• Chicago midday values are slightly lower with soybeans tugging values downward on the warmer forecast for the Upper Midwest and the Northern Plains. US/China remains a topic of discussion following the USDA announcement of 581,000 mt of US soybeans to China. US President Trump stated this morning that that a US/China deal could come sooner than expected which underpinned the marketplace. Yet, Chicago traders report that they are tired of reacting to every US/China comment, and most will say that they will believe a deal when it is signed. China starts a week long holiday on Tuesday and will be out for much of next week.

• Chicago trade volume is being restricted by the coming Central US harvest and Monday’s USDA Crop Report. Variable yields are being reported by corn/soybean farmers with a weak yield trend noted. The market will look to the October NASS/WASDE report for yield trend confirmation as NASS plots are harvested.

• Chicago brokers report that funds have sold 2,100 contracts of Chicago wheat, 4,900 contracts of corn, and 2,600 contracts of soybeans. In soy products, funds have sold 2,100 contracts of soyoil and 2,900 contracts of soymeal. The bulls need to eat every day and selling accelerated in beans at the 100-day moving average.

• FAS confirmed the sale of 581,000 mt of US soybeans to China. China is out of the market from Tuesday and the rest of the week for their 70th Anniversary of Communism. This means that if new US soybean demand is to be completed, it likely will occur Thursday, Friday or Monday. We suspect that China may want to secure the remaining 1.0-1.5 million mt of rumoured/unsold US soybeans before their trade team arrives in Washington DC for new trade negotiations.

• The Argentine Grain Exchange estimated their 2019/20 wheat crop at a record large 21 million mt, the soybean crop at 51 million mt with corn at 50 million mt. Such crops would be sizeable and create considerable new export competition with the US.

• US/Japan announced a trade deal today at noon that would level the tariff field on US ag imports into Japan (as if the US was a TPP member) . The only US ag commodities that did not get like treatment were US dairy products and rice. This is a “big” and “needed” deal since Japan is the US’s largest importer of wheat, beef and pork. The trade pact keeps US ag products flowing to Japan and maintain this important US marketplace. This is an important trade accomplishment for the Trump Administration.

• The midday GFS weather forecast offers 8 hours of near or slightly below 32 degrees for ND, N MN and N WI on Oct 3. The frost would occur outside of the primary US corn/soy areas and should not produce harm to US yield potential. A few snow flakes are possible over MO and NW ND, but any accumulations will be less than 1.0″. The ground is too warm for any lasting accumulations. The forecast then warms up with there being no evidence of a frost/freeze into October 10. The midday forecast is warmer than the overnight run, but equally as wet. Heavy rains of 1.5-3.00″ look to fall across; KS, N MO, IA and N IL. This rain will saturate soils/cause localised harvest delays amid all the rain. The SE US holds in an arid dry flow.

• Chicago values are adrift with wheat/soy tugging the market lower while corn is more stable as early harvest yield reports disappoint. US President Trump says that China is making large purchases of US red meats. Traders will be looking to Thursday’s FAS Weekly Export Sales report for confirmation. Brazilian weather forecasts looking wet during October, potentially creating selling opportunities on rallies.

• Chicago values are mixed at midday in low volume with soybeans firm while the grains sag on static world wheat fob values. The volume of trade is lacklustre as few traders want to extend their risk heading into the end of the month/quarter and next Monday’s NASS September Stocks/Final Production Report. Cash connected traders report that China was again seeking US soybeans this morning. There may have been a few cargoes sold, but the volume was less than Monday’s activity.

• FAS reported that 200,000 mt of US corn sold to Mexico for the 2019/20 crop year. It is expected that US soybean sales should be announced on Wednesday/Thursday as sellers have 48 hours to report a sale of over 100,000 mt.

• We look for a firm close with a frost/freeze risk being talked for the N Plains and NW Midwest October 4-5 and the US/China resuming talks in coming weeks. Short covering is expected heading into the end of the week.

• Chicago brokers offer that funds have sold 2,400 contracts of Chicago wheat. Otherwise, funds have been buyers of 2,400 contracts of corn, 3,600 contracts of soybeans, and 2,500 contracts of soymeal. Funds are net sellers of 1,200 contracts of soyoil with unwinding of the oil/ meal spreads .

• US President Trump criticised China trade practices in a UN Speech and that the US will not take a “bad deal”. President Trump appears to be drawing the line on the acceptance of the May accord that was redlined by China. The trade divide between the US and China remains wide, but China is securing US farm goods for the delay in new US tariffs. The US and China will get back to the negotiating table before the onset of additional tariffs on October 15. It will be interesting to see how China will deal with the pressure of new tariffs right after the DC meetings.

• China reported this mornong that it will continue to purchase a certain amount of US farm products including soybeans and pork . This is the first time China openly discussed the purchase of US pork which has rallied CME hog futures. No tonnage totals are available, but most grain traders expect that China is in the process of securing 4-5 million mt of US soybeans for shipment through January .

• Minn December wheat futures has rallied to its highest price since July as concern for crop quality amid the latent harvest. NASS will estimate US HRW and durum production as of Sept 1 on Monday. Research indicates that Minn wheat futures are near a managed money short covering top.

• The midday GFS weather forecast remains wet across; IA, WI, MO, and IL with1.5-3.00″ of rain. The forecast stays drier across the Eastern and SE US as a ridge of high pressure holds across the SE US with Gulf moisture being pumped northward. Frequent rain chances follow. Unlike the overnight run, the midday GFS compresses the ridge southward allowing for frosty temperatures across the NCUS with lows in the low 30′s. This is warmer than the overnight model run. The cold then hangs around into October 8 limiting field drying and slowing crop maturation.

• Stability of world wheat prices is not a surprise anymore and Chicago is starting to shift its focus to N America and S American weather. In October, it is the speed of the Central US harvest and the speed of planting in Brazil/ Argentina that will key Chicago prices. The 2019 US harvest is likely to be one of the slowest in decades, and snow potential will be a topic of trade discussion in late October. We are anticipating a bounce into Friday.

• Chicago values are in the green at midday with corn, soybeans and wheat all higher. The volume of trade has been rather meagre in corn, but better than expected in soybeans.

• Chicago soybean futures have led the rally amid rumours that China is asking for offers for US soybeans from the Gulf and PNW. Private Chinese crushers are rumoured to have made purchases with totals ranging from 10-20 cargoes. The thinking is that China is back in the US market as progress in last week’s deputy trade meetings was enough for them to seek new purchases.

• The thinking is that China will secure 4-5 million mt of US soybeans that ship in the October to January time-frame in an ad hoc buying program. This is the period that China has a need for US soybeans as S American seasonally slows and their export industry prepares for their new crop harvest in January. China’s big 70th year celebration starts next week Tuesday.

• The week-long China celebration over the installation of communism in 1949 will limit new cash purchases and new US/China negotiations. It is hoped that the US/China will announce dates of new DC meetings by the end of the week. Talks in the last half of October are expected by the industry. The rally this morning ran back against $9.00 November, but prices higher will depend on new Chinese demand and or continued dry weather for Argentina and Brazil.

• Chicago brokers report that funds have sold 2,100 contracts of Chicago wheat. Otherwise, funds have been buyers of 3,000 contracts of corn, 5,400 contracts of soybeans, and 3,000 contracts of soymeal. Funds are flat in soyoil futures. The end of the month and quarter loom next Monday and we expect that funds will continue to square some of their net short positions.

• US weekly export inspections for the week ending 19 were; 9.2 million bu of corn, 33.9 million bu of soybeans, and 17.5 million bu of wheat. China showed up shipping out 7.6 million bu of soybeans or 22%. The US corn exports of just 9 million bu was the lowest we can find for September in over a decade. The US corn export pace remains dismal amid discounted S American and Ukraine offers.

• Many political pundits are taking a stab at trying to decide if the US and China will be able to resolve any of their trade differences in 2020. Most feel that the old May agreement that China took a red line to has to be the starting point for an agreement. But China is unlikely to agree to more than 90% of that agreement anytime soon and this trade war could go on for some time.

• The midday GFS weather forecast is drier across a much of; IA, WI, MO, and W IL than the overnight solution. The forecast has shifted the rains farther north. The forecast is wetter in OH, PA and the rest of the NE US. A ridge of high pressure holds across the SE US with Gulf moisture being pumped northward into the Central US. Frequent rain chances follow which could delay the onset of the harvest. Unlike the overnight run, the midday GFS elongates this ridge and retrogrades it westward to the Central US. This would be a much drier weather pattern by October 4. Our confidence in this ridge shift west is low, but it is the main reason why the midday is farther north with rain chances. Also, there is an indication of 32 degrees reaching into N Dakota, MN and N WI on Oct 3-4. This is colder and different from the overnight. Our confidence in the midday GFS is low.

• We look for US corn and soy crop conditions to hold steady this week with some catch up in crop maturity. The S American weather forecast is arid/warm for Argentina and dry for Brazil. Rain will be needed soon for early seed germination.

• Sideways and dull has been Chicago with corn, soybeans and wheat trading either side of unchanged. Chicago grain values appear to have reached a level of value until fresh fundamental news is available. Few traders want to expand their risk and US farmers (other nationalities too) are not willing to sell cash grain at today’s price (following the recent meltdown).

• The corn/soy markets are finding support on 2019 yields being below last year and cash basis levels that are premium. We see the cash basis strength as related to the late start of harvest and tightfisted farmer holding. Both will act to underpin breaks. But end users see no reason to chase rallies which leaves Chicago in limbo. Our best guess is tyat Chicago markets will range trade heading into the September 30 Stocks/Seeding report. Next week’s trade will depend on the news emanating from the US/China deputy trade meetings in DC. Will China return and secure additional US ag products next week.

• Chicago brokers report that funds have sold 1,400 contracts of wheat and 1,900 contracts of corn, while being flat in soybeans. In soy products, funds have bought 1,800 contracts of soymeal while being flat in soyoil.

• The weekly US export sales report offered better sales totals for US corn and soybeans than prior weeks. The US sold 10.5 million bu of wheat, 57.7 million bu of corn, and 63.5 million bu of soybeans. The biggest corn buyer was Mexico taking 45.5 million bu (79%) while China/unknown buyers (likely China) secured 37.5 million bu of US soybeans (60%). Mexico was also the largest buyer of US wheat.

• For their respective crop years to date, the US has sold 452 million bu of wheat (up 77 million or 21% from last year) with US corn sales down 311 million bu or 48% at 341 million with US soybean sales down 37% at 411 million bu. US corn and soybean sales are at multi-year lows and this week’s sales to Mexico in corn and China in soybeans does not alter that negative trend.

• The Brazilian Real is priced at 4.14:1 US$ with the Peso priced at 56.7:1 this morning. The weak Real/Peso is encouraging S American farmers to expand their 2020 seedings/production.

• Argentina is offering fob corn at 39 cents/bu less than the US Gulf for October with their discount being 37 cents/bu through January. US soybeans are the cheapest in the world at $334.50/mt ($9.10/bu)while fob Russian wheat is holding at $186/mt or $5.065. US grain lacks export competitiveness into 2020.

• The discount of non-US wheat/corn means that any sustained Chicago rally must be based on a supply dislocation, plainly, adverse weather. Central US harvest and S American weather will key any Chicago rallies going forward.

• Portions of IA and W IL are drier while the areas to the north and south are slightly wetter. The forecast is equally as warm with there being no evidence of a Midwest frost/freeze for another 14 days. A ridge of high pressure will hold across the SE US with Gulf moisture being pumped northward into the Central US. Frequent rain chances follow which could delay the summer row crop harvest. Some 80-83% of the US corn should reach the dent stage by Sunday with each passing warm week adding to 2019 US yield potential.

• Chicago values are adrift. Yesterday, soybean futures were down 5 cents, today they are up 5 cents. Grain values are mixed. China is back pricing Brazilian soybeans for late October and November. The Central US weather forecast is warm/wet and harvest delays must be monitored. Our view is sideways into the end of September.

• Midday Chicago markets are mixed with corn/wheat futures firm, while the soy complex sags amid the fear of reduced SE Asian soybean and soymeal demand. The volume of trade has been extremely slow with fresh news lacking. Wheat rallied on chart based buying as Chicago wheat rallied above its 50-day moving average which triggered short covering .

• Farmers are starting to report their initial yield results and they are mixed/variable. It is far too early for any real US yield trends, and of course, their reported yield findings to NASS are always questioned. The marketplace will be hearing actual yield reports in the weeks leading into December, but the October Crop Report and NASS’s harvest of their objective yield plots that will determine 2019 yield trends. We look for a mixed Chicago close as neither the grain rally or the soybean decline is able garner any real momentum. Resting orders are lacking above and below the market.

• Chicago brokers report that funds have bought 2,100 contracts of wheat and 2,400 contracts of corn, while selling 2,000 contracts of soybeans. In soy products, managed money has sold 3,200 contracts of soymeal while being flat in soyoil. It does not take much volume to move the markets around.

• China did not show up as booking any additional US soybeans this morning. With the China trade team in Washington, we expect that they want to see how the meetings go before encouraging any additional purchases. If these preliminary meetings go well and the US does not demand that China scale back state support of industries, additional ag demand could be found early next week. China likely wants to scale out its ag purchases over time to better understand the US’s trade position.

• We hear that China and the US are working on dates for the next high-level meetings. Mid October seems to be the earliest that negotiations could restart. The problem is that this is also the time that the US is expected to raise tariffs, following a 2-week delay. Raising tariffs during or ahead of the arrival of next Chinese trade team won’t sit very well with the Chinese.

• The lowest bid to GASC was $194.13/mt for Russian wheat. GASC has not defined how much wheat it will secure or from whom. Based on the bids, its likely to be filled by Russian and Eastern European origin supplies. It should be noted that the offers were numerous as competition from wheat sellers is keen. The abundance of wheat is likely to prevent GASC from paying more than $205/mt in early 2020.

• The US Central Bank will be announcing its interest rate decision later today. A 0.25% cut is expected which should not impact world ag currencies.

• The US National Weather Service has problems with its computer and the midday forecast is not available.

• Neutral Chicago outlooks are advised until clarity over actual US yields emerge in October. A S American drought is needed to raise the prospect of new “supply shock” and elevate fear in the marketplace of shortages. US corn and soybean yield declines can spark a Chicago bounce, but a push above $4.00 spot corn and $9.50 spot soybean futures require the loss of the S American crop or a US/China trade deal that is bigger than 3-5 million mt of US soybeans. Our view remains that a lasting top occurred this summer and that a new supply shock is needed for a major price recovery, prices look to be set in a range.

• Chicago ag futures have extended their overnight declines as spot WTI crude falls to losses of $2.50/barrel and as funds generally are reducing commodity exposure. Saudi Arabian officials suggest Saudi oil output will return to normal in the next 2-3 weeks, faster than anticipated. Saudi oil exports will continue amid large stocks.

• Other breaking news is lacking. Corn, wheat and soybean futures were unable to trade through major chart-based resistance, including $9.00, Nov beans, $3.75, Dec corn, and $4.90. Dec Chicago wheat.

• It is the lack of any meaningful demand story that has kept new money on the sidelines despite ongoing US production uncertainty. World grain markets are simply too cheap to provide much of a bullish catalyst in the near term.

• Early yield reports have been variable but generally decent, though corn harvested in September will be largely made up of crops planted in Apr/May.

• FAS reported that China secured another 250,000 mt of US soybeans this morning. This brings China’s total purchases since last Friday to 720,000 mt. Ultimately, the trade expects China to buy 2-3 million mt of beans from the US as both a goodwill gesture and a way to bridge the gap between late 2019 and the beginning of S America’s next harvest. Additional sales announcements are expected into next week.

• However, we would mention that Gulf soybean basis has been little changed since the beginning of China’s buying spree. Gulf soy basis for Oct-Dec is quoted at $0.23-0.30/bu over futures. This compares to $0.72/bu over in late July. The US soy cash market is well supplied.

• US ethanol margins remain supported at $0.40/gallon, basis spot, vs. near-zero 30 days ago. US ethanol production seasonally ramps up beginning in October. Key will be whether US export demand can be sustained amid falling Brazilian prices. Brazilian ethanol’s premium this week is just $0.25/gallon over Gulf origin. A rise in Brazilian prices is needed to boost export demand in the next 2-3 months.

• Improved rainfall is still offered to South Australia and New South Wales in the East.

• The S American forecast at midday is wetter in Central Brazil beyond Sep 26 as high pressure loses its dominance on the climate pattern there. Cumulative totals of 0.50-1.00″ are offered to most of Brazil’s soy belt. This will be enough to trigger accelerated planting.

• The midday GFS weather forecast is drier than the morning release, but still advertises the return of moderate to heavy Midwest rainfall in the next 10 days. A tropical storm will make landfall in TX/LA in the next 24 hours. Moderate rainfall will impact the Plains and Midwest every 2-3 days into Sep 29. Early harvesting will be slowed, but a nice boost in soil moisture is offered to HRW areas of TX, OK and E KS. No frost is indicated into Oct 3.

• Neutral outlooks are advised until clarity over actual US yields emerge in October. However, it remains that rallies will struggle amid cheap and plentiful world supplies. And a S American drought in Dec-Jan is needed to materially alter the current structure of world ag markets.

• The bullish macro tailwind provided by a $6.00/barrel higher crude oil market has lifted Chicago corn and soyoil (the biofuels) to moderate daily gains. Soymeal futures are sinking while US wheat futures are enjoying additional fund short covering amid the firming Black Sea wheat marketplace. The rally in the Ruble placed a bid under Black Sea cash wheat with values rising $2-3/mt to $185-187/mt for November according to cash sources. The bounce in Russian wheat fob offers is underpinning US wheat futures values. The volume of trade is modest this morning with cash selling orders noted above $3.75 December corn and $9.10 November soybeans. The expectation is for a mixed close with the market awaiting additional details on China’s demand for US soybeans.

• Chicago brokers estimate that funds have bought 5,500 contracts of corn, 3,900 contracts of wheat and 2,200 contracts of soybeans. In soy products, funds have bought 3,400 contracts of soyoil while selling 1,500 contracts of meal. Short covering from managed money in corn/wheat are the big morning features.

• The USDA did confirm that China secured 256,000 mt of US soybeans. This takes their total purchases in their latest round to around 460,000 mt or a little over 8 cargoes. Rumours persist that private Chinese importers have secured at least 2 million mt of US soybeans since tariffs were removed on Thursday. However, the spread between the US Gulf and Brazil has fallen 45 cents in just 3 trading days. Brazilian soybeans for October or priced at 77 cents over November Chicago futures vs the US Gulf at 28-30 cents over this morning. China will take some 6.2-6.7 million mt of soybeans on average per month for an annual import total of 78-80 million mt in our estimation. This compares to WASDE which is forecasting 2019/20 China soybean imports of 85 million mt.

• US export inspections for the week ending Sept 12 were; 16. 6 million bu of corn, 24.5 million bu of soybeans, and 16.8 million bu of wheat. China shipped out 7.6 million bu or 32% of the weekly soybean export total. These were old crop sales that were rolled forward to new crop.

• For their respective crop years to date, the US has sold 35.2 million bu of corn (down 32.7 million or nearly 50% from last year), 45.5 million bu of soybeans (down 14 Mil Bu or 23%), and 274.5 million bu of wheat (up 50 million or 22%). The slow US corn and soybean export pace is expected to worsen in coming weeks. China’s purchases of US new crop soybeans are said to be for November/December.

• Dry weather in Europe is causing difficulty with winter grain emergence across; France, Germany, Bulgaria and Romania as soil moisture is short.

• US president Trump has backed a plan that would raise 2020 US Biofuel quotas 10% to compensate for the exemptions handed out to 31 refineries that received waivers. The plan would raise US total domestic mandates for biofuels to 22.4 billion gallons from just over 20 billion this year. Yet, the proposal does not consider RINs and how they could be used to fulfill the elevated yearly obligations. This is rumoured to be a 3-year plan.

• The midday GFS weather forecast is wetter in the Midwest with widespread totals likely across; IA, IL, IN, OH and WI. However, there is no indication of soaking precipitation that would delay early harvest efforts into Sep 25. The Midwest temperature pattern will be warm over the next 2 weeks. There is no evidence of a frost/freeze into early October.

• China is still out on holiday which is limiting soy trade. Corn/wheat values are firm on the worry over rising world energy prices due to the simmering geopolitical landscape. Will the US respond against Iran? The loss of Saudi oil production will underpin world energy prices.

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Weekend summary 13 September 2019

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Fund positions disaggregated data

• As expected, the September USDA Crop Report offered few changes from August with the US corn and soybean yield fractionally lower amid reductions in plant populations. NASS pegged the US corn yield at 168.2 bushels/acre (down 1.3 bushels/acre from August) with the soybean yield at 47.9 bushels/acre (down 0.6 bushels/acre from August).

• NASS used an ear weight (0.343lbs/ear) that was the lowest since 2015 with plant populations being the weakest since the 2012 drought. Ear weights can move up or down depending on late season weather. Our considered view is that ear weights will move lower as the crop runs short of nitrogen and June corn struggles to reach maturity.

• NASS forecast the 2019 US corn crop at 13.8 million bu, a decline of 102 million bu from August. This crop total was on the high end of trade expectations. WASDE forecast 2019/20 US corn end stocks at 2,190 million bu  (up 9 million from August) based on larger old crop stocks and 25 million bu cut in US ethanol production to 5,450 million bu. The US average farmgate cash corn price held at $3.60/bu. This would reflect a range for spot Chicago corn futures of $3.40-3.90.

• NASS estimated the 2019 US soybean crop at 3,633 million bu, a decline of 47 million from August. NASS lowered their soybean yield to 47.9 bushels/acre, down 0.6 bushels/acre.

• Note that NASS forecast that US soybean pod weight to be the highest in a decade at 0.35 grams/pod. This is up 0.1 gram from last year and likely too high. There are numerous reports of 3 and 4 bean pods in poorly populated plant areas. However, this pod weight looks high and a further reduction in US soybean yields is expected in October. And since 2014, note that NASS has tended to overstate soybean pod weights in Sept with the exception being 2013. We maintain our view of an Oct US soy yield closer to 47.0 bushels/acre. This would assume a normal end of the 2019 growing season. NASS made no attempt to provide information on the 6 million acres that have yet to pod. Soy yields appear to have more downside risk than corn.

• WASDE lowered 2019/20 soybean end stocks to 640 million bu, a 115 million bu drop from August. WASDE lowered old crop US soybean stocks by 65 million bu while making no adjustments to US new crop demand. The average US farmgate price was raised by 10 cents to $8.50/bu which equates to a $8.20-9.20 Chicago range.

• US wheat end stocks held steady at 1,014 million bu with the final US Small Grains Report due out later this month. WASDE did lower the 2019 Russian wheat crop to 72.50 million mt, down 500,000 mt. Russian 2019/20 wheat exports were left unchanged at 34.0 million mt. World wheat stocks were pegged at 286.5 million mt including China, and 141 million excluding China. The US and world wheat market lacks a fundamental story for either the bulls or the bears. Range trade is forecast.

• We hear that China is bidding for 1-3 million mt of us soybeans off the PNW with a total purchase package ranging from 3-5 million mt according to US exporter sources. The demand is helping to underpin Chicago. Note that this China demand will not create a new demand bull soy market. We hear no new China interest for either US corn or wheat.

• Reaction to a slightly bearish corn report will key future price direction with the timing right for a seasonal low. Early harvest results have been disappointing, a trend that should garner more trade attention during October.

• Corn, soybean and wheat markets are a bit weaker at midday. Follow-through buying interest is lacking ahead of Thursday’s USDA update, in which US and world grain stocks will be presented as more than adequate. We note that it is not until combine harvesters begin to roll and NASS can more accurately assess corn and soy harvest weights that the market will have a precise handle on US production. Yield cuts are expected tomorrow, but an outright bullish report is unlikely. Very early yield checks in IL have been disappointing but it will be several weeks before a trend is established.

• Macro markets are mixed, with commodity indexes fading after testing a multi-week high on Tuesday. The trade is skeptical that a comprehensive US-Chinese deal will be scored via October’s meeting, and that soybeans and pork tariffs were not waived overnight is being digested. No new US export sales were reported this morning. Crude is down $1.60 despite another sizeable draw in US stocks.

• And world grain markets still reflect abundant near-term supplies. Russian wheat is offered at $184/mt, vs. $185 earlier in the week. This is comparable to $3.70, basis Dec KC. France’s Farm Ministry has raised French wheat production to 39.5 million mt, vs. 34 million in 2018/19 and the second largest crop on record. The EU and Black Sea grain markets continue to probe for demand. It will be difficult to sustain rallies in world corn markets amid the abundance of available N Hemisphere wheat.

• Malaysian palm oil futures have struggled on rallies despite palm oil stocks in August falling below the previous year, for the first time since June 2017.

• US ethanol production through the week ending 301 million gallons, vs. 298 million the prior week and on par with the same week a year ago. US ethanol stocks fell sharply to 945 million gallons, vs. 1,000 million the week before. Rather quickly the ethanol market has found balance. We also note that the spot futures-based ethanol production margin has rallied to $0.40/gallon, vs. $0.02/gallon in early August. End user demand will be found on breaks, and work maintains that seasonal bottoms in Chicago markets are being formed .

• The S American weather forecast remains arid into Sep 25, with high temperatures in Brazil to be consistently in the 90s, or some 4-8 degrees above normal. S American dryness will grab much more market attention if extended range forecasts fail to offer a pattern change in the next two weeks. We would mention the most immediate concern is Argentine wheat development.

• Argentina’s wheat crop is expected to reach 10-12% heading this week. Soil moisture deficits in Argentina will widen during critical growth stages.

• The midday GFS weather forecast is consistent with the morning run and maintains a pattern of well above normal temperatures into Sep 20. Maximum highs in the 80s will be widespread next week. A moderation in warmth is forecast in the 10-15 day period, but there is still no sign of frost into the very latter part of the month. We would also mention that model guidance is trending wetter, with light/moderate rain to expand into the E Plains and Western Corn Belt Sep19-22. NE, IA, MN, WI and IL will be favoured.

• The markets will again briefly re-set following the release of updated NASS yields Thursday. However, it is the Oct report that will better define US production and end stocks. Abundant and cheap nearby world supplies will work against lasting Chicago price rallies.