• Following higher overnight trade, soybeans were able to extend gains ahead of the weekend, closing 9 cents higher for the day and barely below unchanged for the week. News at the end of the week was limited, but rains (and snow in the North) have slowed harvest, and funds are giving up on their short Chicago grain positions. News that President Trump could meet with the Chinese president next month has also renewed optimism that a trade deal could be reached. The Commitment of Traders report showed that funds had cut their net short soybean position by 3,000 contracts, but were large buyers in the soymeal and soyoil markets. In soymeal funds bought more than 12,000 contracts, taking their ownership stake to a seven week high of 39,000 contracts. In soyoil funds covered another 10,000 contracts and cut the net short position to the lowest since last April. In the last three weeks, funds have bought close to 69,000 contracts of soyoil, which has nearly been a record buying spree. Without a trade resolution, we see spot soybean in a broad $8-9 range, with an immediate target at $8.75 Nov.

• Dec corn hit a new seven-week high amid follow-through fund short covering. There is now talk of a sub-180 bushels/acre national yield, as well as talk of disappointing yield checks across the Western Corn Belt. New harvest data will be slow to find the market amid recent rainfall and cool temperatures, but very close attention will be paid to daily yield updates. Money flow is noted, but our work maintains fundamental value lies between $3.70-3.95, basis spot. US export sales totaled 40 million bu. This is down noticeably from recent weeks but still above the pace required to meet the USDA’s forecast. Total export commitments through Oct 4 are up 51% from last year. Managed funds on Tuesday were short a net 34,000 contracts. This evening we estimate managed funds are flat. A modest net long is expected as money leaves equity markets, and the US yield loss could pull end stocks below 1.6 billion bu. A bearish outlook requires confirmation of a large US acreage shift and favourable Brazilian weather next spring.

• US wheat futures rallied 7-10 cents on fund short covering. As of Tuesday managed funds were short a net 17,000 contracts in Chicago, and this evening are estimated to be short a net 28-30,000 contracts. There is little fresh news available, but prevailing trends are supportive. Dryness will persist across much of Europe and the Black Sea into the very end of October. Heavy snow will keep harvest sluggish across Saskatchewan and Manitoba. Notice that the EU market broke through a longer term downtrend line in late September, and close attention will be paid to money flow in wheat markets next week. US export sales were an uneventful 12 million bu, vs. 16 Mil the prior week, but Black Sea offers for Dec remain at $240-245/mt, near parity with Gulf HRW. Recall deferred Black Sea offers have held support as the months pass, and so we expect the US market to find equilibrium at $5.15-5.30 in the near term. A close above $5.30, turns the Dec Chicago chart bullish.

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Weekend summary 12 October 2018

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Fund positions disaggregated data

• The October USDA crop report was supportive with Chicago corn, soybeans and wheat rallying to moderate gains following the report. The data confirmed a 600,000 acre decline in US soybean harvested acres (FSA data), while the US soybean yield rose to 53.1 bushels/acre. The US 2018 corn yield was fell by 0.6 bushels/acre to 180.7 bushels/acre. We expect that based upon extremely wet weather and saturated fields that US corn and soybean yields will decline in November. The USTHATS yield data is becoming “solid” as 80% of the NASS corn test plots had been harvested with 14% in dent and measured in the lab. The October NASS data allows the marketplace to focus on demand with US corn/soybean/wheat crop sizes largely determined. The data confirms that US corn and soybean futures scored their seasonal/annual lows in mid-September. We maintain that the grains will continue to outperform the soybean complex in the next 45 days.

• NASS estimated the 2018 US corn yield at 180.7 bushels/acre, down 0.6 from September and near the lower end of trade estimates. NASS did not alter US corn seeded or harvested acres based on FSA data. US corn ear weights were record large, but ear numbers declined from last month. The US 2018 corn yield is still record large, but latent and wet harvest efforts in the W Midwest are likely to produce additional ear loss. We see the 2018 final US corn yield closer to 180.2 bushels/acre. US 2018/19 corn end stocks were forecast to rise 39 million bu to 1,813 million. We expect that WASDE is still too low with its US corn export estimate by 25-50 million bu, and that US ethanol corn use could rise by 75-150 million bu. Both (and the fall in US production) could tug US 2018/19 US corn stocks to 1,650-1,675 million bu. Such stocks argue for a rally to $3.80-3.90 basis spot Chicago futures. Corn appears to be caught in a $3.60-3.85 range with normal S American weather for their new crop.

• NASS cut the US soybean harvested acres by 600,000 acres to 88.3 million acres and raised yield to 53.1 bushels/acre. The yield came in below trade forecasts and did not score a record. Amid the extra 43 million bu of old crop stocks, US soybean total 2018/19 supplies were record large at 4,690 million bu. WASDE increased its 2018/19 US soybean end stocks forecast to 885 million bu, up 40 million from September. Such stocks are record large but expected. USDA made no changes in 2018/19 US export or crush estimates with total US soybean demand estimated at 4,268 million bu. This is down 28 million from last year. WASDE estimated the average US farmgate price at $8.60 which argues that the downside price risk in spot Chicago soybeans is limited below $8.00. We maintain that spot Chicago soybeans will hold in a range of $8.00-9.00 until there is evidence that the US/China will head to the negotiation table.

• US 2018/19 wheat stocks were raised by 21 million bu to 956 million. The increase was based on increased supply and a 10 million bu cut in feed demand. The average farmgate cash price is estimated at $5.10. The downside price risk in December Chicago wheat is likely no more than $5.00. WASDE lowered the 2018 Aussie wheat crop by 1.5 million mt to 18.5 million while Russia crop was dropped 1.0 to 70 million mt. WASDE held its Canadian wheat crop estimate at 31.5 million mt (even with 40% of the crop under snow). We note that WASDE held its Russian wheat export estimate at (a too high) 35 million mt and EU wheat export estimate at 23 million mt. US fob wheat is cheap in relation to other destinations, but USDA will be conservative. We maintain that the outlook for Chicago wheat is bullish on budding US export demand. This is no place to turn bearish of wheat.

• The morning has been mostly red, and not just in ag markets. Crude is down $1.70/barrel at $73.30, basis spot WTI. Emerging market currencies are weaker. EU milling wheat futures look to settle down €.75-1.00/mt. Oilseed markets worldwide have found renewed selling interest ahead of Thursday’s USDA data, with EU and Canadian rapeseed contracts down $2-4/mt.

• USDA reports since July have been bearish relative to expectations. However, prices have bounced back rather quickly following the August report. Our point is that both the bulls and bears are wary of large new positions ahead of what is usually a major USDA release. Supply will be weighed against strong US corn demand, and as the US wheat market begins to find non-traditional export destinations.

• Other news this morning is lacking. No new daily export sales were reported. The US administration’s decision to allow year-round sales of E15 is being a bit more scrutinised. On the margin, this will boost US domestic corn consumption. However, this boost is estimated by the trade to range from 25- 200 million bu. It is our opinion that finding new export markets for US ethanol is more important than changes to domestic blend volumes. Hurricane Michael has made landfall in FL/GA as a Cat 4 system. The eye of the storm will impact the Southeast in the next several hours. Michael then moves quickly across the primary corn/soybean areas of GA, SD and NC. Only a small percentage of the US total crop is at risk, but grain flows across the Southeast (poultry operations) could be affected. Rainfall accumulation in the Southeast is estimated at 2-6” in the next 48 hours. Other world weather patterns are little changed at midday. Favourable rains will continue to fall across a majority of Brazil’s Ag Belt into late October. Little/no rain is offered to Central and Western Argentina, where developing dryness is being watched more closely. The Aussie forecast is wet across the driest areas of NSW in the East over the next 7-8 days, but this will only work to boost soil moisture ahead of spring planting there.

• The central US GFS weather forecast is little changed from the morning run, but importantly the model maintains a lasting patter of dryness beyond the next 24 hours. Outside of the S Plains and Southeast little/no meaningful precipitation is forecast into the final week of October. Temperatures stay cooler than normal, with freezing overnight lows to drop into NE, IA, and N IL periodically over the next 10 days.

• The fear of another big yield increase is still apparent, but we expect the market to digest any US production increases rather quickly. Ahead of Thursday’s release, we estimate that managed funds are short a net 70,000 contracts of corn, 60,000 contracts of beans and 20,000 contracts of Chicago wheat.

• The morning has been mixed in Chicago with corn/soybeans weaker while wheat is firmer. Chicago trade volume is being curtailed by Thursday’s USDA Crop Report with everyone waiting for the data. Fund managers see the stock market retreat on rising US interest rates are looking for other non-correlated opportunities. Commodities are near the top of their buy lists, and we doubt that any widespread selling pressure will develop in the grains. Soybeans are somewhat different (from grains) amid the lack of Chinese demand and potential for a US yield surprise. The fundamental view of the grains outperforming soybeans persists. The only real worry remains the amount of US soybean crop that remains unharvested across the W. Midwest and the E. Plains. Soybean quality concern is noted throughout the Delta, and issues of off quality beans are being felt much farther north into IA/S MN.

• A mixed Chicago close is expected today. We doubt that either the bulls or the bears will be able to push their case very far. The “odds-on” bet is a market that holds in a range into Thursday. World end users are hoping for a bearish report to make forward purchases. The October USDA report should delineate how big-is-big in terms of US corn/soy yields. Speculators are betting on a bearish report based on the August/September results. Anything less than a 182 bushels/acre US corn and 53.6 bushels/acre soybean yield will be positive.

• Chicago brokers estimate that funds have bought; 4,000 contracts of wheat while being flat in corn/soymeal while selling 3,100 contracts of soybeans and 4,300 contracts of soyoil. US export inspections for the week ending October 4 were; 53.2 million bu of corn, 20.9 million bu of soybeans, and 15.6 million bu of wheat. The corn export total was larger than expected while soybeans and wheat were in line. For their respective crop years to date, the US has exported 228 million bu of corn (up 87 million bu or 62%), 130 million bu of soybeans (down 70 million bu or 35%), and 269.5 million bu of wheat (down 109 million bu or 29%). The debate that traders are having is US wheat cheap enough vs. Russian offers that world demand is shifting to the US.

• Bangladesh purchased 120,000 mt of US HRS wheat for shipment this crop year. The purchase was a surprise and along with the Saudi purchase of US HRW wheat last week argues that US wheat export demand is ready to jump. We note that Russian 12.5% spread vs 11.5% has pushed out to a season’s high $11/mt.

• The central US GFS weather forecast shows hurricane Michael has become a dangerous storm and is gaining in intensity. The storm looks to make landfall as a strong Cat 3 or weak Cat 4 storm on Wednesday. This major hurricane is altering the N American weather pattern. The midday GFS is drier than was projected overnight across the W Midwest with rains of 0.50-1.50”. The diminished rain totals will help the harvest advance after a needed 5-7 days of drying. Cold air will be pulled southward from Canada and produce a frost/freeze across the N Midwest to help plant dry down. Also, a drier profile is offered during the 11-15 day period, which is a change. The midday GFS offers a drier forecast.

• The fear of another big yield increase is pressuring Chicago corn/soy prices at midday. We see the time for wheat to start a bullish move as near as export demand shifts to the US. US wheat is cheap vs Russian or EU fob offers.

• Mostly lower is the morning Chicago trade with traders positioning ahead of what is expected to be a bearish USDA October Crop Report on Thursday. Soybeans have held better than the grains as the value of the Brazilian currency, the Real, has rallied vs the US$. The Real traded down to 3.70:1 and has recovered to 3.75:1 at midday. In about 10 days, the value of the Real has rallied nearly 19% which is depressing their interior cash soybean basis bids. We do not detect that Brazilian farmers are changing their cropping plans, but their smile is not as wide based on slumping cash margins. The grains have been pressured via modest selling with wheat longs exiting their positions. Wheat bulls remember the bearish market reaction of Chicago following the August and September reports and fear that WASDE will again become more conservative in their supply cuts.

• We note that the October report incorporates FSA data in terms of US corn/soybean seeding changes. The FSA data argues for a modest cut in US corn and soy seeding. Soybean seeded acres are likely to be trimmed more than corn. NASS should have harvested some 75-85% of their operational test plots for the October report. They will rely heavily on this data for their US yield corn/soybean/sorghum estimates. Farmer surveys play a reduced role in the October report with harvest losses to be featured in NASS’s November data. The point is that much of the bearish news on large US corn/soybean crops will be known following the October USDA report. Seasonal price trends for soy/corn turn positive after October 12 and some sort of Chicago recovery is expected. US elevators are not seeing big movement off the combine as producers choose to store as much of their harvest as possible. Farmers are delivering on their prior sales contracts, but new sales are not being made amid weak cash basis bids and wide carries in futures. Chicago is telling farmers to store as much of their crop as possible, and they appear to agree.

• Private Argentine wheat estimates are dropping to 18.0 million mt vs a WASDE forecast of 19.5 million. Frost/dryness and even hail has taken their toll with rain needed by mid-October. BAGE estimates that 41% of the Argentine wheat crop is rated good/excellent vs 70% last year. Crop ratings are expected to slide this week amid the recent cold/dry weather.

• The central US GFS weather forecast shows that tropical storm Michael has become a hurricane and is stronger than forecast. The storm looks to make landfall as a Cat 3 storm late Wednesday. The midday GFS forecast is slightly drier than was projected overnight across the W Midwest with rains of 1.50-3.00”. The heaviest rain will be focused on Central Kansas with most totals across Iowa ranging from 1.50-2.00”. Such rain will keep harvest operations on hold this week. The best harvest chance is on the weekend or early next week. A wetter profile looks to return during the 11-15 day period. Other than a few days, we see no lengthy period of warm/ dry weather for the wet W Midwest to allow an active harvest.

• The bearish supply news of 2018 US corn/soy crops will be known on Thursday. It is demand and the outlook for crop production overseas that will determine Chicago price trends into yearend. We see US wheat as positioned to garner world demand with Saudi’s purchase last week being confirmation. Expect US wheat export demand to ramp up.

• The Commitment of Traders report showed another week of shifting sentiment. Funds were net sellers through the week in the wheat market, selling close 18,000 contracts across all three exchanges. Funds were still net long in Kansas, and added to net short positions in Chicago and Minneapolis. Funds were big buyers in livestock, corn, and in all three of the soy markets. Across the ten key Ag markets funds were net buyers through the week of more than 105,000 contracts and were net back to net long of just over 6,400 contracts.

• Soybeans saw selling right from the morning open, but the early break found strong demand that carried the market higher into the end of the day. At the close, November soybeans were back over the 50-day moving average and marked the best close in seven weeks. The Commitment of Traders report showed that funds covered more than 14,000 contracts last week, and their net short position of just over 44,000 is now the smallest in six weeks. In soymeal, funds added 5,000 contracts to their net long position now worth 26,000 contracts. But funds largest shift was in soyoil where they covered more than 34,000 contracts. US farmers have pushed hard ahead of rains that have brought harvest to a standstill across much of the Midwest. But after an active week we look for harvest progress through Sunday to have reached 38-41% complete. Soybeans ended the week with a rally, but we look for trading to slow in the first half of next week ahead of the Oct crop report. Nov beans have resistance near $8.85.

• Dec corn ended flat, and again the market tried and failed to trade through its 50-day moving average. Price were weak at midday on chart-based selling, but recall seasonal trends and export demand remain positive. Otherwise, fresh news is lacking. Managed funds on Tuesday were short a net 57,000 contracts, fewer than expected. The trade does seem to react to fund position on Sun/Mon, but such a position is not viewed as market changing. Corn still appears cheap, and a scramble for supply is expected in the weeks ahead. Excessive US rainfall will at the least slow down the filling of the pipeline. The autumn/early winter program will be record/near record large. Even amid an Oct yield of 181-182 bushels/acre, fair value is seen between $3.70-3.90, Dec. Note that there is renewed uncertainty over Ukrainian yields. A USDA attaché report pegged Ukrainian production at 29.5 million mt, vs. USDA’s official number of 31 million. It is a small difference, but following severe loss in Russia, Black Sea corn trade could be disrupted further.

• World wheat futures again ended steady to higher, with Russian interior prices also rising across the Siberian spring wheat belt. Like corn and beans, the market is concerned about coming US rainfall, which will be most excessive across the HRW Belt. There is ample time remaining to seed winter wheat, but accumulation of 5-10” across TX, OK and E KS will halt fieldwork for at least two weeks. Elsewhere, dryness continues across Australia, Europe and the Black Sea region into the second half of October. Part of our thesis in wheat is that a substantial rise in acres and favorable weather are needed to boost major exporter supplies in 2019/20. This is now less certain given N Hemisphere weather issues. Managed funds on Tuesday were short a net 12,000 contracts in Chicago (larger than expected) and long a net 28,000 contracts in Kansas. This compares to length in Kansas of 64,000 contracts in late August, and fund length is now far from excessive. We maintain a slow but steady rally unfolds into late year. Aussie supply & demand will be key in next week’s WASDE.

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IAG Europe Grains Update 5 October 2018

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Fund positions disaggregated data

• World crude oil futures found new highs yesterday despite a sizeable build in US stocks. We note that US stocks are still somewhat tight and around 13% below last year. What is driving values higher currently are potential additional sanctions on Iran, and whether sanctions will act to severely depress Iranian exports. Sanctions in 2012 disrupted world oil trade flows considerably, and many are anticipating a return to $100 as sanctions loom.

• Ag markets are higher at midday amid a lack of producer selling, and to some extent amid frost this morning in the Northern US and coming excessive rainfall. Corn is leading the way on a percentage basis, and Dec oats at midday is up a massive 13 cents and is testing contract highs at $2.87. Short covering is the theme and higher closes are expected. Interestingly, the markets have shown resilience it the face of mixed input.

• Egypt’s GASC bought three cargoes of Russian wheat for Dec arrival at $234-237/mt, which compares to Egypt’s last purchase in mid-Sep at $226-228, but appears rather aggressive compared to fob quotes Wednesday evening. Egypt was offered 1 million mt of wheat, 655,000 mt of which was Russian and none of which was US origin.

• Informa raised US corn yield to 182.1 bushels/acre and bean yield to 53.0. Informa pegs US corn production at 14,890 million bu, 63 million above USDA. Informa pegs soybean production 4,677 million bu, 16 million above USDA. Based on crop ratings, steady to higher yields in next week’s report are likely, but unfortunately combine data from the Northern US won’t be available until late month.

• US weekly export sales were mixed, with wheat at the lower end of expectations, corn in the middle and soybeans well above. US corn sales through the week ending Sep 27 totalled 56 million bu, down 11 million from the prior week but well above the average needed to hit the USDA’s target. Wheat sales were a routine 16 million bu, vs. 24 million the previous week. US soybean sales totaled 56 million bu, up 24 million on the week and even 21 million above this week a year ago. Mexico was the largest buyer. 3.5 million bu of US beans were sold to Argentina last week. For their respective crop years to date, the US has sold 776 million bu of corn, up 63% from last year; 742 million bu of soybeans, down 13%; and 415 million bu of wheat, down 19%.

• The Brazilian Real is a bit weaker today, but quietly has rallied 7% in just two weeks. Brazil begins its presidential election on Sunday. Pro-business candidate Jair Bolsonaro continues to lead polls.

• The central US GFS weather forecast is drier in the 11-15 day period but is otherwise unchanged. Warmer and drier weather does lie ahead, but only after excessive rainfall and regional flooding impact the Plains and W Midwest. The GFS is still drier than its EU and Canadian counterparts, but precipitation accumulation next week of 2-3” will be widespread. Accumulation of 4-9” favors OK, KS, MO and parts of IA and IL. Gulf tropical activity also needs monitoring. The EU forecast this morning introduced a potential storm Oct 13-14. The GFS doesn’t include any landfall but does indicate Gulf activity in the extended period.

• Soaring oat futures, new multi-week highs in EU canola, and rising Egyptian tender results all suggest seasonal bottoms have been scored. New positions will be lacking ahead of next Thursday’s Oct WASDE release.

• Stratégie Grains have updated their latest UK cereal production estimates; soft wheat production is maintained at 14.04 million mt vs. 14.62 million in 2017/18. Winter barley output is estimated at 2.84 million mt vs. 2.95 million last year with spring barley at 3.97 million mt vs. 4.22 million last year. Quality for soft wheat was meeting specs based upon preliminary results, average specific weight was put at 77.7 kg/hl vs. 75.9 last year. Hagberg falling number levels were also improved on last year whilst protein at 12.4% is behind last year’s 12.8% but above the average of 12.1% (2013-17). Barley quality was also described as satisfactory with specific weight averaging 66.6 kg/hl vs. 64.5 last year. 2019/20 acreage trends were suggested to be between 2 and 4% higher compared with the 2018 harvest figure.

• It has been a mixed and somewhat dull session, with markets unsure how to digest potential slowing of Russian wheat shipments and coming Central US rainfall. Corn and wheat sit near unchanged. Nov beans are down 3. Russia through the first days of October has exported a record 12.9 million mt of wheat, vs. 9.5 million a year ago. This reflects a sizable 37% of the USDA’s forecast and over 50% of the still-discussed government cap of 25 million mt. There are more questions than answers regarding near term Russian wheat exports, but we fully expect this issue to dominate newswires in the weeks ahead.

• Should weather forecast models verify, some 14” of rain will have fallen across IA in Sep and the first half of October. This is record large, and the only year that comes close is 1941, when Sep-Oct rainfall was recorded at 13”. With soil moisture at/near capacity, flooding will be the primary issue. Time will tell if yield and quality is affected.

• Argentina’s Peso is a bit stronger today, but the forward curve has weakened noticeably. Farmer profitability is rising, but producer sales will absent over the next several weeks.

• US export sales on Thursday are expected to feature 55-65 million bu of corn, 30-35 million bu of soybeans and 18-23 million bu of wheat. FAS this morning announced that exporters had sold 260,000 mt of corn to Japan for 2018/19 delivery. Recall that US weekly corn sales need average only 34 million bu to meet the USDA’s forecast.

• World canola futures continue to rally based on EU dryness and coming Canadian snowfall.

• The central US GFS weather forecast is unchanged from the morning release. Heavy/excessive rainfall lies ahead. The greatest totals still look to favour OK, KS, MO, IA and WI. Freezing temperatures stay isolated to the far Northern US and Canadian Prairies. Relative warmth across MO, IA, WI and IL may boost disease pressure.

• Grain markets continue to hesitate to break through major moving averages amid expectations of even higher yields in next Monday’s October report. Corn export demand into late year will likely be record large, and Aussie crop potential continues to decline.

• It has been a mostly higher session this morning, with a host of raw material markets shrugging off early weakness. Spot WTI crude is flat, and well off session lows. EU milling wheat futures look to close slightly lower in old crop and slightly higher in deferred positions. Newswires have been quiet, but concern over global weather patterns persist. Pockets of New South Wales and Queensland in Eastern Australia will see rainfall of 0.75-1.50” over the next 72 hours. However, this looks to be a one-time event rather than the beginning of a pattern change. The Aussie bureau of meteorology expect a moderate El Niño to take effect by December, which along with severely short soil moisture will sustain drought there through the period. It is too late for rain to boost wheat and canola potential, but sorghum planting typically begins in October. The Aussie grain market can ill afford to lose both winter and spring crops.

• In the US, NOAA’s QPF (quantitative precipitation forecast is the expected amount of melted precipitation accumulated over a specified time period over a specified area) has fine-tuned expected rainfall totals to upwards of 5-7” into early next week across OK, KS, NE, MO, IA, MN and WI. Yet more rain is expected in the 8-15 day period. Quality issues will be watched for, and harvest/winter wheat seeding will be halted completely into the latter part of the month. Also, in Europe there is still no sign of needed rainfall into Oct 17. The primary window for winter canola seeding there has passed. EU and Canadian canola market have rallied sharply since mid-September. The time available to plant wheat is longer in duration, but early wheat seeding will be done amid near zero soil moisture.

• The only real bright spot is S America, where normal/above normal rainfall finds its way north into Mato Grosso and Goias. The pace of corn and soybean planting in Brazil will be much improved on recent years.

• Wednesday’s weekly EIA report is expected to include a modest boost in US crude stocks, but recall stocks remain some 16% below last year despite rising production. Ethanol grind will be seasonally reduced over the next 1-2 weeks. We would mention that Brazilian ethanol prices continue to rally and are quoted $.36/gallon (21%) above US Gulf origin. US ethanol exports will stay elevated.

• The central US GFS weather forecast is wetter in the Eastern Midwest Oct 12-13, and wetter in pockets of the E Plains in the near term. A steady flow of moderate to heavy rainfall begins Thurs/Fri, and persists into Oct 13. The biggest risk of flooding lies in OK, KS, NW MO and W IA. Note that soil moisture there is already abnormally high. The models have trended warmer in recent releases, with freezing temperatures to stay relegated to the Dakotas and Canada.

• The question ahead is whether coming rainfall materially affects crop quality/quantity. Grain markets are, in our opinion, forming a base amid coming demand.

• It has been a surprisingly bullish session in Chicago, with Dec corn up 9 and Nov beans up 18 at midday. Wheat has been flat, with market-specific wheat news lacking and with EU futures aiming to settle unchanged. Confirmation of USMCA (previously NAFTA) sparked this morning’s short covering effort, and recall that as of last Tuesday managed funds were short a net 113,000 contracts of corn and 59,000 contracts of beans. The United States-Mexico-Canada agreement mostly touches on auto manufacturing, intellectual property and dairy, but the deal will keep grain flow within N America intact. Crude’s rally is attracting more investment in raw materials as a whole, and commodity indexes look to recover further from mid-summer’s collapse.

• Spot WTI crude is up another $1.40/barrel to new highs. Brent crude’s premium to Malaysian palm oil has widened to $109/mt, which is historically high. The Dow, as expected, is up 200 points. The US$ is up slightly.

• US export inspections through the week ending Sep 27 included 53 million bu of corn, 22 million bu of soybeans and 14 million bu of wheat. All were within trade expectations, but the pace of US corn exports is still much better than that needed to meet the USDA’s forecast. Corn shipments over the next 48 weeks need to average just 42 million bu. For their respective crop years to date, the US has shipped 174 million bu of corn, up 47% from last year; 108 million bu of soybeans, down 26%; and 254 million bu of wheat, down 31%.

• Brazilian soybean exports have now matched the USDA’s forecast. The USDA in its Sep WASDE put Brazilian soybean end stocks 1.1 million mt. The world’s soybean surplus now rests solely in the US. Most tonnages of Argentine demand for US beans is expected as Argentine domestic stocks are replaced. There is also some measure of attention being paid to coming rainfall in the US, which looks to continue well into the middle part of October. A wide band of rainfall worth 3-6” is offered to KS, NE, IA, MN and WI next week. Corn harvest this afternoon will be pegged at 24-28% complete. Soybean harvest should have reached 22-26% finished.

• The Aussie forecast features needed rainfall of 0.25-1.00” across some of the driest areas of New South Wales late this week. It is too late to meaningfully affect wheat potential, however, and dryness resumes thereafter. There is also growing concern over winter rapeseed seeding in Europe, where near zero rain is projected in the next two weeks.

• The central US GFS weather forecast is little changed, if a bit warmer across the Great Lakes next week and beyond. Scattered showers dot the Northern Midwest over the next 24 hours. A pattern of lasting rainfall begins Thurs/Fri and continues unabated into Oct 11- 12. Snow favours the Canadian Prairies and North Dakota.

• A new North American trade agreement is noted, but we view recent market action as simply traders finding value in current prices. World cash wheat prices have bottomed, and it is tough to know just how high is high with respect to autumn/early winter US corn export demand.