midday GFS weather forecast has added rainfall to IA, MN, WI and IL Oct 11-12. The GFS also keeps intact a blast of cold air late next week. Overnight low temperatures will fall into low/mid-30s across the Dakotas and NW Corn Belt, including parts of N IA. Damage to national yields will be minimal, but the recent rush to maturity will be slowed moving forward. Harvest into mid-month will be challenged by wet soils.

• Macro-driven weakness was short lived amid US production concerns and what has been a rather slow transition to the wet season in S America. Breaks into the Oct 10 crop report will be brief/shallow. Black Sea corn yields remain solid. US grain export potential remains weak.

• Red has been the morning in Chicago as macro markets plunge on weak US manufacturing data. Ag fundamentals remain mixed, with the battle between the demand bears and supply bulls to rage on into the release of the USDA’s October reports. Note that the Central US weather forecast maintains a favourable shift to drier Midwest weather beyond the weekend. Additional soaking rainfall is not indicated into the second half of October.

• This month’s ISM manufacturing index fell to 47.8%, the lowest since June of 2009 and down another 1.3 points from the prior month. The US manufacturing sector has contracted for two consecutive months, and financial markets are concerned over ongoing trade barriers and slow global economic expansion. The Dow at midday is down 490 points. Spot WTI crude is down $1.25. Ag markets have been forced to follow.

• And the EIA’s weekly energy report failed to offer any bullish corn/ethanol input. US ethanol production through the week ending Sep 27 totalled 282 million gallons. This is up 5 million on the previous week but down 17 million (6%) from the same week in 2018. Ethanol stocks still managed to rise 30 million gallons to a lofty 975 million gallons. The US ethanol market is well supplied despite weak production.

• US crude stocks, less reserves, were up 5.5 million barrels on the week and remain 5% above year-ago levels.

• FAS announced a sale of US beans to China worth 464,000 mt. This brings China’s total purchase since mid-September to 2.1 million mt. Additional sales will be announced in coming days, yet Chinese demand for beans will likely be capped at 4-5 million mt without trade deal progress.

• Egypt secured just 60,000 mt of French wheat for early Nov shipment at $199/mt on a fob basis. The rally in Russia’s market has allowed EU origin to better compete for nearby market share. German and French wheat is offered slightly below Russian for Nov shipment, and a lasting rally in world cash wheat markets will be tempered by ongoing competition for demand. Argentine corn basis has fallen to even money with Chicago futures, vs. US Gulf basis at $0.42/bu over. We continue to caution against chasing USDA driven rallies as US demand potential has failed to improve.

• Weekly US export sales on Thursday are expected to include 400-550,000 mt of corn, 300-400,000 mt of wheat and 1.2-1.5 million mt of beans. Year-over-year lags on corn and bean export commitments remain sizeable.

• The midday GFS weather forecast is cooler in the upper Midwest beyond Oct 10, with overnight low temperatures at or near freezing offered to ND, MN, WI and Ml Oct 11-12. Relative warmth returns thereafter, but close attention will be paid to whether the afternoon EU model follows this cooler trend. Otherwise, active showers continue across the E Plains and W Midwest into Friday. A much drier pattern evolves across the whole Central US beginning Sunday, which lasts through all of next week.

• Today’s break is mostly macro driven. Yet, fundamentally, rallies above $3.90, Dec corn, $5.00, Dec Chicago wheat, and $9.20, Nov beans, will struggle amid weak US export potential and a lack of growth in biofuel production.

• It has been a mixed and much less eventful session in Chicago. Row crops are a bit stronger on follow-through short covering. It is estimated that managed funds on Monday morning were short a net 174,000 contracts of corn and 53,000 contracts of beans. Short covering followed NASS data Monday, with estimates that funds have bought/covered a net 55,000 contracts of corn, and 20,000 contracts of beans. Additional covering is likely into Wednesday.

• Wheat has turned lower amid bearish Jun-Aug feed consumption and as improved harvest weather is offered to ND and Southern Canada into late next week. HRS basis in ND has improved in the last 30 days, but bids there remain $0.75/Bu under Dec Minneapolis. We suspect that large HRS carryover will temper any lasting rally in spring wheat cash markets due to quality loss.

• No new export sales were reported by FAS this morning. This is despite talk that China secured sizeable tonnages of US beans on Monday and follows Chinese tariff waivers on 1.8 million tons of additional US soybeans over the weekend.

• US corn and soybean export commitments remain 50% and 35% below last year, respectively. Non-US cash corn and wheat prices are well below US Gulf origin into early 2020. Work also suggests that the USDA will add 1-2 million tons to the Black Sea corn crop in its Oct WASDE.

• Spot WTI crude oil is down another $0.45/barrel at $53.50, and has retraced the entirety of the rally triggered by temporary Saudi supply loss. Ethanol futures are down $0.07/gallon at midday. Futures-based ethanol margins have rallied sharply since mid-August, from $0.05/gallon to $0.60/gallon, but whether this encourages a needed ethanol production boost remains to be seen. Weekly US ethanol production is typically weak until early/mid-October. Delayed corn harvest will delay this seasonal boost 1-2 weeks.

• A pattern of below-normal rainfall will persist in key areas of Argentina as well as Goias and Minas Gerais in Central Brazil to Oct 15. Nearby rainfall of 0.50-2.00″ will allow seeding to accelerate in Mato Grosso, Mato Grosso do Sul and Parana (55% of total Brazilian soy area). But elsewhere replanting will be necessary if rains fail to materialise in the next two weeks. Climate work suggests below-normal rainfall continues into the latter part of the month.

• The pace of corn and soy planting in S America will gain attention in the weeks ahead. It is critical that widespread soaking rain develops across the whole of Central Brazil by early November.

• In the US, the midday GFS weather forecast is consistent with the morning run. Soaking rainfall of 1-3″ will challenge early harvesting across KS, NE, MO, IA and WI through the balance of the week. However, needed Midwest dryness is projected Oct 7-12. Rainfall thereafter will be mostly scattered in nature. Expansive high pressure ridging aloft the Southeast US will sustain above-normal temperatures across all but the N Plains into early next week.

• Corn and soybean balance sheets tightened via reduced carry-in stocks. Yet, the message is that nearby non-US supplies are large. Any real change to world major crop supply and demand will be a function of supply dislocation in S America. We look for the supply bulls to have slight leverage into NASS’s Oct report. We would anticipate any strong rallies in the next 2-3 weeks to be short lived as producer selling kicks in.

• Sept 30 Stocks/Final Small Grain Report Analysis:
• 2018/19 US Corn End Stocks; Average Estimate 2,436 million bu – Actual 2,114 million bu
• 2018/19 US Soybean End Stocks; Average Estimate 980 million bu – Actual 913 million bu
• 2019 US All Wheat Production; Average Estimate 1,971 million bu – Actual 1,962 million bu

• NASS September Stocks and Final Winter wheat production totals were bullish. The big surprises came from 2018/19 US corn and soybeans stocks that came in well below trade expectations. Chicago values have rallied sharply on the news and the data places much more importance on the Oct 11 US crop production report. The bears will be unable to sustain much downside price until US 2019 corn and soybean yields are better known.

• NASS revised down 2018 US soybean production by a record 116 million bu with yield down 1.0 bushels/acre to 50.6 bushels/acre. Planted area was pegged at 89.2 million acres (300,000 acres less) with harvested area down 400,000 acres at 87.6 million acres.

• US September 2018/19 corn stocks at 2,114 million bu came in 322 million less than expected by .the trade due to enlarged feed/residual use. Q4 US corn feed/residual is estimated by us at 1,039  million bu, a record. For wheat, June-August wheat feeding is estimated at 194 million bu vs 189 million last year.

• It is apparent that NASS had a real issue in estimating last year’s US corn and soybean crops. Analysts argued that they were too high, and were proven correct in the end. The 2018 US soybean yield decline was 2.5% or 116 million bu. A 2.5% drop in last year’s US corn crop amounts to 360 million bu, slightly more than the 322 million bu decline. The point is that it is likely that both 2018 US corn/soy crops were overstated by 2.5%. It is just that corn will be big upward adjustment to 2018/19 corn feed/residual. The 2018 US corn yield should be 172.8 bushels/acre, a drop of 3.6 bushels/acre, which will not be reported by NASS.

• The final 2019 US all winter wheat crop was 1.96 million bu, up from a revised total of 1.89 million bu in 2018. The US wheat yield was estimated at 51.6 bushels/acre, up 4.0 bu from the prior year. Winter wheat production accounted for 1.3 billion bu (up 10%) with spring wheat at 600 million bu (down 4%), and durum wheat (down 26%). US SRW production was 239.2 million bu, US HRW 833.2 million bu with US white production at 231.6 million bu. US HRS production amounted to 558.9 million bu. The wheat production data is viewed as slightly bullish to Chicago values.

• The September Stocks Report data does little, if anything, to bolster future confidence in USDA analysis. The big miss in US 2019 US corn and soybean stocks begs the question of their 2018 crop size analysis. Our bet is that NASS missed both the US corn and soybean crop sizes by 2.5% due to cold/wet harvest weather last autumn.

• Chicago prices are unlikely to decline until it is confirmed that US corn and soybean yields are equal to or larger than their September NASS forecasts. We see the upside price potential as $3.90-4.10 basis December corn and $9.10-9.25 basis November soybeans. The upside in December Chicago wheat is pegged at $5.05-5.15.

• S American weather becomes more important going forward as US and world soybean production has fallen 3 million mt in soybeans and 8.2 million mt in corn. The NASS September report does not change long held bearish opinions, just that the upside is raised via the loss of US old crop supply and the uncertainty of new crop US yields in the early harvest.

• Mixed and low volume trade best defines Chicago trading at midday. The summer row crops have witnessed early fund selling with corn in the downside lead, while wheat values rise on the potential for Southern Hemisphere crop losses due to adverse weather. Position squaring is featured with directional trends lacking. We look for a mixed Chicago close with traders holding off on taking new risk prior to Monday’s USDA September Stocks and Small Grains Final Production report.

• The USDA reported another 257,000 mt of US soybeans that were sold to China in the 2019/20 crop year. The announcements take total announced US soybean sales to China this week at just under 840,000 mt. China has total sales commitments on the books in a new crop position of 2.1 million mt, so this week’s sales take China’s known purchase total closer to 3.0 million mt.

• China has discussed allowing private crushers to secure 4-5 million mt of US soybeans on a tariff free basis. Their purchases were initially off the PNW coastline, but Chinese crushers are now including the Gulf. Private Chinese crushers are more cautious in their purchases than Sinograin (Chinese Government).

• The USDA reported that for the week ending Sept 19, China secured 391,000 mt of US soybeans with net cancellations of 32,000 mt. There are just over 4.0 million mt of US soybeans sold to an unknown buyer with most arguing that at least half of those soybeans are to Chinese buyers. This would place 2019/20 US soybean sales to China at closer to 5.0-5.5 million mt on a known/unknown basis.

• The weekly export sales report for the week ending Sept 19 were; 10.4 million bu of wheat, 19.4 million bu of corn, and 38.1 million bu of soybeans. All weekly sales totals were disappointing.

• For their crop years to date, the US has sold 462 million bu of wheat (up 63 million or 16%), 360 million bu of corn (down 359 million or 50%), and 449 million bu of soybeans (down 236 million or 34%). The start of the sales year for US corn and soybeans has been very disappointing and likely to get worse before there is a hint of any improvement. Argentine, Brazil, and Ukraine are offering their corn some $0.15-0.40/bu under the US Gulf.

• Brazilian farmers are becoming active in soybean seeding with rain projected to be on the way in the next week, they will risk seed laying in dry seedbeds for 10 days if they know that rains will arrive.

• The midday GFS weather forecast shows a few far northern spots will reach down into the mid 30′s, but there is no evidence of a crop damaging frost/freeze into October 10. Much of the Canadian grain areas will see their growing season end in early October, but key US crop areas will be spared as a ridge of high pressure over the SE US elongates and retrogrades west. This more western position of the ridge shifts the mean position of the jet stream normal. Near to above normal rainfall is expected across the C Plains and the W and N Midwest. The E Midwest will enjoy drier weather conditions. The frequent rain looks to produce isolated flooding across IA where rainfall totals could reach upwards of 4.00″.

• The export outlook for US corn, soybean and wheat is dismal. US corn export sales will be slow right into 2020 amid keen export competition. This caps rallies in spot Chicago soybeans above $9.20 and December corn above $3.85. The demand bears are regaining their footing. However, Midwest harvest yield reports are disappointing thereby keeping Chicago values supported. Rallies and breaks will fail.