• Soybeans were back and forth, in uneventful trade on Tuesday and 1-2 cents lower at the close. Soymeal continued to trade in a broad range, while soyoil marked the first higher close out of the last nine trading days. The soybean harvest is advancing well, though high freight costs are keeping cash basis levels under pressure. However, barge rates for Nov/Dec are significantly cheaper, suggesting that spot basis should stabilise by mid-month. Seasonally, Chicago soybean futures tend to bottom in early October.

• Chicago markets are all trading towards the close in the red as crude oil sheds as much as $1.30/barrel and the US$ rallies further; other news is remarkably absent. December corn is once again below its 20 day moving average, wheat is faltering having made monthly highs last week, and November soybeans are solidly below the 50 day moving average.

• The September Grain Stocks Report was considered bullish for soybeans as stocks came in at 301 million bu, well below expectations and down 44 million from the September supply and demand report. Last year’s production was revised lower by 10.6 million bu and demand was posted higher from both crush and exports. A 1 bu/acre yield cut in the USDA October report would equate to end stocks of 339 million bu, and a 2 bu/acre cut would see that figure at 249 million bu. There are some who anticipate yields starting to drop off as harvest progresses and later planted beans, which saw a dry finish to their growing period, are harvested. If this situation materialises we could well see traders’ mindset change and thoughts moving away from ample supplies to tight supplies.

• Corn figures in the report were also considered bullish compared with trade estimates as September 1st stocks were reported at 2.295 billion bu compared with the average trade estimate of 2.346 billion. With the market currently very oversold and prices cheap enough to support better demand we see downside as extremely tough to substantiate.

• Wheat data was deemed just about bearish compared with trade estimates, wheat stocks came in at 2.253 billion bu vs. average estimates of 2.203 billion.

• Our view remains that market lows were scored in late August yet there is currently insufficient bullish or bearish information to substantiate a definitive trend either higher or lower. The October USDA crop report is only just around the corner, and last week’s stocks report has added a degree of pressure on US soybean yield  of 48 bushels/acre plus to keep stock levels from dipping below 400 million bu. Watch this space is our thought!

• US export data has been released as follows:

• Today’s action in Chicago (so far) has been largely lower and also somewhat dull with corn, wheat and soybeans all 1-5 cents lower at the time of writing. Grain export data was close to market anticipation, and even record weekly soybean demand could not spark anything meaningful, including fund buying. Key US data is out tomorrow, and our guess is that there is simply a lack of enthusiasm for new positions ahead of the release.

• Whilst it might be that corn export numbers were a touch disappointing, it should be noted that ongoing S American corn export volumes are at record levels. Soybean figures clearly reflect Chinese appetite for beans, from all origins, particularly at current (relatively low) price levels. It would seem prudent for both old and new crop Chinese soybean import volume figures to be increased somewhat.

• Corn demand shows little hope of improvement in the short to medium term, and it may just be that the USDA’s current US export estimate is too currently high. US wheat export prospects will only show signs of improvement once Black Sea export volumes start to reduce, potentially in December or January.

• The Australian weather forecast has added some rainfall for Queensland, but turned drier in NSW, which accounts for a much larger share of Australia’s total grain crop. Very heavy rain, 3 to 4 inches, is offered for Queensland this weekend, and will doubtless be welcomed, but other key wheat growing regions look set to remain dry into the first week of October. Aussie cash wheat continues to firm in price, particularly for higher grades.

• Demand for US soybeans is massive, but just how this impacts the balance hinges upon old crop carryover stocks, and whether yield is 50 bushels/acre or closer to 48, both of which will be determined in the next two weeks. Neutral prices trends are most likely into mid-autumn.

• Russia’s SovEcon has suggested that the 2017 record wheat harvest may well be a precursor to a second “bumper” crop in 2018 as a consequence of fast paced early plantings this autumn. A slow start to planting has been replaced with a much better pace, with 11.2 million ha planted as of Tuesday, which compares with 10.8 million has a year ago. SovEcon  intimated that as much as a record 18.1 million ha could be planted this season. Clearly such an area could well weigh heavily upon prices, both locally and globally, assuming average weather conditions. The strong Russian planting area is driven largely by lower production costs, which in turn leaves growers in profit despite current low prices. SovEcon’s final word was  that costs of production in Russia were “substantially lower than the rest of the world”, which should resonate loud in the ears of growers elsewhere.

• Early selling in November soybeans found good demand under the 100 day moving average, and soybeans traded up into late in the day to close two cents higher. In the soy product markets, meal end firm while liquidation kept soybean oil prices lower. US soybean cash basis has collapsed in the last week as harvest gains pace, with IL river bids up and down the state quoted as much as $.60/bu under. The Delta harvest is running well ahead of normal and good yields have kept the Gulf well supplied. Additionally, limited August rains have lowered river depths, restricting the tonnage that barges can haul and thus raising barge freight rates. Spot freight rates typically spike in late September as the harvest gets underway, and we note that forward offers are significantly cheaper. Exporters have noted exceptionally strong Chinese demand, and expect they will ship out a record number of beans in the first quarter. Our bet is for an early seasonal low in basis, with strong export demand to support Chicago soybean futures on breaks.

• Corn bucked off a stronger US$ and unchanged S American cash markets, and settled 1-2 cents higher. US yield data so far suggest NASS’s September estimate is relatively accurate, or at least within 1-3 bu of final. Export sales on Thursday will no doubt be unexcited. However, we have in recent days has mentioned that the US ethanol market is strong, and with wheat values rising, the burden on the global corn market to find demand is less intense than it was a year ago. Black Sea feed wheat this evening is up another $2/mt to $178 (vs. Gulf corn at $157), and note also that feed wheat’s seasonal trends points higher through Nov/Dec. S America will dominate world corn trade through late year, but it is becoming likely that the USDA is underestimating total corn trade. US ethanol production last week totalled 293 million gallons, down 11 million from the prior week but up 2 million on the same week in 2016. Ethanol stocks fell and, importantly, it appears that non-domestic ethanol disappearance remains strong. There is still no compelling argument for a major price move in either direction.

• Chicago wheat hit new six week highs amid positive technical considerations, and as world cash prices continue to inch higher. There’s also growing concern over SRW establishment in the US, particularly as short and long term outlooks trend drier across the C and E Midwest. Managed funds in Chicago are still short an estimated 70,000 contracts. Russian wheat offers rest at $191-193/mt into November, vs. $180/mt in late August. In the last six weeks Russian prices have rallied 6%; French & German offers in the same period are up 2-4%, and as demand is found in the Black Sea prices there are rising to match other world origins. Further upside exists into mid/late November. Do to overlook Australia’s massive premium to all other markets, and that a full 3-4 million mt of demand previously filled by Australia will be forced elsewhere, and, recall, Russian exports will be capped by logistical constraints. An overly bullish outlook requires adverse weather, but over time a test of $4.80, basis December Chicago, is projected barring major surprises in coming USDA reports.

• US crop condition data has been released as follows:

• Following lower overnight trade, the soybean market continued lower in a mix of technical trading and selling in the soybean oil market. The EPA on Tuesday said that it will seek comments on potential reductions to both biodiesel and the advanced biofuel RFS targets for 2018, as well as biodiesel targets for 2019. Comments will be accepted for 15 days, with the 2019 targets to be announced on November 30th. While the impacts of such a decision are more months/years away, soybean oil futures sank as the news moved through the trade. The impact of reduced biodiesel imports has yet to be realised in either B100 prices or producer margins. In fact, since the Commerce Dept. implemented taxes on Argentine biodiesel, both B100 price and production margins have turned lower as the spread between soybean oil and B100 has narrowed. Nearby support ahead of Friday’s stocks report is expected under $9.60, while strong rallies will struggle against harvest pressure.
  

NOTE - Biodiesel is diesel fuel made from vegetable oils, animal fats, or recycled restaurant greases. It’s safe, biodegradable, and produces less air pollutants than petroleum-based diesel. Biodiesel can be used in its pure form (B100) or blended with petroleum diesel. Common blends include B2 (2% biodiesel), B5, and B20.

• The EU and GFS weather models continue to pull a Brazilian pattern change further into the nearby time period, and confidence is rising with respect to soil moisture being replenished in Central Brazil over the next ten days. The US$ has recovered well from early September’s low, and we would mention that US interior basis has been in retreat as bins are cleared ahead of harvest. Fresh yield data this week has not been overly shocking, and so NASS’s September yield figure is likely within 1-3 bushels/acre of final. The trade’s average guess on Sep 1 stocks rests at 2,350 million bu, exactly what the USDA printed in the last WASDE. Fireworks are not anticipated on Friday. The EPA announced today it is seeking comments on a potential cut to the RFS mandate in 2017 and beyond. This mostly affects biodiesel, as ethanol is left more to the free market, and we would also note that gasoline’s premium to ethanol is again rising, and production margins remain stout. Note, too, that Brazilian ethanol’s premium to US origin is rising, and this week nearly matches the 20% tariff put on imports of US ethanol this summer. We expect the US ethanol market to remain strong. Otherwise there is just not a lot of fresh input. Chart-based support rests at $3.45.

• US wheat futures ended marginally lower, EU and Black Sea cash prices are unchanged, overall the wheat market was rather listless today. We do highlight the recent bounce in spring wheat’s premium to other classes this week. NASS’s final wheat production estimate is due on Friday, and though yield was stabilised during the final throes of summer, it is abandonment that will push US HRS production 15-25 million bu lower, thereby pushing HRS end stocks closer to 120-125 million bu. We doubt much downside risk is left in the spring wheat market, as there is little doubt hefty premiums are needed to ration supply. World wheat price trends are noticeably positive in the Sep-Nov quarter, made evident by the recent rally in Black Sea fob offers, and so spot Minneapolis should find lasting fair value at $6.30-6.80, basis December. Australian forecasts lack any substantial moisture relief into Oct 5th, and a close eye wil needl be kept on continued rainfall in Argentina.