• HEADLINES: Chicago ag markets extend rally on bullish EIA data; Unwanted precipitation impacts Midwest next week.

• US and global ag markets have built upon overnight gains amid bullish US energy data, hot Argentine forecasts and as new money continues to enter the raw material space. The CRB index is likely to score a sixth consecutive weekly rally, and amid ongoing US/world inflation and tight per-capita food stocks, additional money will find the ag space into early 2022. Soybeans have been the leader amid suspected Chinese pricing and as prying the remainder of harvest from the US soy producer will be a difficult task. Soybean vessel line-ups are rising, as is the need for physical soy supply.

• EIA pegged US ethanol production through the week ending Oct 15 at 322 million gallons, up 19 million on the prior week and the third largest for any week on record. We estimate that production last week reflected 96% of capacity, and amid margins in excess of $1.00 per bushel, production will stay near full capacity throughout the autumn and winter. Importantly, ethanol stocks last week did NOT rise significantly amid elevated residual use (exports). There remains a need to sustain large weekly production, and ethanol production and blending economics stay favourable.

• US crude stocks last week totalled 426.5 million barrels, down slightly from the prior week and down 13% from mid-Oct 2020. Motor gasoline stocks last week were down 4% from a year ago. WTI crude futures are positive at midday, with RBOB’s premium to ethanol still a sizeable $0.27 per gallon.

• Our message is that the USDA’s 2021/22 corn grind forecast is increasingly viewed as 100 million bushels too low as weekly US gasoline use stays at or above pre-Covid levels. A string of solid weekly export sales data, and the market’s perception of US corn stocks/use will begin to change in a meaningful way.

• December Paris milling wheat has posted a new contract high of €278.75/mt. Spot Paris rapeseed is testing April’s all-time high of €700/mt. EU rapeseed’s premium to Nov Chicago soy is now an incredible $314 per ton, or 80%. International ag markets continue to reflect current dire supply tightness, with record S American crop sizes absolutely needed next spring/summer to stabilise global supplies. Minneapolis wheat today near $10.00 per bushel and spot cotton at $1.10 per pound shows clearly the need for acreage expansion in the US, and elsewhere.

• Continued net soil moisture loss in Argentina will begin to fuel abnormal heat next week, with highs in the 90’s to be widespread. This warm pattern is forecast to continue into early November, and whether current conditions are setting the stage for longer-term drought must be monitored closely.

• The midday GFS weather forecast is drier in the eastern Midwest in the 6-10 day period but maintains widespread heavy rainfall east of the MS River Sun-Tues. Most concerning is that the GFS forecast advertises accumulation of 2-4” across central IL, central IN and OH, which will continue to challenge the second half of harvest progress there. Dry weather resumes in the eastern Midwest beginning late next week, but such heavy rainfall will delay operations into the following weekend.

• The S American forecast is consistent with prior output. Near ideal conditions will persist across Central and Northern Brazil into early Nov, while worrisome dryness will be ongoing across Argentina and RGDS in far Southern Brazil through the period.

• The rapid finding of increased crop demand requires NASS to keep its US corn and soy yields steady to higher in its Nov report to prevent sizeable downward revisions to US stocks. We repeat our belief that lows have been scored. Seasonal trends are positive into winter.

• HEADLINES: Morning rally fades on lack of news; Rapeseed markets soar; Argentine dryness to persist.

• Price action in Chicago and elsewhere has been mixed this morning, with oilseeds gaining on grains. We understand that Chinese buying/pricing exists under the Chicago soybean market and despite varying opinions on final 2021/22 US soybeans exports, there is no doubt that China remains the big short in the marketplace currently. The pace of Brazilian soy seeding will be rapid in the weeks ahead, and new crop soybean exports will reach the world marketplace by the second half of February. But there exists a wide open for excellent US soy sales and shipments in the meantime.

• Outside markets lack a clear trend at midday. Paris milling wheat and corn futures look to settle near unchanged. It is EU and Canadian rapeseed markets have been this morning’s  bullish leader, with spot rapeseed in Europe reaching new rally highs of €689 ($801) per tonne. This compares to Nov Chicago soybeans at $451 per ton. The trade is now wondering whether rapeseed prices must nearly double soybeans in order to adequately shift demand. Recall the world’s rapeseed supply issue is not solvable this year, and elevated substitution from rapeseed oil to soybean or other vegoil is a requirement.

• Iraq’s ag ministry has suggested 2022/23 wheat seedings there would be cut in half due to water shortages. Any drop in Iraqi wheat production would boost the need for imports immediately as end stocks there have dwindled to near zero. Cutting Iraqi planted wheat area in half would mandate imports of 4.5-4.7 million tonnes, vs. a projected 2.6 million in 2021/22. This would also be a new record large import total.

• Relatedly, Kazakhstan’s Minister of Ag pegged total grain exports in 2021/22 at just 6.0-6.5 million tonnes, vs. USDA’s projected 8.1 million. There is a clear wheat supply/demand issue in the Mid-East and Kazakhstan, and the USDA in subsequent releases will continue to boost total world wheat trade.

• It is tough to find other significant input. EIA’s weekly report on Wednesday is expected to show another week of sizeable US ethanol production, while crude and motor gasoline stocks stay well below recent years. We have previously highlighted that ethanol production is incredibly profitable amid current corn prices. We note that the incentive to boost blend rates has also been elevated, with RBOB gasoline’s premium to the ethanol ($0.28 per gallon) the highest since March.

• S America’s weather pattern appears to be developing a classic La Niña signature as dryness spreads northward into Rio Grande do Sul in far Southern Brazil. The midday GFS forecast has extended near complete dryness in Argentina and Southern Brazil into Nov 3. Rain will be needed soon thereafter.

• The midday GFS weather forecast has reduced rainfall totals projected in IA next week but maintains a pattern of widespread soaking rainfall across a bulk of the Midwest next Mon-Wed. Rainfall totals in excess of 1” will favour MO, IL, WI, MI and portions of IN. We note that the EU model has a much drier bias next week, and so the EU’s afternoon solution will be monitored closely. This is not an overly threating pattern but will add to harvest challenges east of the Mississippi River. Already corn and soy yields in the second half of harvest are expected to drop meaningfully in pockets of the eastern Midwest due to recent wet conditions.

• The S American forecast is unchanged at midday. Rapid soil moisture lies ahead across Argentina’s primary ag belt.

• Harvest lows have been scored in our opinion, but the rate/intensity of this season’s recovery requires steady confirmation of sizeable demand. We maintain a strategy of using breaks to add to Q1 2022 supply coverage. Continued dryness in Argentina will be a big deal for corn and soymeal markets.

• HEADLINES: Early weakness uncovers new buying; Gulf activity nears normal; Midwest forecast trends wetter.

• Early weakness found new buying in Chicago, despite a relative weakening of global energy markets and a lack of new export sales announced by FAS this morning. We have in recent days has highlighted the recent surge in end user margins, profitability spreading from biofuel producers, crush plants and livestock operations. The market does not need to break to clear stocks and in fact end users can absorb a lasting post-harvest recovery easily. Price action since late last week continues to validate that secondary lows were potentially scored just after the release of the USDA’s October WASDE.

• Gulf loading capacity is very close to normal. Export inspections through the week ending Oct 14 featured 38 million bu of corn, vs. 33 million the previous week, 84 million bu of soybeans, vs. 64 million the previous week, while wheat shipments were a disappointing 5 million bu, vs. 16 million the prior week. Priority will be given to soybeans over the next 60 days, and while the pace must stay elevated to offset early September’s Gulf closure, soybean’s southern demand pull will be robust into late year. Similar soy inspections are anticipated next week, and China will be active in extended forward coverage on even modest breaks.

• Corn’s Gulf demand pull stays mediocre into winter but given US export commitments sit at the second highest level on record as of early Oct, weekly corn export inspections of 50-80 million bu will become common January onward.

• Paris milling futures are down slightly on speculative profit taking but it is equally difficult to find fresh bearish wheat input. Most importantly, interior cash wheat and flour price in Russia are up again this week in both Rubles and US$. Interior flour prices are rapidly rising to all-time record highs posted in late 2020, and our bet is that new record Russian flour prices are scored in the Dec-Jan period. It is imperative that European wheat prices follow the Black Sea higher in order to slow export demand, and ultimately this bodes favourably for the US’s share of world trade in early 2022.

• EU and Ukrainian corn harvests remain historically slow. The corn harvest in France is just 15% complete vs. 62% a year ago. The EU corn market’s goal in the very near term is encourage some measure of Ukrainian imports, which only occurs at higher prices. EU corn yields will be excellent, but the feed balance sheet stays incredibly tight until late November. Additionally, Ukrainian corn fob basis has rallied to $1.65-1.70 per bu over Chicago futures, vs. $1.45-1.50 in late September. Our message is that the cost of world corn trade execution will be costly, and US Gulf corn is viewed as increasingly cheap in the global feedgrain marketplace. Brazilian interior corn is again testing $7.00/bu.

• The midday GFS weather forecast is much wetter in the western and Central Midwest beginning mid/late next week and continues to trend drier in Argentina. Favourably dry and mild conditions allow the Central US harvest to roll along smoothly into the weekend. Thereafter, a series of frontal systems trigger an active pattern of rainfall across the far eastern Plains, Midwest and Delta region into Oct 30. Cumulative totals in the 6-10 day period across eastern IA, MO, IL, IN and MI are estimated in a range of 1.5-3.0”.

• The S American forecast features daily showers in Central and Northern Brazil, a developing dry trend in far Southern Brazil and a noticeable lack of precipitation in all of Argentina over the next two weeks.

• After a rather emotional period of determining Northern Hemisphere crop sizes, market focus has returned to demand, which will be sizeable, and tight global/exporter corn and wheat stocks. The worst of supply fears have been eased following NASS October US yield data, but there is still no tolerance for additional supply dislocation in any hemisphere in calendar year 2022.

• Short covering from oversold conditions, along with firming cash markets, lifted Chicago soybeans 10-11 cents at the end of the week. Additionally, the USDA announced daily export sales to China and Unknown Destinations, with a combined volume of 31.4 million bu.

• NOPA reported end of September soybean oil stocks at 1,684 million lbs, up 1% from August and 18% higher than a year ago. NOPA stocks typically range from 400-500,000 lbs under total US stocks that are reported by NASS at the end of the month. Implied disappearance from NOPA processors was 8% less than last year. To date, there has not been a significant increase in US soybean oil domestic consumption. However, historic prices have also not had a tremendous impact on disappearance either. The buildout of the US renewable fuel industry is still in its infancy and expected to produce a massive increase in US vegoil consumption in the years ahead.

• Seasonal trends for both cash and futures are higher, and we expect a recovery is underway. Initial sales targets are at $12.80-13.20 basis November soybeans.

• Chicago corn futures ended 7-10 cents higher and ended the week just marginally lower. The post-USDA recovery has been swift, and indeed the outlook has turned more positive. Bearish USDA data has been digested. There is little doubt autumn/winter consumption rates will be impressive. We hear of Chinese interest as futures there exceed $10/bu. China aside, there are just few options for global feed importers. Gulf corn ends the week offered $15/mt below Ukrainian origin and $55/mt below Black Sea feed wheat.

• US export sales through the week ending Oct 7 totalled 41 million bu, a full 10 million above the pace needed to meet the USDA’s forecast. US corn export demand typically rises in autumn and peaks in the Dec-Jan period. Ukraine’s ongoing harvest delays will keep US corn highly competitive into late year.

• The big question now is whether total US corn consumption can exceed USDA’s forecast by 250-300 million bu, which would wipe out USDA’s projected increase in stocks. Our bet is that demand will be lifted in subsequent reports as export sales stay strong and ethanol production is maximised in the near/medium terms. Breaks continue to be opportunities for end users.

• US wheat futures ended 9-13 cents higher, led by spot KC, as the major exporter balance sheet continues to tighten. We hear of light but continued interest from China for US SRW. US export sales were a robust 21 million bu, a 5-week high and well above the pace needed to meet the USDA’s forecast. Ultimately, we expect the USDA to lower exporter wheat end stocks another 3-4 million mt as global import demand is more accurately assessed. Wheat remains a bull.

• The EU market should lead over time. Cumulative Jul-Sep EU wheat export shipments are estimated at 8.5 million mt, up 45% from last year. The pace of EU demand must be slowed to keep domestic stocks adequate, and the most logical solution is to shift importer demand to the US beginning in early 2022.

• We would also note that managed funds on Tuesday were short a net 8,500 contracts in Chicago. This position has only been partially covered. Similar to recent years, the spec community is expected to establish a decently sized long position in winter/early spring. It is imperative to use breaks to add to supply coverage.

• HEADLINES: China buys 5-6 cargoes of French wheat; Wet weather topples E Midwest corn; Ukraine corn too wet.

• Chicago futures are bouncing with wheat in the lead on rumours of Chinese buying of French wheat. Corn/soybeans have traded positive and negative with momentum funds selling rallies with 50% of the US corn/soybean harvest left to complete and pre-weekend hedge pressure expected on Friday. The charts are pointed down, but the short-term momentum funds had become too bearish and were covering recent sales. We see strong support below $12.00 in November soybeans, $5.00 in December corn and under $7.20 in December KC wheat. A higher Chicago close is expected with talk of harvest lows being offered.

• FAS will release their export sales estimates on Friday due to Monday’s Columbus Day holiday. FAS announced the sale of another 130,000 mt of US soybeans to an unknown buyer this morning. The cargo size points the finger at China as the buyer with estimated US soybean purchases totalling over 1.0 million mt this week. The USDA should release strong export sales totals on Friday morning with US corn and soybean sales ranging from 1.1-1.5 million mt (each) and wheat sales of 325-400,000 mt. US cumulative corn sales are the second largest on record and project that the USDA is understating 2021/22 US corn exports.

• China is rumoured to be booking French wheat with as many as 5-6 cargoes selling according to EU export sources. Asian watchers argue that China is using TRQ’s to make the purchase. What is unknown is whether China is using old or new TRQ’s. A year ago, China issued TRQ’s in October for wheat and corn purchases. The TRQ’s licenses are good for 1 year. China may be cleaning up old TRQ’s before issuing the next batch for 9.4 million mt of wheat and 7.2 million mt of corn. The US’s win against China in April of 2018 makes it costly for China should they not purchase WTO pledged amounts. Paris wheat futures rallied and closed strongly on the China wheat rumours.

• US ethanol production was record large last week at 303 million gallons. This was up 10% from the week prior and shows that near record large US ethanol margins are pushing plants to produce to capacity. We look for ethanol output to hold above the 2019 level well into early 2022. US ethanol stocks fell 1% to 834 million gallons amid strong demand. The fall in US ethanol stocks was the bullish surprise of the report. The rising price of gasoline makes US ethanol look cheap at $2.21/gallon. Corn ethanol plants are raising cash corn bids to secure supply. We calculate that ethanol plants are making $1.14/bu of corn that is processed.

• The Ukraine corn harvest is making slow progress amid wet fields and seed that just won’t naturally dry down very fast. Amid the soaring cost of EU natgas, we calculate that it takes more than $1.00/bu to dry 25% corn down to 12-14%. Farmers facing this big cost would rather just leave the crop in the field. This is causing Ukraine exporters huge problems as demurrage costs rise on vessels waiting to load. Demand could be shifted back to the US Gulf.

• A slow-moving front will push east across the Eastern US into the weekend. Rain totals are estimated in a range of 0.25-1.25” with locally heavier amounts. Following that rain, a 7-9 day period of dry/mild weather follows. The E Midwest is so wet, that it will take 4-5 days of dry weather before harvest resumes.

• US export sales are increasing while China is securing milling wheat in France. The world wheat market cannot accept much fresh demand without posting new highs with Paris December futures targeting €280.00/mt. E Midwest farmers report that the wet weather has toppled corn with harvest to be slow/difficult from here forward. Yield losses are unavoidable in downed fields, how/whether that will impact yield and final output remains to be seen.

• HEADLINES: Massive fund selling sends ag markets lower; Markets shift focus to demand following October yield update.

• World ag futures, except for rapeseed/canola, are sharply lower at midday. International corn markets are fully digesting Tuesday’s slightly bearish USDA data, while it is difficult to find a catalyst for today’s plunge in wheat contacts. Paris milling wheat futures as of Tuesday evening were heavily overbought, and the market there could lose another €5-7 €uro per ton and still be in a clear longer-term bullish trend. Global crude oil futures steady to slightly lower. The Dow is down 170 points as US inflation is maintained and as elevated food/energy prices will stay intact until supply issues are resolved by increased production. US crude stocks as of Oct 8, to be released Thursday, are expected to stay 60-65 million barrels (14%) below last year.

• The US CPI in September was up 5.4% year-over-year, slightly above expectations, with food and beverage inflation rising 4.5%. We have highlighted the difficulty in finding raw material inflation amid sizeable growth in global per-capita incomes in 2021 and 2022. Recall GDP growth in both emerging and developed markets will likely exceed pre-Covid levels in calendar year 2022. There remains an investable story for US/world ag into spring.

• FAS’s daily reporting system featured US soybean export sales of 528,000 to China and unknown destinations. Exporters also sold 162,000 tons of corn to unknown destinations. Key to a lasting price recovery in the near term is an acceleration in export demand following bearish USDA data, and focus moving forward shifts from debating yield to measuring the pace consumption. Daily/weekly export sales must be monitored closely. A boost in sales is needed to offset demand damage caused by the Gulf’s closure in early September. End user response to current prices amid very profitable margins is critical over the next 30 days.

• Newswires report that Iranian wheat imports may reach 8 million mt in 2021/22 following this year’s crop failure. Sources suggest Mid-East wheat production has been dramatically understated all season, and active buying from the region has contributed to record global wheat trade through early October. USDA in its October Report pegs 2021/22 Iranian wheat imports at just 4.5 million mt. Imports of 8 million, if realised, would be the largest since 2008/09.

• Wheat’s issues remain numerous. The Argentine government issued a statement indicating GMO wheat there can only be used for seed, and in reality, producers are expected to destroy all GMO varieties. Measures will be taken to prevent GMO wheat from finding the marketplace. There will not be certainty over Argentine wheat trade flow for some time, but there is no tolerance for additional world wheat supply dislocation.

• The midday GFS weather forecast is consistent with the overnight run in that a slow-moving front continues to push eastward across the Central US. The best rains are forecast to fall across the E Midwest in the next few days. Rainfall totals are estimated in a range of 0.25-1.25” with locally heavier amounts. Following that rain, an extended period of dry and mild weather is forecast. The arid conditions will allow for the harvest to be completed and for the winter wheat seeding pace to push ahead. Central US weather leans favourable for Midwest crops into late October.

• Massive fund selling is pummelling corn, soybean, and wheat futures. The selling in the summer row crops is the leftover bearishness from Tuesday’s USDA crop report. China is said to have purchased another 4-6 cargoes of US soybeans on the morning break. China is picking up its soybean purchase pace. The next downside support rests at $5.00 December corn and $11.70 November soybeans. The break in wheat makes no sense with world fob prices rising.

• HEADLINES: October USDA data leans slightly bearish corn/soy; Exporter wheat stocks/use pegged at record low level.

• The USDA October Crop Report was slightly bearish with corn/soybean futures pushing lower following the report’s release. November soybeans fell to their hard support at $12.00 while December corn uncovered end user pricing below $5.20. US wheat data was considered positive, and futures are slightly higher.

• NASS did not adjust US corn and soybean acres from their September forecast leaving corn harvested acres at 85.1 million acres and soybeans at 86.4 Mil acres. US wheat harvested acres was adjusted down 900,000 acres to reflect the results of the 2021 US Small Grain Report. We do not expect any further adjustments in US corn/soybean planted/harvested acres until the final January report. US wheat production is now considered final, with future adjustments only coming on the demand side of the balance sheet.

• The USDA raised their 2021 US corn yield by 0.2  to 176.5 bushels/acre, just below the 2018 record of 176.6 bushels/acre. This yield produced a US 2021 corn crop of 15,019 million bu or above 220 million more than use. Research maintains that the US corn yield will decline to 173 bushels/acre in January.

• There can be some adjustment in US corn/soy yields into the final, but the market’s focus will shift to demand and S American crop prospects. Also, will hedge funds desire to expand their commodity risk exposure heading into the end of the year amid surging energy values. The downside price risk in corn/soy/wheat is becoming limited amid the now known supply fundamentals.

• NASS lowered the Illinois corn yield to 210 bushels/acre and raised Iowa to 201 and Minnesota to 178 bushels/acre. Indiana and Ohio corn yields were lowered to 194 and 188 bushels/acre, respectively. The implied ear weight was right at trend and slightly above September. US 2021/22 corn end stocks at 1,500 million bu allowed NASS to hold their annual farmgate cash price forecast at $5.45/bu.

• NASS raised their 2021 US soybean yield to 51.5 bushels/acre with US production at 4.448 billion bu, up 74 million from September. The combination of the 0.9 bushels/acre increase in yield and 81 million bu found in the September stocks report pushed 2020/21 US soybean end stocks to 320 million bu. Such stocks were slightly larger than trade estimates and considered modestly bearish.

• The USDA held their 2021/22 US soybean export estimate at 2,090 million bu with crush up 10 million at 2,190 million bu. We would argue that USDA is too high with their soybean export estimate, but it will take months to fully adjust. US soyoil stocks were raised 320 million pounds to 1,798 million due to the extra crush and larger carry in. This could pressure the oil/meal spread.

US End Stocks (million bu)

                    September    October

            2020/21        2021/22         2021/22

Corn            1,236           1,408             1,500

Soybeans        256          185                320

Wheat            844            615               580

• US and world data largely matched expectations, but the Oct Report confirmed additional tightening of the US, world and exporter balance sheets. US wheat end stocks were lowered 35 million to 580 million bu, the lowest since 2007/08, to account for reduced final production. Lower projected feed use only partially offset the smaller crop size,  and we view the USDA’s trimming of US wheat feed demand as premature. 2021/22 US HRW stocks were lowered 36 million to 311 million bu. KC wheat will be the longer-term bullish leader of the grain space as HRW stocks drop another 40-50 million bu in 2022/23 if acreage expansion fails to exceed 500,000.

• Major exporter wheat production was down 3.5 million mt amid lower revisions in the US and Canada. Exporter wheat consumption was lowered just 1.7 million mt, leaving end stocks at an extremely tight 52 million mt. Exporter wheat stocks/use was lowered to 12.6%, vs. 13.4% in September and which is record low. We also note that USDA has left Russian wheat exports unchanged at 35 million mt, which is viewed as 3-4 million too high. It remains that wheat’s current supply issues will only be solved with above trend yields across the Northern Hemisphere next spring/summer. A bullish price trend stays intact into mid/late winter.

Global End Stocks (million mt)

                      September    October

            2020/21    2021/22        2021/22

Corn                  290.0        297.6             301.7

Soybeans           99.1         98.9              104.6

Wheat              288.4        283.2             277.2

• Chicago row crop markets have shed premium on the relative loosening of US balance sheets. Yet, the soy market cannot afford to lose planted area in 2022, the US yield debate is not quite settled, and dryness in Argentina will be much more attention grabbing should it persist into November. We continue to favour using harvest-based prices to lock in forward coverage. The world cannot afford to lose any S American corn yield this winter.

• Looks like a quiet start to the week.

•  What is important:

1. USDA out on Tuesday
2. Brazil soy planting progressing ahead of average.
3. US harvest moving mostly ahead of normal
4. Waiting for rain in E EU and Russia.
5. Waiting for the rain to stop in China
6. Outside markets – momentum trades.

• HEADLINES: Chicago grains stay firm; Soybeans weaken amid profit taking in EU rapeseed, ahead of USDA Report.

• Fob Black Sea feed wheat for spot delivery is quoted this evening at $303 per tonne. Feed wheat for Dec-Jan is quoted at $308-310 per tonne. Feed wheat prices have followed the surge in milling wheat values, and despite lower than expected wheat quality in western Europe, it is clear the feed wheat market is on a path to slow down forward sales.

• US Gulf corn is marginally the Northern Hemisphere’s cheapest feed supply. Black Sea and US corn are both offered $35-40 per tonne below feed wheat for late autumn/winter arrival. Feed wheat’s current premium to corn is the largest since early March and feed wheat’s substantial premium has developed much faster than in previous years. The message is that the US and Ukraine will dominate world feedgrain trade into late spring 2022. This is bullish cash fob prices in both countries.

• Spot Chicago oats on Monday rallied $0.20 per bushel to score yet another all-time high at $6.73. This is an incredible flat price, as well as a new high in oats premium to corn, which on a metric tonne basis now rests at $253, the price of oats is more than double the price of corn. The US oat market has quietly been a modestly bullish trend since the spring of 2020, but rather quickly the US and global markets must outright eliminate consumption over the next 8 months.

• The loss of Canadian production this year is most significant, but Canada’s production shortage has triggered a new record low in global oat stocks and stocks/use. The USDA in September WASDE forecast 2021/22 global oat stocks 2.2 million tons, with stocks/use at a record low 9.1%. Our stocks to fall another 400,000 tons as Canadian yields are lowered further. Global oat stocks of just 1.7 million tons will reflect just 26 days of use, vs. 43 days in 2020/21. Demand rationing is required.

• Oat and canola/rapeseed price action this summer/early autumn highlights the world’s heavy reliance on Canadian exports as well at a time of vegoil and grain demand growth. Canadian oat exports account for some 65-70% of global oat trade. Importantly, Sources suggest Canadian crop production will be lowered further as actual yields become known. We peg final Canadian oat production at 2.4 million tons, vs. USDA’s estimate in early Sep of 2.9 million. Canadian oat exports will likely be no larger than 1.0 million tons, vs. 2.0 million last year.

• The Canadian oat market is working to keep supplies in the domestic market while the US market is working to encourage Canadian exports. It is a bullish battle for supply that will only get resolved once enlarged production is confirmed in summer 2022. We also note that EU (Scandinavian) production in 2021 was down 290,000 tons year on year, which along with soaring freight has raised the cost of importing EU oats into the US. US oat imports from Sweden and Finland account for a small but important 5% of total US oat imports on an annual basis.

• The story in the world oat market is that record low global and Canadian stocks/use is raising the need to recapture all area lost in 2021. The story in the US market centres on the lack of access to imports, which in turn raises the need to boost US planted area to balance supply and demand in 2022/23. US oat seedings of 3.2 million, a 13-year high, are needed to boost 2022/23 US oat end stocks to a more comfortable 36 million bushels. And even then, supply issues are only resolved if Canadian yields are at/above trend next summer.

• The recent oat rally is due in part to panic buying. But the panic is logical as oats are competing with highly profitable canola and spring wheat prices for arable land. A test of $7.00, basis spot Chicago, is probable before a lasting high is scored. July 2022 oats stay perched above $5.85 until acreage expansion can be confirmed.

• Limited news and liquidation ahead of the October Crop Report had soybeans down 13-14 cents on Monday.

• Export inspections and the Crop Progress reports are delayed until Tuesday due to the Columbus Day holiday, while the Export Sales report will be rolled back to Friday.

• While soybean prices in Chicago continue to erode, other world oilseed futures are holding historic premiums to Chicago. At the start of the week, Canadian canola futures are trading at a record $2.54/bu premium to soybeans, while Matif rapeseed is $2.74/bu over Chicago soybeans. The overall global oilseed supply and demand balance is very tight, with the next major harvest still 4-5 months out. Chicago trade is waiting on the USDA’s October yield projections, but after the report, we expect that the overall tightness in world stocks will support both cash and futures markets.

• The first target for spot Chicago soybeans holds at a chart gap left at the August expiration at $13.95.

• December Chicago corn rallied 2.5 cents amid soaring oat futures and as another round of contract highs were scored in the European market on Monday. It is becoming difficult to find bearish trends in global corn/feedgrain markets and any lasting decline in US prices hinges exclusively on NASS’S yield update on Tuesday. We continue to advise customers to again use post-USDA weakness to add to supply coverage. Export demand is brightening. Ethanol margins are incredibly profitable nationwide.

• Northern hemisphere production will be defined by early November, but exporter supply risks remain intact. Argentine corn seeding has just started but lasting dryness there in the face of rapidly developing La Niña is a concern. Near complete dryness is offered to some 70% of Argentina’s corn belt into October 25. The extended range Argentine forecast will be monitored closely as there is zero room for additional supply dislocation.

• Barring a bearish US yield surprise, we reiterate that normal seasonal price trends place December Chicago at $5.80 prior to expiration.

• US and world wheat futures ended mixed but very close to unchanged. The USDA in its Oct report Tuesday will lower US end stocks to 575-580 million bushels. The exporter balance sheet will tighten slightly. These changes have largely been digested, but upside risk remains intact.

• Russia’s interior wheat market is little changed in Rubles, but in US$ cash wheat in Southern Russia has scored a new seasonal high of $221 per tonne. Brent crude at $84 will keep downside in the Ruble limited.

• A Russian wheat export tax of $60 per tonne is imminent, and we maintain that Russian fob prices test $325-330 by late October. Spot Russian fob this evening is quoted at $315.

• Close attention will be paid to whether Brazil’s phytosanitary body allows for the import of GMO Argentine wheat in at some point in November. The world has already lost an incredible tonnage of its exportable wheat supply. Millers unwilling to take Argentine origin further complicates the world trade matrix.

• Strong chart-based support lies at $7.20 basis December KC/Chicago. A larger break must be used to add to Q1 2022 supply coverage. The wheat outlook remains bullish.

• HEADLINES: Low volume Chicago trade amid a lack of fresh news; Another harvest weekend with farmers storing crop.

• Low volume/stronger Chicago futures has been featured heading into the weekend. Energy markets keep pushing higher and unlike Tuesday, Russian President Putin has no solution to cap today’s crude/gas rally. US corn and soybean harvest should be nearing 50% completed early next week and the Columbus Day holiday is normally the date for a seasonal harvest low. Fund managers are aware of this seasonal but are holding back on purchases awaiting Tuesday’s USDA report. A neutral or only slightly bearish report will engender fund buying. A bullish report will just send values upwards.

• The surprise so far is that Midwest farmers have not been big cash sellers. Producers are meeting prior contract sales, but the rest of the grain is heading right into the bin. Mississippi River basis has rallied sharply this week as barge freight rates declined. CIF soybeans are trading above $0.20/bu above last year. US corn/soybeans are the cheapest in the world, which will attract fresh import demand. We anticipate China and others to be more aggressive buyers next week. Some importers will want to get ahead of the USDA report while others hope for a bearish reaction. As we see the set-up, corn/wheat data should be bullish while soybean stocks will grow and be bearish. China has booked 5-7 soybean cargoes overnight.

• A US soybean yield of 51-51.5 bushels/acre would surprise no one, the harder question is related to US corn yield and will a new record be set above the 2018 high at 176.6 bushels/acre. Traders seem to forget, but the summer of 2021 was one for the record books in terms of heat, while just over 30% of the corn area battled drought right into early September. We are on the low end of NASS corn yield at a 173 bushels/acre. The report should set up a battle of more beans vs less corn.

• The US Gulf export capacity has slowly rebuilt with only Cargill Reserve being down. But even Cargill Reserve is loading vessels from the rail. The Gulf is back to at least 90% of capacity which should help US export inspections and future US grain trade.

• Margins for ethanol producers and soybean crushers are rising. Ethanol margins equate to $0.37/gallon or some $1.05/bu. Soybean crush margins range from $1.17-1.30/bu which is helping to raise interior soybean cash bids. However, RIN values end the week under pressure as RVO rumours prevail (once again). For weeks, traders have been guessing when the EPA will announce lower mandates for 2020 and 2021, and a mandate hike for 2022. We hear that the mandate is still being scored by OMB, but as 2021 calendar advances, a lowering of the mandate will not have much of influence on the corn grind or biodiesel blend. But it will be bearish of RIN values as a help to struggling blenders.

• The IMF trimmed their world GDP outlook to just below 6% amid the Delta variant and logistical delays. Many feared an even larger GDP decline.

• Chicago brokers estimate that the managed money has sold 3,000 contracts of wheat and bought 2,500 contracts of corn and 3,200 contracts of soybeans. In soy products, funds have bought 1,400 contracts of soyoil and 3,000 soymeal.

• November WTI Crude oil futures have rallied above $80/barrel. The rise in energy values shows no sign of slowing with the cold season starting in 6 weeks. The next upside price target rests at $84-86.00 November WTI.

• The midday GFS weather forecast is similarly dry across the W Plains with showers starting to break out across the N Plains and W Midwest on Sunday. An above normal temperature pattern is forecast with highs in the 70’s/80’s. The warmth will continue to speed the harvest with any crop concern cantered on the SW Plains where dryness deepens.

• Chicago volume is limited with another active harvest weekend ahead and the USDA report due Tuesday. Argentina is on holiday today, the US banking system is closed Monday, with Brazil on holiday Tuesday. Export sources report that China has booked 5-7 US cargoes of beans overnight. Will China be an even bigger buyer next week. The 50-day moving average crosses at $5.39 basis Dec corn which will be important next week. It is a mixed to firm Chicago push into the weekend.

• HEADLINES: First week of solid US export sales; China fully back on Friday; Talk of fresh Chinese soybean interest.

• Chicago futures came under early selling pressure based on bearish charts and the early slide in energy values. However, scale down commercial buying was uncovered/evident in Chicago with soyoil rallying sharply with the rally in crude oil. We hear that stronger commercial demand was noted below $5.25 December corn and $59.00 in December soyoil.

• The linkage between the bio crops of soyoil/corn and energy appears to be growing. The bio crops on a cost (or BTU) basis are priced well below the cost of coal, natgas and gasoline. Fund managers are aware of the highly profitable cash margins that ethanol/biodiesel producers are gathering. And as Americans are heading back to work (October employment report) expected to show Friday that another 500,000 people returned to work during September, the need for fuel both in the US and world is growing.

• The world energy rally is based on underinvestment in future carbon fuel production outside of OPEC+. This underinvestment along with historically low energy supplies heading into the cold season will keep energy prices rising. Any lasting break will have to wait until early winter.

• There are US consumer trade groups that wish the US to slow or halt exports of US energy/natgas to preserve domestic supplies and lower prices. This type of thinking is dangerous. It has food/grain importers wondering about the US being a reliable food supplier. Should importers lay down additional in country stocks, just in case We would hope that the US stays a free trade nation and that its energy, ag and manufactured goods trade is unencumbered. Let the markets do their job. For now, the US is not going to tap the Strategic Reserve which was also a bullish new item for crude futures.

• US export sales for the week ending September 30 were 12.2 million bu of wheat (including 3.9 million bu of spring wheat), 49.8 million bu of corn, and 38.3 million bu of soybeans. Including large sales of US soymeal and soyoil, the sales showed that US grain and soy products are again competitive in the world marketplace. As the Gulf becomes 90% operational in mid-October, the outlook for US corn, wheat and soybean export shipments is brightening.

• For their respective crop years to date, the US as sold 419 million bu of wheat (down 114 million or 21%), 1,046 million bu of corn (up 29 million or 3%), and 931 million bu of soybeans (down 559 million or 37%). US corn sales are the second largest on record as Mexico has purchased a record amount of US corn. The big question that traders are pondering is China soybean demand from the return from their Golden Week Holiday. Chinese soy crush margins have recovered strongly.

• Chicago brokers estimate that managed money has sold 3,000 contracts of wheat and 4,500 contracts of corn, while buying 2,200 contracts of soybeans. In soy products, funds have bought 5,400 contracts of soyoil and sold 3,000 soymeal.

• Brazil’s CONAB estimated their 2022 soybean harvest at 140.75 million mt, a record and some 2.5% or 3.5 million mt more than last year. CONAB estimate 2022 Brazilian corn production at 116.3 million mt based on improved weather conditions.

• The midday GFS weather forecast is similarly dry across the W Plains with showers starting to break out across the N Plains and W Midwest on Sunday. An above normal temperature pattern is forecast with highs in the 70’s/80’s. The warmth will continue to speed the harvest with any crop concern cantered on the SW Plains where dryness deepens.

• Oats have scored a new historic high at $6.22 while the oat/corn premium has reached out to $0.88/bu. Record cash market basis Canada argues for even smaller crops with record large feed imports. Inflation concerns are real and fund managers hope for a bearish USDA report to position for Chicago into 2022. Tight world markets will not allow large US crops to have a lasting bearish impact. Lower than expected US yields would be exceptionally bullish in corn/soybeans. The market is expecting a bearish report. The problem is that US farmers are not selling, and cash basis bids are rising. We doubt that Midwest farmers will sell in a down market as their costs to plant a new crop soar.