10 September 2019

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  • Corn, soybean and wheat futures are higher in mid-session trade with selling absent ahead of Thursday’s USDA Sept Crop Report. The volume of trade has been light to moderate with short covering featured amid a lack of aggressive selling.
  • Research argues that seasonal lows are being formed. We note that the 2018 USDA September Crop Report was bearish, but that a seasonal bottom was forged just three days after, which ended up being the seasonal/annual low.
  • We see no reason why 2019 corn, soybeans and wheat cannot forge their seasonal lows either right before (Monday) or right after the USDA September report. Once farmers start their harvest, we would expect that cash sales will be modest, and that there will be a basis pull to get grain away from the farmer.
  • And the US 2019 harvest is going be a long drawn out affair with wide swings in crop quality amid the latent spring seeding dates. We doubt that December corn will fall much below $3.50 or November soybeans too far below $8.40. In the case of wheat, spot KC futures at $3.62 should have forged the bottom.
  • Chicago brokers estimate that funds have bought 3,500 contracts of corn, 2,300 contracts of wheat, and 4,500 contracts of soybeans. In soy products, funds have bought 2,400 contracts of soymeal and are flat of soyoil.
  • Further research argues that the NASS soybean yield estimate could hold a bullish surprise on Thursday. For the 10 million acres that were not podding as of September 1 (6.1 million acres still not podding as of September 8), NASS is likely to use a low-ball yield to reflect the high risk of a sharp drop in yield before the end of the growing season. It takes 54-60 days to go from pod to a soybean seed for harvest, that puts these non-podded Midwest soybeans into late October or early November. The chance that non podded soybeans will produce more than 5-12 bushels/acre of soybeans is rather low.
  • There are suggestions that Brazilian dryness could persist into at least mid-October. The drying trend could persist longer, but amid the cool ocean waters off each side of Brazil and the Lack of El Niño, the weather risk for Brazilian crops is elevated. on Sept 10 it is premature to become overly worried, but it is a weather trend worth highlighting with early Brazilian soy seeding needed to fulfill China demand in January/February, and for the timely planting of the winter corn crop.
  • There are reports that China is expected to agree to secure more US ag goods in the hope of a better trade deal with the US. The headline rallied Chicago. The headline argues that China is expected to secure US soybeans and meat products. US pork/beef are the products that China needs most. CME Livestock futures have rallied strongly on the news with rumours that China is back checking prices and making some initial purchases.
  • The midday GFS weather forecast is slightly wetter than the overnight run, but the forecast is basically consistent with the overall pattern; high-pressure ridge across the Central US with a zonally flowing jet stream produces warm temperatures and wet weather conditions across the N Plains and the Upper Midwest. There is no evidence of any frost/freeze into Sept 26. A hurricane is forecast to track across the far W Atlantic. This storm shifts the ridge west to the Rockies and draws cooler temperatures south. The temperatures are not cool enough for a freeze.
  • Growing concern about premature death of the US corn crop due to disease/lack of nitrogen, along with the potential for progress in US/China trade is producing a Chicago seasonal low. The USDA report looms, but even if the report is bearish, we doubt that any break will be sustained.

9 September 2019

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  • Chicago values fell in early active trading with values recovering into midday with wheat being the upside leader. The market fell into end user support with the recovery occurring on reduced volume. The wheat rally appears to be largely technical as KC wheat fell to multiyear lows but did not fall below last week’s low.
  • Traders are debating what NASS/USDA will say in Thursday’s September Crop Report. NASS will have difficulty measuring yield amid the immaturity of this year’s crop. The industry fears that NASS will overstate yield once again.
  • Traders are really wanting harvest data to make a more accurate assessment of yield. We would maintain that this year’s corn and soy crops are so variable that it will require the US corn/soybean harvest to push beyond 60% to have real ability to measure crop size. And although there are reports of scattered corn fields that are being cut in the Southern Midwest this week, most of the Midwest harvest will wait until October and November. The one certainty of the 2019 harvest is that it will be a long drawn out affair with some farmers cutting corn and soybeans until the snow falls in December. We are looking for a slightly higher close with weekly lows likely scored this morning.
  • The USDA indicated this morning that US farmers in disaster areas will be eligible for additional Government payments as outlined in spring disaster legislation. Some $3 billion of additional monies will be available to farmers impacted by natural disasters in 2018 and 2019, including late winter and spring flooding and Hurricane Dorian. This will include additional 10% PP payment (indemnity) to producers that were unable to plant a crop. If a producer was enrolled in the Harvest Price Option (HPO) there could be an additional 5% on top of the 10%, for a total of 15%. Producers need to enroll for the additional payments, and if a producer is not in a disaster area, he/she can petition the FSA State Committee to be included. The additional monies will further slow the sale of cash corn/soybeans as producers see additional revenue from the Government and store their crops in the hope of higher prices.
  • US weekly export inspections for the week ending September 5 were; 23.3 million bu of corn, 33.3million bu of soybeans, and 14.8 million bu of wheat. For their respective crop years to date, the US has exported 17.7 million bu of corn (down 9 million from last year or 33%), 18.5 million bu of soybeans (down12.2 million or 40%), and 257.2 million bu of wheat (up 48 million or 23%). The US corn and soybean export pace is expected to fall further behind last year amid China’s absence as a soybean buyer/importer (as of today via the trade war) and cheaper fob price offers from Argentina, Brazil and Ukraine in corn.
  • Brazilian farmers are starting to prepare to seed their 2020 corn and soybean crops as September 15 is the date that seeds can emerge. The acute dryness across N Brazil will limit early seeding progress with producers hoping for seed germinating rains later this month or by early October. The ridge of high pressure across Brazil looks to be stable and needs to be closely watched for any early spring dryness.
  • The midday GFS weather forecast is consistent with the overnight and prior day solutions. A high-pressure ridge across the Central US with a zonally flowing jet stream produces warm temperatures and wet weather conditions across the N Plains and the Upper Midwest. There is no evidence of any frost/freeze into Sept 25. A hurricane is forecast to track across the far W Atlantic. This storm shifts the ridge westward to the Rockies and draws cooler temperatures south. The temperatures are not cool enough to produce a frost.
  • Chicago corn is within 3-4 cents of testing a weekly trend line basis spot Chicago corn at $3.375 while KC wheat is bouncing off multiyear lows. Soybeans are holding better amid the yield uncertainty with plants just podding. We look for steady or 1% gain in US corn/soy good/excellent conditions. Our view is that the Chicago is in a bottoming phase in corn, wheat and soybeans.

5 September 2019

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  • Chicago corn and wheat are higher at midday as support has been found at major chart-based support in corn. Open interest in Chicago wheat on Wednesday was up 4,600 contracts, which suggests funds and end users are willing to bet on a seasonal low being formed. Soybeans are down 12-14 on falling ClF Gulf basis levels, with spot basis down $.06/bu to just $0.14 over.
  • CNBC is reporting that Chinese insiders hint that high-level US/Chinese trade talks in early October may be more substantial than prior meetings. The coming meeting marks the 13th round of negotiations between the two sides, and there is something to be gained ahead of an election year and following unrest in Hong Kong there is speculation that new developments will arise. The Dow has extended its recovery and at midday is up 430 points.
  • Weekly EIA ethanol data leans bearish. Through the week ending August 30, US ethanol production totalled 298 million gallons, down 7 million on the prior week and the lowest since March. Using official NASS corn used for ethanol data through July along with EIA weekly data for August, we put final old crop corn ethanol consumption at 5,400 million bu, vs. USDA’s 5,425 million.
  • Weekly US ethanol stocks totalled 1.0 billion gallons vs. 965 million a week ago. The US ethanol market is well supplied. Future corn consumption remains a concern unless solid US ethanol exports can be sustained. Note that Brazil has raised its tariff-free quota on ethanol imports to 198 million gallons, vs. 160 million previously. New destinations for US ethanol are desired though.
  • US crude stocks, less reserves, as of Aug 30 fell to 423 million barrels, a new 2019 low. Spot crude has rallied $1/barrel to $57.20. US crude stocks are likely to decline further into late year as US rig counts decline.
  • Newly released EU model climate guidance features normal to slightly below normal Central temperatures for the month of September, but warmer than normal temperatures during Oct and Nov. Confidence so far out is low, but forward-looking models lack evidence to suggest a major frost/freeze event lies in the offing. Near term forecasts have trended warmer since Tuesday. Patchy frost is possible in parts of Ontario, but otherwise major North American Ag areas will stay frost-free into Sep 20.
  • EU model forecasts also feature lingering dryness in Brazil and Central Argentina into late October. A more normal pattern is forecast in November and beyond. Neutral ENSO conditions into late year argue against lasting S American drought during key corn/soy growing stages. Soil moisture available to Argentina’s wheat crop is a concern.
  • The GFS weather forecast at midday is cooler across the Dakotas and MN in the 6-10-day period as a weak frontal system brings cooler and wetter air to the Northern US Sep 13-15. Lows across the Dakotas, MN and WI are again projected to drop into the mid/upper 40s late next week. We view the midday GFS as being too cool, but a close eye will be kept on whether the evening run of the EU model follows this trend. Other climate scientists hint at ongoing Central US warmth into final week of September. Broadly, the upper air flow is expected to stay rather progressive, which is the wrong setup for a mid-Sep frost event. Moderate to heavy rainfall worth 0.25-2.00″ impacts the Dakotas and NW Midwest Sun-Tues.
  • Ag markets look likely to chop into next Thursday’s Sep WASDE. The bulls and bears will struggle for leverage amid weak global cash grain markets, but already sizeable net short positions in Chicago.

4 September 2019

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  • It has been a mixed session in Chicago, with row crops down slightly on the lack of near-term frost risks and with wheat higher on a weakening US$. US wheat futures on Tuesday reached deeply oversold technical levels and a bounce was due.
  • The Dow has maintained a rally of 200 points at midday, with spot crude up a sizable $2.25/barrel. It is a session of raw material consolidation following recent weakness. Follow through commodity buying will be a function of whether the US and China can meet in September. Otherwise, the bet is that the trade war lingers into the 2020 US Presidential election. In other political news, the UK Parliament has blocked a no-deal Brexit, which is currently scheduled for Oct 31. The threat of a UK general election now hangs heavy in the air. This has triggered minor selling of the US$.
  • Official Census US ag exports in July were near expectations. Corn shipments in July totaled 114 million bu, vs. 121 million in June. Soybean exports totaled 135 million bu, vs. 117 million the prior month.
  • Using weekly FGIS data for August, calculated final 2018/19 US corn exports stand at 2,030 million bu, vs. the USDA’s 2,100 million. Final US soybean exports are pegged at 1,695 million, very close to the USDA’s 1,700 million bu forecast.
  • Also of note, the value of ag imports exceeded the value of US ag exports for a third month in 2019. July’s ag trade deficit was $115 million, which follows trade deficits in April and May of $865 and $251 million, respectively. Access to export markets is what is needed in the US looking forward.
  • President Trump this morning stated the Administration’s updated biofuel policy would be submitted and approved within the next two weeks. Still no details are available, but like grains and oilseeds, lasting US ethanol exports are desired as domestic US gasoline consumption will grow only slightly.
  • Current futures-based ethanol production margins have rallied to $.40/gallon following the break in corn value. Spot ethanol margins in mid-August were just $0.02-0.07/gallon. The corn market is working to boost domestic consumption prior to the USDA’s Sep WASDE.
  • Brokerage firm Allendale released its survey-based production estimate, with corn production pegged at 13.76 billion bu, vs. NASS’s 13.90 billion. Soybean production is estimated at 3.50 billion bu, vs. NASS’s 3.68 billion. Allendale’s corn number leans a bit negative. Yield risk is shifting to soybeans amid slowed crop growth.
  • The midday GFS weather forecast is cooler in the 11-15 day period, but confidence in GFS forecast details so far out is low. The GFS advertises overnight lows very close to freezing across the far upper portions of MN and across much of Ontario Sep 17-18. Lows in the 40s are offered to ND, MN and parts of northern WI beyond Sep 15. Whether the EU ensemble models follow this temperature pattern will be watched closely this afternoon.
  • Otherwise, the primary Corn Belt will stay frost-free into Sep 20. High pressure ridging expands through the balance of the week. Maximum highs on Thurs-Fri will reach into the mid/upper 80s across the Central Plains, IA and MO. The next chance for soaking rainfall occurs Sun-Thurs. Totals in excess of 1″ will favour the N Plains and NW Corn Belt. Dryness in N IA will be eased.
  • The market still lacks clarity over 2019 US production potential. The world cash markets show no signs of global supply tightness.

3 September 2019

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  • World wheat prices are pacing the Chicago decline this morning with Black Sea values offered $3-4/mt below where they closed out last week. Russian 12.5% wheat is being offered at $186/mt down $3/mt which has pressured EU and US wheat values to start the week.
  • Chicago corn/soybeans are following wheat lower with funds adding to their net short positions as December corn futures score a fresh contract low. The weakness in wheat is too much for corn to overlook and a bottom must be forged in this grain before corn will uncover any bullish heart.
  • The midday GFS weather forecast has no indication of a Central US frost/ freeze into September16. Amid improved Midwest weather since mid-August, traders are betting that US corn/soybeans are adding to their yield potential. A further bump in US corn/soybean crop conditions is expected this afternoon.
  • The tone in Chicago is heavy with the charts arguing for additional fund selling in the new month. The new contract lows in corn argues that should a recovery occur, December corn will struggle at the $3.88-3.9275 gap.
  • Chicago brokers estimate that funds have sold 5,200 contracts of wheat and 12,6700 contracts of corn. Funds have also sold 3,200 contracts of soybeans along with 2,000 contracts of soyoil, while being flat in soymeal.
  • US export inspections for the week ending August 29 were; 14.0 million bu of corn, 19.3 million bu of wheat and 47.0 million bu of soybeans. For their respective crop years to date, the US has shipped out 1,857 million bu of corn (down 416 million or 18%), 240.7 million of wheat (up 47.3 million or 24%), and 1,680 million bu of soybeans (down 388 million or 19%). The US weekly corn export pace of just 14 million bu was bearish as S America and the Ukraine continue to fill the world’s feedgrain needs.
  • Brazil exported a record 7.6 million mt (298 million bu) of corn during August vs 2.825 million mt (110.7 million bu) last year. Including soybeans, Brazil exported 13 million mt of both grains or nearly 500 million bu which will put to rest concern over Brazilian export logistics/capacity. Brazil is on a pace to easily export record tonnages of corn. Brazil, Argentina and the Ukraine are likely to capture much of the world’s feedgrain demand into February of 2020.
  • China’s Vice Premier Liu He stated that China is looking to resolve the trade differences on basis of equality and mutual respect, both sides must seek common ground and that China firmly opposes the trade war as it is not good for China, the US and the world. On the other side of the table, US President Trump stated that the US is doing very well in negotiations with China. Who is right? For both sides, there seems to be a divide related to trust.
  • The midday GFS weather forecast has hurricane Dorian following the same path as the overnight runs and the consistency is increasing confidence in that Dorian will stay just offshore before making landfall along the SC/NC border, and then heading back out to sea. This will limit the storm surge, but strong winds will batter the Eastern US Coastline.
  • Showers/storms are pulling through the Midwest with most rainfall accumulations to be less than 0.50″. The Delta and S Plains will stay dry for the next 10-12 days. There are hints of additional tropical storms in the extended range that take aim on the SE Coastline once again. There is no indication of a Central US frost/freeze into September 19.
  • The new contract lows in corn is causing funds to add to their growing short position with the next downside target being $3.435 Sept, the lows in May. And Sept KC wheat reached the lowest level in 14 years (2005) at $3.66. This is no place to turn bearish with an important USDA crop report due out on Sept 12.

28 August 2019

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  • Chicago values have rallied into mid-session as USDA Sec Perdue stated that the Trump Administration is looking for ways to boost US Biofuel demand including infrastructure. No exact timeframe for an announcement was offered. The early price slide was based on abundant world wheat supplies and the pricing of DP old crop corn contracts must be settled by Thursday’s close. Otherwise, the news grapevine is empty with traders discussing the latency of the 2019 US corn and soybean crop. Yet, no trader is willing to place a long bet until a frost event can be seen in the forecast.
  • Measuring losses from any frost/freeze event is impossible and traders know that the September12 NASS crop report is starting point. Getting past the September USDA report is a must to measure how a cold weather event might impact 20198/20 US corn and soybean stocks.
  • We look for a mixed settlement with corn finding support below $3.65 December while November soybeans have support under $8.50. World wheat fob prices are likely to forge their seasonal harvest lows in September. The charts are looking much better amid the morning formation of a reversal.
  • Once a soybean plant begins the podding process (R3), it requires some 53-56 days to reach full maturity (R7-R8). This means that for the nearly 16 million acres of soybeans that are starting the podding process as of Sunday, they will require nearly 8 weeks to reach maturity. In other words, first frost/freeze dates will have to hold off until October 19-30th. This would be 2-3 weeks later than normal across the N Plains and 1-2 weeks later than normal across the northern 1/3 of the Midwest. Yield and crop quality losses would be expected with normal frost dates including finding more chlorophyll in immature seeds that could cause discoloration of the seed’s oil. From the start of flowering, soybeans demand at least 72-79 days to reach maturity.
  • The low-ball French wheat offer from LDC to GASC was likely to underscore where French wheat needs to be (outside of Algeria) to capture world demand. The 50,000mt sale indicates the competitive landscape that must occur for EU wheat against the Black Sea. Ukraine is likely to export near record amounts of corn/wheat in the 2019/20 crop year that will trim back Russian, US and Australian wheat/corn export demand. World wheat prices can enjoy a modest seasonal recovery as the Northern Hemisphere harvest ends, but the outlook is sideways to bearish amid 2019/20 world wheat demand that looks to be almost static vs. last year.
  • Weekly US ethanol demand was 305 million gallons, up 4 million from last week, but 14 million gallons below last year. US ethanol stocks fell to 966 million gallons, down 15 Mil gallons from last year.
  • The midday GFS weather forecast is wetter than the overnight run with nearly all Midwest areas seeing better rain chances. Following the heavy rain since mid-August, multiple days of sun is helpful. Warmer temperatures are desired, but frost/freeze remains absent into Sep 13.
  • A seasonally cool temperature pattern lies ahead. Warmer temperatures evolve in the 11-15 day period following the exodus of the remains of hurricane Dorian to the east. There is no evidence of a frost/freeze risk for the Central US into mid-September. Yet, several isolated incidences of a frost are possible across the NW Canadian Prairies in early September, which is right on seasonal averages.
  • The Stats Canada all wheat estimates of 31.25 million mt and the canola estimate of 18.45 million mt were below trade expectations. Oats and barley production were larger than expected.
  • We maintain that some cold weather premium is needed in Chicago prices heading into late September. However, amid sluggish US export demand, we would see any frost/freeze rally as producing the next selling opportunity. The supply bull market should return briefly following the September USDA crop report.

27 August 2019

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  • Ag markets are steady to lower at midday as cool Central US temperatures battle against falling world cash grain markets. Major exporting currencies are down sharply today, with the Argentine Peso at 56:1 and the Brazilian Real at 4.19:1, a level not seen since the middle of 2018. Brazil continues to struggle with its Federal Pension reform and a flood of dollars leaving the country. China’s Yuan also fell to a new 10-year low, and is now down 14% from the spring of 2018, prior to the beginning of the US-China trade war. Weakness in S American currencies is keeping corn fob offers there depressed.
  • Concern over cool Plains/Great Lakes temperatures, and a lack needed GDD (growing degree days) accumulation, will persist until confirmation of a warmer temperature profile is available. Low pressure will be anchored aloft Southeastern Canada into late week. Morning lows across the Dakotas Thurs-Fri morning will drop into the mid/upper 40s. However, the upper air pattern next week is void of any major frost/freeze threat.
  • Actual premium won’t be added until lows below 35 are included in near term operational model output. The market will view frost/freeze events as binary, either the growing season ends prematurely, or it doesn’t.
  • Argentine cash corn basis is down slightly this week, with spot fob offers now the lowest since the middle part of 2017 at $144/mt. US Gulf corn for September shipment is quoted at $163/mt. Steep discounts to US origin are present in S America and the Black Sea into the very end of 2019. Weak world corn prices are signaling an abundance of supply in exportable positions.
  • Egypt this morning was offered a sizeable 760,000mt of EU and Black Sea wheat. The cheapest offer made was French origin at $194/mt. Russian wheat follows at $200 /mt, which is comparable to $3.99, December KC, on a fob basis. However, when adding freight, US wheat remains non-competitive into North Africa and the mid-East. We note that Egypt’s last wheat purchase on Aug 15 was executed at $201/mt, basis fob. Today’s purchase price will be roughly $199-200/mt. The world wheat market remains flat.
  • Yet, we would mention that European wheat futures are bottoming (in our opinion) right on schedule ahead of the September delivery period. It is just tough to be overly bearish grain prices at current values, with Dec corn at $3.60-3.70 having digested potential 2019/20 US end stocks of 1.9-2.2 billion bu.
  • Chinese crush margins are rising on rising domestic soymeal values.
  • The midday GFS weather forecast is drier than the morning run across the Plains and Midwest over the next 10 days. Following heavy rainfall in mid-August, multiple days of sunshine will be helpful. Warmer temperatures are desired, but frost/freeze remains absent into Sep 10.
  • A rather variable temperature pattern lies ahead. Warmer temperatures evolve next week as strong high pressure aloft is re-established across the Plains and Southern Midwest. High temperatures next Tues-Sat will reach into the 70s and 80s. A second blast of cooler air occurs Sep 8-9, but low readings in the upper 30s and 40s will stay isolated to northern MN and southern Canada.
  • Neither the bulls nor bears will hold much leverage into the Sep Crop report, or more likely until the Midwest harvest begins.

22 August 2019

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  • Soybean futures pushed to new weekly highs after the open but were back to unchanged by midday. Late day selling put the market on the lows leaving futures down 4-5 cents. The weekly US Export Sales report was disappointing. Weekly exports of 1.2 million mt (both crop years combined) were the largest since February. However, sales for the week amounted to just 25,936 mt of old crop and 792,575 mt of new crop. Outstanding salesof 4 million mt are unchanged from last year and similar to the past 3 years. It is the lack of new crop sales that is hanging over the market. Total new crop sales of 5 million mt are the lowest since 2005/06 (13 years).  The trade anxiously awaits the national corn yield estimate from Pro Farmer. After which, the market attention will turn to the length of the 2019 growing season. We remain bearish on rallies back to $9.00 basis spot futures with soyoil to gain on soymeal into 2020 on strong palmoil prices.

 

  • Dec Chicago corn ended unchanged amid limited fresh news. Pro Farmer’s official yield estimates will be released Friday. So far, route estimates suggest worst-case yield scenarios will be avoided barring an early frost, with solid yield potential intact across much of the Western Corn Belt. Export sales remain lacklustre and recall that 2018/19 exports were largely driven by shortages in S America. Without adverse S American weather this winter, competition for world trade continues into at least mid-2020.However, most important in the near term is the cooling of N American temperatures.  21 million corn acres across the Northern US had not reached dent as of last weekend. Cool temperatures over the next 10 days will keep corn’s push to maturity sluggish. The midday GFS features lows near freezing across parts of Saskatchewan in the 12-15 day period. A US frost won’t occur in the next two weeks, but the cool to cold trend is concerning. Breaks will struggle below $3.70 December, but rallies demand a Midwest frost/freeze threat.

 

  • Chicago and KC wheat futures ended higher, with spot contracts leading the way ahead of the Sep delivery period. Research suggests that a lasting bottom is forming in Europe. Upside vigor through the autumn months will hinge upon Southern Hemisphere weather. As of now vegetation health maps show markedly better conditions in Eastern Australia and much of Argentina. Crop critical S Hemisphere weather lies just ahead. US wheat export sales through the week ending Aug 15 were a solid 22 million bu, vs. 17 million the prior week. Total 2019/20 export commitments sit at 383 million bu, up 69 million (22%) from mid-Aug a year ago. Traditional destinations have been active buyers of US HRW and HRS. We suspect this is due to spot prices being down $.90/bu from a year ago, basis Minneapolis, and $1.35/bu, basis KC. Yet, pace analysis suggests the USDA’s 975 million bu all wheat export forecast is accurate. A neutral outlook is advised. World cash markets are projected to creep slowly higher over time. US wheat is finding enough feed/export demand to support breaks below $4.60, basis Dec Chicago futures.

21 August 2019

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  • It has been a mixed morning in Chicago with the grains weaker while soybeans are firm. Fund selling has slowed, but December corn fell below last week’s low at $3.68. Spot Chicago wheat appears to be targeting the top of a chart gap at $4.50 while the world wheat market struggles to find a bottom.
  • World wheat traders fear that WASDE is once again overstating world wheat trade amid the cheapness of world corn and lack of feed wheat throughout the Black Sea. The Pro Farmer Tour is being watched, but the corn yield data from OH/IN did not show the disaster that some supply bulls have argued for.
  • US crop maturity is a big deal, but traders are unwilling to place any bullish frost bets until there is a cold weather threat on the forecast maps.
  • We look for a mixed close, but the downside potential in corn is becoming limited. Wheat values may still have 5-10 cents of downside price risk, but this no place to be turning bearish of Chicago grain or oilseed. Cold weather risks will escalate during beyond mid-September as the race to the end of the growing season begins in trying to better understand US production.
  • Chicago brokers estimate that funds are net sellers of 1,300 contracts of wheat and 3,900 contracts of corn, while buying 2,500 contracts of soybeans. Funds have bought 1,800 contracts of soyoil while being flat in meal.
  • US ethanol production reached 301 million gallons last week vs 307 million in the week prior. US ethanol stocks fell to 981 million gallons, unchanged from last year. US crude oil stocks were 438 million barrels, up 7% on the year. The weekly energy/ biofuel data is seen as neutral to slightly bearish. The sharp drop in US corn prices has not stimulated US ethanol production. The big problem facing US ethanol is oversupply in capacity which pressures margin.
  • The Pro Farmer Crop Tour has pushed into IL and IA with the yield results awaited. Today’s additional rainfall across IL/MO/NE is aiding the yield outlook with some rains to leak into IL. The PF Tour is expected to release their US corn yield estimate on Thursday evening or Friday morning. The Tour has really helped define the degree that immaturity could become a yield issue should the 2019 Midwest growing season prematurely end.
  • China has been active this morning booking 10-12 cargoes of Brazilian soybeans for October. FOB prices are rising and the Brazilian premium vs the US Gulf has reached close to $1.00 /bu. China is 50-60% booked on Oct crush.
  • The midday GFS weather forecast is farther north with Midwest rain next week as a series of storm systems next week are projected to include a larger share of IL, MO and IN. The midday model has 1-2.00″ of rain across much of MO, the southern 2/3′s of IL and southern half of IN. Rains of 0.25-1.00″ are projected for the Upper Midwest and N Plains. The forecast has enough rain to limit any dry weather concern, but cool temperatures in the last week of August will slow crop maturity. The primary weather concern going forward is no longer rain, its crop maturity and the finish of the 2019 growing season.
  • The downside price risk is limited in corn with values near last year’s Aug 22 price level. Different this year is the uncertainty surrounding US corn/soy production relative to maturity. Dec corn bottomed following the Sept crop report at $3.45. Prior to the report the low was $3.59. The point is that corn has a few cents of downside risk with Mother Nature in control of the upside. Soy pod counts are well down from last year, but will the plant be placing on more blooms/pods heading into September. And Chicago wheat is likely within 6-8 cents of a low. Our best guess is that there will be better days to make new sales as a Chicago bottom forms in late August.

20 August 2019

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  • It has been a another mostly weak session in Chicago, with better than expected rains moving across E IA & W IL. This has pulled Dec corn down to last week’s low at $3.70. Nov beans are 7 cents off session highs. US and world wheat futures also continue to probe for elevated autumn export demand, which it seemingly has been unable to find.
  • Spot Russian wheat fob offers have fallen to $191/mt, vs. $195 in early August and vs. $225/mt on this week a year ago. French cash wheat has found new seasonal lows at $186/mt. French wheat a year ago was trading at $245-250/mt. There are hints that export commitments in the EU and Black Sea are struggling as importers stay hand-to-mouth. The world wheat market has acted as a weight on US corn values.
  • Radar maps show decently organized rainfall working across the western third of IL currently. This event was largely unexpected by EU and GFS model solutions released late Monday evening.
  • Hourly rainfall maps show accumulation in the last 24 hours across E IA/WIL in a range of 0.25-1.50″. Additional light but widespread rain will linger across the E Plains and majority of the principle Corn Belt into Thursday. Yield risks persist, and the duration of the growing season is far from certain. But the market is trading recent and upcoming boosts in Eastern Midwest soil moisture.
  • S American currencies continue to recover from last week’s collapse, with the US$ down slightly today. WTI crude is stable at $56/barrel. Ethanol production and blend margins are up slightly this week amid weakness in corn and ethanol values. Wednesday’s EIA report is expected to show a slight uptick in weekly production. US ethanol stocks, however, will remain perched near record highs at 1,000 million gallons.
  • The only bright spot today has been in world vegetable oil markets, which are maintaining support amid developing dryness in Malaysia and Indonesia. Spot rapeseed futures in Europe are nearing contract highs at €380/mt ($420/mt) as rapeseed oil prices have reached new 21-month highs. Dryness in Southeast Asia will be watched closely amid slowing crush rates in China.
  • Participants from the Pro Farmer Tour continue to find yield variability as the trek across toward the Central Midwest is generally finding solid potential in NE and very immature crops in IN.
  • Warmth in September is desired across the Northern and Eastern Corn Belt. Sep temperature guidance is trending warmer, but the near-term forecast keeps temperatures at substantially below normal.
  • The midday GFS weather forecast is much wetter in all but the Southern Plains over the next 10 days. Most important is that high pressure ridging relaxes its grip on the Plains and Midwest into August 30. This will allow for a steady stream of moisture to be funnelled across the heart of the US Ag Belt. The GFS forecast is also cooler than the morning run, with overnight lows to fall into the 40’s across ND, MN and WI Aug 30-31.
  • Additional official Pro Farmer yields are awaited, but amid a wetter US forecast, follow-through buying needs a new supply fear to sustain rallies. This year only combine data will give the market a real sense of future yield changes.