21 September 2021

Posted on September 21, 2021 by simon

• HEADLINES: China buys a few cargoes of US soybeans; Traders to monitor overnight Chinese equity markets; No US wheat offers to Morocco.

• Mixed Chicago futures in rather average volume. An early round of Chicago selling was absorbed by end user buying, while US farmers are focussed on harvest. The soy complex paced the recovery on Chinese demand. China is rumoured to have purchased 3-5 cargoes of US soybeans for November off the Gulf this morning with additional orders working. Chinese crushers are using weakening Chicago values to boost their forward coverage. Wheat futures are weaker on liquidation and Friday’s weekly drop in the Russian export tax rate. Corn appears to be caught in between soybeans/wheat awaiting yield results.

• China has purchased a known 10.3 million mt of US soybeans to date with an estimated 4.0 million hidden in the unknown category. We estimate that China will import 34-35 million mt of US soybeans in 2021/22, so their unfilled demand is pegged at 20-21 million mt. China is close bought and Hurricane Ida and the resulting 3–4-week Gulf export slowdown made matters worse. China has an immediate need for US soybeans and their return from their autumn holiday should produce a point of support. US weekly soybean exports should really ramp up in October to a point where the US is shipping 75-85 million bu/week. This demand will firm cash basis.

• There are few resting orders above Chicago with end users able to scale into purchases on the early break. The overnight price action in Chinese equities will drive raw material (Chicago) prices on Wednesday. China will return from their holiday and there is hope that Chinese equities will not melt down very much due to Evergrande. A weaker Chinese stock market is expected with the US equity recovery helping to blunt any bearish reaction. Traders are waiting for China’s stock market reaction before taking a more bullish grain/soy stance.

• Chicago brokers estimate that funds have sold 5,100 contracts of wheat and 7,600 contracts of corn, while buying 1,900 contracts of soybeans. In the products, funds have sold a net 2,200 contracts of soyoil and 1,400 contracts of soymeal. Funds are building a larger net short soymeal position.

• The industry is questioning the sharp rise in IL crop ratings when producer yield reports do not suggest improvement. And the Illinois corn and soybean crop is mature or nearly so, which makes such sizeable condition gains even more difficult to understand. Illinois crop ratings have been volatile all summer. The 2020 Illinois corn yield was 192 bushels/acre with NASS pegging the 2021 yield at a record 214 million bu (up 22 bushels/acre). Harvest data argues for an IL corn yield near or slightly above 200 bushels/acre. Yield trends in nearby Indiana and Ohio are similar. Harvest data will be watched, but the yield trend is down for later seeded corn. Soybean yield trends will be better defined by the weekend.

• There were no offers of US SRW wheat to Morocco on a reduced import quota. The tender went unfilled.

• The forecast is wetter across the Delta and through the SE US Plains. The GFS weather forecast has added rain for late September to this area. Other forecasting models are not as wet, and questions about the correctness of this rain are noted. The EU model will need to confirm the change in E Plains and Delta rain with the jet stream being pulled southward.

• US corn/soybean yield reports maintain their importance to Chicago price. Disappointing yield trends are noted in the E Midwest with N Plains/W Midwest yields down as they were impacted by drought. E Midwest corn yields has one wondering if the 2021 US corn yield can surpass last year’s 172 bushels/acre.

• However, before adding long Chicago positions, traders want to be comfortable that China’s equity market does not fall too far tonight following their 4-day weekend. Evergrande’s debt has not been restructured and some additional messiness in world financial markets is expected. And key to nearby price direction will be US export demand and how shipments ramp up in October. Chicago bulls need to see larger weekly US corn/soybean exports in October.

20 September 2021

Posted on September 20, 2021 by simon

• HEADLINES: Low volume Chicago morning with all eyes on China’s Evergrande for economic contagion; China August trade data calls for 101 million mt in 2020/21.

• It is an Evergrande (China’s second largest property developer by sales value) and a macro-Monday. Chicago futures are trading weaker at midday with soybeans/soy products showing the biggest losses tied to the uncertain viability of China’s Evergrande, with estimated loan/interest rate payments amounting to $669 million by the end of the year. Corn and wheat futures are following, but the losses are being limited by strong world cash markets.

• The initial Evergrande bond interest rate payment was to be made today with a larger tranche due Thursday. Evergrande has already told banks not to expect payment today, but it is far less certain what will happen Thursday. China injected liquidity into its banking system on Friday/Saturday to prevent any financial contagion. And China is on their Autumn Festival which concludes Tuesday. Although the financial struggles of Evergrande are sizeable (estimating holdings in real estate equal 2% of China GDP), we doubt that it represents a threat to China’s banking system. This is key since China should be able to control the financial damage beyond Evergrande. Yet, amid all the uncertainty, a host of world asset prices are lower awaiting fresh news.

• Chicago brokers estimate that funds have sold 4,300 contracts of wheat, 6,000 contracts of corn, and 7,400 contracts of soybeans. In soy products, funds have sold 3,400 contracts of soyoil and 2,100 contracts of soymeal. It has all been on the sell side from funds with end users buying the early break.

• US weekly exports for the week ending September 16 were 15.9 million bu of corn, 10.1 million bu of soybeans, and 20.7 million bu of wheat. The export inspections were above trade estimates with more than half of the Gulf just getting back to operation. Slowly and surely, the impact from Hurricane Ida will wane in coming weeks as Gulf CIF/FOB and barge trade returns to normal.

• Chinese August trade data indicates that the USDA is still too low by 2 million mt in soybeans and as much as 3-4 million mt on corn imports for the 2020/21 international crop year that ends on October 1. We estimate that China will import 101 million mt of soybeans and 29-30 million mt of corn in 2020/21, both are record large and reflect that China’s feed/soybean import demand is record large.

• Soybean cutting started on the weekend which followed corn with disappointing yield results. Early soybean yield data is running 2-6 bushels/acre below field checks and producer expectations. Disease pressures are also noted, but it is too early to confirm a yield trend. Many more E Midwest producers will switch over to cutting soybeans later this week and allow their corn to dry down. Propane costs are through the roof which is causing more Midwest farmers to await drying corn, even amid poor corn stalk quality.

• The forecast is dry across the Plains and the W Midwest with limited rainfall for the next 10-12 days. Warm temperatures and the dry weather conditions should promote active harvest progress. Expansive high-pressure ridging holds across the West Central US which maintains a warm/dry upper air flow. The E Midwest will see showers/storms in the coming days which will slow the harvest. Harvest rolls along smoothly well into the first week of October. Maximum highs temperatures range from the mid 70′s to the lower 90′s. We note that La Niña is coming on strong and much be carefully watched during the 2021/22 S American growing season.

• First it was Hurricane Ida and now it’s China’s Evergrande Property Group that are masking bullish Chicago grain/soy fundamentals. Next week’s Sept Stocks report for corn/wheat should confirm tightening US supplies. China will be back from holiday late Tuesday (US time) with new buying for US soybeans. A turnaround Tuesday is expected following steady/1% decline in NASS corn/soy condition ratings this afternoon. Russian wheat export taxes will keep rising with farmers holding stored supply. Our view stays bullish of Chicago corn, wheat, and soybeans. Key support for November beans rests at $12.50-12.60.

17 September 2021

Posted on September 17, 2021 by simon

• HEADLINES: Chicago corn/wheat hold chart-based support, Soybeans stumble on fresh soyoil low; China on holiday for their moon festival next week.

• Chicago futures are lower at midday with corn/wheat futures trying to grab back some of the morning losses. Hedge and speculative sales were noted heading into the first real harvest weekend of the season. December corn and November soybeans returned to test chart-based support which lies under $5.20 and $12.75, respectively. Wheat futures followed on profit taking, but world cash prices did not budge. The world wheat market continues to add premium for tightening supplies of world protein wheat.

• FAS announced that China booked 132,000 mt of US soybeans today. US exporters report that China continues to book US soybeans out of the Gulf and PWN for November realising that elevation space is getting tight on a massive export program. Midwest cash basis will break on the shift from old to new crop supplies, but a basis low should be set in the first third of the harvest. There is plenty of bin space available to tuck the 2021 crop away. China crush margins beyond the next 30 days are deeply positive and China is extremely short bought on nearby needs. Cash sorghum traders advise that China has become interested/active in securing US December-March sorghum.

• China will be on holiday Monday/Tuesday for their Moon Festival. We hear that China is asking Ukraine to pull their corn purchases forward for October export. This may allow China to roll their US corn export slots to soybeans (which China desperately needs). The 12 million mt of known/unknown US corn purchase was to ship by the end of February. Now because of Hurricane Ida and the damage on the Gulf, the completion of those exports could be pushed backwards to March. It is soybeans that China needs for spot or nearby shipment.

• The US$ has rallied early today which sparked speculative Chicago selling. Fund managers continue to closely link the value of the greenback to a host of raw material values. The US$ is back trading at its best level since late August as the Delta Covid variant does not appear to be having a negative impact on the US economy. Will the Fed taper bond purchases by late year.

• Chicago traders estimate that managed money has sold 3,100 contracts of wheat, 5,200 contracts of corn, and 5,900 contracts of soybeans. In soy products, funds have sold 1,000 contracts of soymeal and 4,300 contracts of soyoil.

• Some cash corn is moving in the E Midwest the best sellers being in Indiana and Ohio. The movement is not heavy and cash basis bids are holding steady. We expect that producers will really get at the corn/soybean harvest next week. Producers will deliver against their forward contracts, but with seed moisture falling at least .5% each day and the Midwest weather forecast being open, the 2021 harvest will likely be one of the fastest in recent memory.

• The midday GFS weather forecast is drier than the overnight for much of the Midwest. Expansive high pressure ridging meanders into the heart of the Midwest on the weekend which cuts off precipitation entirely from the Central US. Cooler but still very dry conditions are projected in the 6–10-day period. Harvest rolls along smoothly well into the first week of October. Maximum highs temperatures will range from the 80s and low 90s.

• End users are poorly covered and US corn yield is disappointing on late summer disease pressures (premature death of the plant). The premature death lowers corn test weight. By the end of next week, some 25-30% of the US corn crop will be harvested and a lower yield assumption will be set for the October NASS report. The lower yield raises the importance of the September Stocks report on the 30th . Tightening world protein wheat stocks, the lower corn yield and strengthening US soybean demand from China does not argue for a lasting downtrend. Corn, wheat and soyoil are the best values on any further Chicago break.

To download our weekly update as a PDF file please click on the link below:

Weekend summary 17 September 2021

16 September 2021

Posted on September 16, 2021 by simon

• HEADLINES: Chicago markets lack direction following early-week recovery; NOAA climate forecast features autumn dryness in S Plains.

• Chicago futures are flat in mediocre volume at midday. Fresh input is lacking, and the trade now waits on additional yield results from the principal Midwest and waits for Gulf loading capacity to expand in the weeks ahead. CHS says its Myrtle Grove, LA facility will be ready by peak harvest but otherwise the exact rate of weekly shipments will remain uncertain into early/mid-October.

• We do note that international markets are firm. Spot Paris milling wheat is up €0.25 per tonne. Paris rapeseed is up another €9 per tonne and looks to touch €600 per tonne for the first time since April, and second time in history. Brazil’s interior corn price index remains perched at $7.55 per bushel. Spot Chicago oats have scored a newer 7½ year high at $5.50, basis December. Note that Dec Chicago oats carries a premium to corn of $170 per ton, also the highest since 2014. Solving oat and spring wheat supply tightness will be incredibly difficult this year amid the lack of Canada’s exportable supplies.

• Weekly export sales are supportive wheat/soy but corn sales were rather weak, though this was not unexpected given the lack of fob offers in early Sep.

• Corn sales through week ending Sep 9 totalled a meagre 10 million bu, vs. 36 million the previous week. There were no cancellations to speak of, but rather new interest was hindered by the closure of Gulf operations. Soy sales totalled 46 million bu, vs. 54 million the prior week. All-wheat sales totalled 23 million bu, vs. 14 million, following last week’s sizeable reported HRW sale to Nigeria. Wheat and soy markets benefit more from logistic capabilities across the West Coast. We also note that US wheat sales moving forward must average only 13 million bu to meet the USDA’s forecast. Wheat export potential, longer term, stays bright amid the lack of milling supply in western Europe and bullish seasonal trends in cash prices worldwide.

• NOAA’s monthly long-term climate update pegs the odds of La Niña development at 70-80% by winter. IRl’s associated S American climate forecast includes high odds of widespread drought across key areas of Argentina and Southern Brazil. The global feed market cannot tolerate additional supply dislocation, and any hint of first-crop yield loss in Brazil adds a new leg to Brazilian corn’s long-term bull market. Recall some 30% of Brazil’s first corn crop is grown in RGDS an d Santa Caterina, states in the bullseye of projected drought development.

• NOAA climate guidance also features warmth and dryness across the Southern Plains and Southwestern US in the Oct-Dec period. Drought development is likely by early winter across the bulk of the US HRW Belt. PNW soil moisture will be replenished via active autumn precipitation.

• The midday GFS weather forecast is much drier than the overnight release across all areas but New England. Expansive high pressure ridging meanders into the heart of the Midwest on the weekend, and this upper air pattern cuts off precipitation entirely from the Central US. Cooler but still very dry conditions are projected in the 6–10-day period. Harvest rolls along smoothly into the first week of October. Additionally, there is no risk of frost in the next 10 days, and max highs temperatures in the 80s and low 90s return to the Dakotas and MN on Sunday.

• Chicago ag markets last week were too cheap given high global cash markets and concern over the details of US corn and soy yields. A lasting recovery lies ahead, the intensity of which will be determined by combine data and Gulf loadings in the next 30 days. Breaks remain buying opportunities for end users.

15 September 2021

Posted on September 15, 2021 by simon

• HEADLINES: NOPA crush grows, Soyoil stocks greater; Midwest corn yields disappoint; Funds back buying corn.

• Chicago futures are sharply higher at midday with corn/wheat leading the upward charge for the second day in a row. Friday’s high was exceeded in corn/wheat which spurred fresh chart buying with the soy complex able to shrug off bearish fundamental news of China/unknown destination soybean sales cancelation, and the shifting of that demand to Brazil amid their acute need for supply. We believe that China secured at least 8 cargoes of Brazilian soybeans for late September/October paying more than a $3.00/bu premium to Chicago. This shift of demand is likely due to the Gulf woes due to Ida, and China’s short bought position in the soybean market. Another 5-6 cargoes are in the works today which should get close to cleaning out Brazil of old crop exportable soybean supply. December corn futures are testing the 20 day moving average at $5.33 with the 50 day at $5.44 and the 100 day at $5.56.

• Surprisingly, US farm selling has not been very aggressive on the rally with Missouri showing an increase in cash corn movement while E Midwest farmers try to better understand early corn/soy yield trends before adding to their sales. On average, US farmers have sold at least 50% of their 2021 summer row crop production and on farm storage can hold the rest. We would doubt that the US farmer is going to make the same mistake as last year and sell at harvest.

• Chicago brokers estimate that funds have bought 3,100 contracts of wheat, 9,800 contracts of corn and 2,400 contracts of soybeans. In soy products, funds have bought 3,500 contracts of soyoil while selling 1,200 contracts of soymeal.

• Early corn harvest data continues to be disappointing with disease laden fields yielding 10-40 bushels/acre less that field surveys/farmer expectations. The disease pressure on corn increased dramatically during August/early September with E Midwest fields prematurely dying. Tar Spot, Anthracnose, Northern Leaf Blight, GLS and Southern Rust are the disease culprits. Stalk quality is exceptionally poor, and some corn plants are simply falling over. Any strong thunderstorm complex that produces gusty wind risks tangling corn fields and elevating harvest losses. We estimate that 7-8% of the US corn crop is cut, but that harvest must reach closer to 20% for a more accurate US yield trend.

• NOPA reported that their members crushed 158.8 million bu of soybeans during August, above the July crush rate of 155.1 million and trade estimates of 154-155 million bu. Last year the US crushed 165 million bu, so the lack of US soybeans maintained a lower US crush rate. We look for the US crush rate to expand with the new crop harvest in October. US soyoil supplies were larger than expected at 1,668 million pounds, well above July’s 1,617 million pounds and the average trade estimate of 1,555 million pounds. The larger August soyoil supply pulled Chicago futures down from their highs. Soymeal exports jumped to 856,619 tons, up from 719,508 tons in July. We continue to maintain that the USDA is too low with their 2021/22 soybean crush amid renewable diesel demand.

• We understand anxiety about soybean yields, but it is just too early to make any valid assessment. It will be another week or 10 days before a yield trend can be established. Just 40% of the US soybean crop was dropping leaves as of Sunday, 10 days of warm/sunny weather will help spur harvest.

• The world has lost more than 60 million mt of grain since March amid the Brazilian winter corn drought, a Canadian drought, and Russian drought amid disappointing winter wheat yields. The US was the one area where large corn/soybean crops appeared to be assured. This pressured Chicago values into the end of summer. However, early US corn harvest yield data is casting doubt on the size of the US summer row crop harvest. End users are extending forward coverage and new speculative buying is eyeing the bull opportunity.

• Like last year, the September Stocks report will be key amid the measurement of June-July-August wheat feeding and final US corn/soybean end stocks. The extremely strong cash basis on September 15 makes it feel like US corn /soy stocks were smaller than forecast. Our point is that any loss of 2021 US corn/soy crop is amplified due to world losses and record low exporter corn/wheat stock/use ratios.

14 September 2021

Posted on September 14, 2021 by simon

• HEADLINES: Stats Canada surprises to the downside, summer drought was harshest since 2002. The need for corn imports.

• Chicago futures are sharply higher at midday with corn/wheat leading the upward charge. Soybean futures have lagged with soymeal acting as an anchor. It has taken greater volume to push the market down than rally it. December corn has exceeded a prior day’s high helping to confirm Friday’s key reversal on the chart. Soybeans are still caught in a range, and a rise above Friday’s high at $13.00 is needed to turn the trend upwards. Wheat futures have confirmed a resumption of the bullish price trend, but a close above the 50-day moving average at $6.90 is desired basis December KC futures. The tone in Chicago is more bullish than any day since late August, but we need to remember that seasonal lows often occur over weeks, while summer highs can occur in a day.

• Chicago brokers estimate that funds have bought 4,200 contracts of wheat, 6,000 corn and 1,400 contracts of soybeans. In soy products, funds have bought 3,200 contracts of soyoil while selling 1,900 contracts of soymeal.

• Statistics Canada estimated their 2021 crops to be down sharply following an acute summer drought with production losses of 28-70% when compared to 2020.

• Stats Canada dropped their 2021 all wheat estimates to 21.7 million mt compared to early season estimates of 32-33 million, and last year’s harvest of 35.2 million. The 2021 canola crop was knifed to 12.8 million mt compared to early seasonal estimates of 20-21 million mt and 19.5 million last year. While their oats estimate fell to just 2.6 million mt, down from early season estimates of 4.5 million and last year’s harvest of 4.6 million mt. Dec Chicago oat futures are trading at a just 5 cent discount to December Chicago corn. The US is Canada’s (and the world’s) largest oat importer, and its shortfall could cause Chicago oats to trade at a premium to corn during the harvest period.

• We look for further falls in Canadian crop production as actual harvest yield data is counted. A final wheat crop of 20-21 million mt and canola crop of 11.5-12.3 million mt appears correct. And the Canadian oat crop could decline to 2.3-2.5 million mt. There is no doubt that Canada will have an acute shortage of feed this winter and likely will import a record 5-6 million mt of US corn based on the shortage of feed barley and wheat. The USDA has Canada taking 3.0 million mt, which is far too low inn our opinion. A bump of 2.5 million mt of US corn imports would add 100 million bu to the US 2021/22 corn export forecast.

• The US CPI for August came in at 5.3%, at the lower end of expectations. The so-called core index which excludes the more volatile food and energy sector climbed 4% year on year in August compared to 4.3% in July. US gasoline prices were up 2.8% in August, but the tamer inflationary outlook could have the US Central Bank wanting to taper its bond purchases until early 2022.

• Early combine yield reports are disappointing on corn, and too limited on soybeans to make any comment. Corn suffered acute disease pressure which has caused stalks to be cannibalised/compromised without fungicide treatments. Additional combine reports are needed, but early corn yields are not matching producer or field check expectations. It is early days, but disappointing corn yield is a trend to monitor. And it will be next week before the Midwest soybean harvest shifts into a higher gear with yield comments to be offered.

• A smaller French wheat crop, a smaller Canadian wheat (and canola, oats, barley, and pea) crop, and early US corn yield trends that are disappointing relative to field checks and producer expectations has lifted Chicago prices. World wheat/corn exporter stock/use ratios are record low. The question is whether falling supplies will push key end users to take forward coverage. We note that Gulf CIF bids are rising and refilling domestic pipeline will take longer than expected. The world is counting on the US corn /soybean crop to pressure fob valuations. Anything less than NASS corn/soy yields from Friday ignite a rally and forge early seasonal lows. The downside price risk is limited.

13 September 2021

Posted on September 13, 2021 by simon

• HEADLINES: Chicago stabilises as the bulls and the bears talk their positions; Nicholas wind damage to be modest; Rain is the issue; Pakistan back for wheat.

• Chicago futures sank in opening trade on renewed fund selling following Friday’s relief rally following the USDA September Crop Report. The bears wanted to push down values following the initial bout of short covering to gauge the resolve of end users. And there was worry that Tropical Storm Nicholas could cause new disruptions to the electrical hook up of Gulf exporters amid the coming rain. Nicholas will make a Texas landfall this afternoon as either a tropical storm or weak hurricane and quickly dissipate into a depression by midday Tuesday. The remains of Nicholas will produce 2-4.00″ of rain for areas impacted by Hurricane Ida, but wind gusts more than 40 mph will be lacking. Nicholas could delay electrical restoration by 12-48 hours, but this system is not expected to produce new structural damage/widespread electrical outages.

• Good news at the Gulf; Bunge started loading vessels today and Cargill Westwego will be back this afternoon. The Gulf export market is coming back to life as electrical service is restored. And 2 ADM elevators are expected to be loading later this week. We reflect that the USDA did not cut 2020/21 US corn /soybean export estimates due to the wrath of hurricane Ida.

• US export inspections for the week ending September 9 were; 5.44 million bu of corn, 3.9 million bu of soybeans, and 20.13 million bu of wheat. The Gulf was virtually shut down with the exports occurring in the PWN, the Texas Coast or the Interior. As the Gulf comes back to life, the US export pace is expected to dramatically quicken. US weekly exports will now be improving.

• The biggest impact on the US corn/soybean balance sheets in the next 25 days will come from combine yield data/reports. NASS did not weight Midwest ears or pods with the US September yield estimate derived by using an implied ear/pod weight. Combine yield data will help determine if the implied NASS corn ear and soybean pod weight is correct.

• Last year, NASS pegged the US corn yield at 178.5 bushels/acre with US 2020/21 corn end stocks to be 2,503 million bu with the US soybean yield at 51.9 bushels/acre and 2020/21 US soybean end stocks at a huge 460 million bu in September. The final 2020/21 US corn yield was 172.0 bushels/acre (down 6.5 bushels/acre from September) with soybeans at 50.2 bushels/acre (down 1.7 bushels/acre) with end stocks on corn/soybeans significantly lower due to demand. A 6.5 bushels/acre drop in the US corn yield in 2021/22 would drop the US corn yield under 170 bushels/acre and soybeans near 49 bushels/acre. Both yields would be extremely bullish amid limited world exporter stocks and the lack of old crop carry in. Therefore, it will be so important to watch combine yield reports in the coming weeks.

• Pakistan tendered for another 500,000 mt of wheat following a purchase of 400,000 mt last week. And Iran has already taken 1.4 million mt of Russian wheat. The USDA is woefully low on Pakistan, Iranian, and Iraqi wheat imports and will be adjusting upwards bigtime in the coming monthly reports. The impact of Mideast demand has been to deplete the Baltic of milling wheat supplies. Russian wheat exports were record large in August as exporters moved supplies offshore as the export tax is forecast to rise October by $5-7/mt/week. GASC and Algeria having only marginal forward coverage.

• Stats Canada will be out in the morning with an update on Canadian Crop production as of the end of August. The last report was as of the end of July. Traders will be watching for declines in canola, oats, and spring wheat production.

• The market has many unknowns in between knowing combine corn/soy yield data, in between the planting of new Brazilian crop via dry weather, in between historically tight old and new crop US corn/soy supplies, in between planting new US/EU/Russian wheat crops, and in between knowing when the Gulf will be fully operational. The bears and the bulls argue that their positions have strengthened following the September USDA report. We believe that US corn/soy yields won’t match the USDA and that the Gulf is coming back faster than the bear’s desire. Bottoms take time (days) to form.

10 September 2021

Posted on September 10, 2021 by simon

• HEADLINES: Chicago rallies as there was no bearish surprises from NASS/WASDE Reports; World exporter stock/use ratios bullish; Harvest yield data to rule.

• The USDA September Crop Reports were neutral with big surprises lacking. The market’s attention will now turn to the September Stocks report at the end of this month and actual harvest yield data that will start to be reported on a near daily basis next week. US export demand also plays a large price role.

• NASS estimated the 2021 US corn crop at 14,996 million bu, the second largest on record with a yield of 176.3 bushels/acre. The US corn yield was just under the 2018 US record of 176.6 bushels/acre. US 2021/22 corn end stocks were forecast at 1.408 million bu, up 166 million. Incorporating FSA data, NASS increased 2021 US corn seedings by 600,000 acres to 93.3 million acres while harvest acres rose a like amount to 85.1 million acres. The increases were less than the bears had forecast. We doubt that NASS will adjust US corn seeded acres again until the January final.

• The Illinois corn yield was a record large 214 bushels/acre, Iowa at 188 bushels/acre, Indiana 197 bushels/acre, while Minnesota was dropped to 174 bushels/acre. Illinois, Indiana, and Ohio yields were record large. The N Dakota corn yield was 108 bushels/acre while S Dakota was 133 bushels/acre. The US yield risk is to the downside in our view. It is ear weight that will now determine US corn yield in October/November.

• US soybean production was forecast at 4,274 million bu, a gain of 35 million from August. NASS raised the US soybean yield to 50.6 bushels/acre, a gain of 0.6 bushels/acre with planted acres falling 400,000 acres to 87.2 million and harvested acres declining 300,000 acres to 86.4 million acres. We would argue that based on the Dakota drought, US harvested soybean acres could drop another 100-200,000 acres.

• US 2021/22 soybean end stocks were forecast at 185 million bu including a bump in old crop stocks of 15 million. WASDE raised 2021/22 US soybean exports by 35 million bu to 2,090 million bu based on larger China imports, while it cut crush by 25 million to 2,180 million bu. We are surprised by the crush decline due to fat margins produced by renewable diesel demand that will be building throughout the crop year. It is possible to argue that the USDA should have raised its 2021/22 crush forecast by 15-25 million bu, not cut it.

• Like corn, Illinois. Indiana and OH produced record soybean yields of 64 bushels/acre, 60 bushels/acre, and 58 bushels/acre, respectively. The N Dakota soybean yield held steady at 25 bushels/acre while S Dakota fell 2.6 to 38 bushels/acre. The big yield gain from August occurred in Minnesota which raised its soybean yield by 9 to 47 bushels/acre.

• Like corn, NASS appeared to use a healthy soybean pod weight in its September soy yield determination. Indiana pod counts were down 10%, yet the yield was record large. We anticipate a declining soybean yield total by the final in January.

• We see November soybean futures in a range of $12.50-14.25 in the coming months as the market monitors Chinese demand and the start of the S American crop production cycle. Soyoil should gain on soymeal, and we fail to find any reason why US domestic soymeal use was cut.

• The USDA lowered 2021/22 US wheat end stocks to 615 million bu (down 12 million) with a reduction of 10 million bu in imports and modest 2 million boost in food use. Such US wheat stocks are the tightest looking backwards into 2012/13. We note that it is the September 30 Final Small Grains Report which will determine final 2021 US wheat production with a sizeable reduction in US HRS wheat harvested acres expected. It is likely that 2021/22 US wheat end stocks will decline to 525-550 million bu following this key report. Also, we expect that US wheat was heavily feed in the June-September time frame.

• 2021/22 world wheat end stocks rose by just over 4 million mt to 283.2 million amid a larger Australian wheat crop along with a 900,000 mt boost in China. The Russian wheat crop was left at 72.5 million mt with its exports at 35 million. China is forecast to import 10 million mt of wheat while the EU exports 35 million mt. The USDA lowered its Canadian wheat crop estimate to by 1 million to 23 million mt. We anticipate for a further decline of 1-2 million mt in Canada due to low yield reports. World wheat prices are unlikely to fall much farther.

• Chicago corn futures rose to a $7.75 high last crop year with end stocks of 1,187 million bu and soybeans to $16.00 with end stocks of 175 million bu. US wheat end stocks will be 229 million bu smaller this year with wheat not available to be fed next summer. Our point is that it does not take much new demand or loss of US or world supply to produce a dynamitic Chicago bull market from current levels.

To download our weekly update as a PDF file please click on the link below:

Weekend summary 10 September 2021

9 September 2021

Posted on September 9, 2021 by simon

• HEADLINES: Wheat falls on massive fund selling ahead of report; Corn/soybeans stabilise on 3 Gulf elevators seeing power; USDA report tomorrow.

• Chicago values opened under pressure and rebounded into the mid-morning as news surfaced of several Gulf exporters coming back on line as power is restored to 2-3 key facilities. Once the lights turn on, it will take facility managers a day or two to make sure that machinery is functionally normal. However, hope continues to build of CIF/FOB trade starting to return with more vigour with employees to be called back to work in each facility next week.

• Zennoh, Bunge and ADM Destrehan either have power or are expected to have the lights on by later today. The roof in the ADM facility was torn off by Ida and it will take longer to assess damage. However, barge and ClF trade is returning with CIF soybean values up $0.05/bu this morning, a positive sign. It is hoped that other facilities will be operational next week, but Cargill Reserve will be down for months for structural repair.

• Pent up Gulf export demand could surface Friday or by early next week. China has been securing soybeans off the PNW, but they would rather book the cheaper Gulf premium. Also, there is talk that China may have interest in US corn from March forward, though confirmation of any sale is lacking.

• It is supportive news that Gulf grain trade is restarting, but there are another 8 Gulf facilities that must come back online to be back at capacity. That will take more time with Cargill Reserve needing months to rebuild damaged legs. But having 4 facilities restart is a step forward and relief to the marketplace.

• Chicago brokers estimate that funds have sold 2,500 contracts of corn, 4,100 contracts of soybeans, and 7,900 contracts of wheat. In soy products, funds have sold 4,600 contracts of soyoil and 1,600 contracts of soymeal.

• FAS/USDA announced the sale of 132,000 mt of US soybeans to China.

• Corn cutting is beginning across portions of the Midwest and Plains with highly varied yields reported. The varied yield story is one that traders will have to struggle through in 2021 due to the big disparity in rainfall from the E and C Midwest to the W Midwest and the N Plains. To date, the yields in IN/IL/OH have been slightly less than expected, but it is too early to determine a trend. That trend determination will occur in a few weeks heading the important NASS Small Grains Report and the September Stocks in all Position Report. The recent heat/fast dry down of the crop is tugging E Midwest corn yields slightly lower.

• The early release of the September FSA data has caused a bigger divergence in 2021 US acreage expectations than existed beforehand. Research sees the FSA data as being substantially complete which helps to confirm the NASS June Seeding estimate. Other analysts are utilising month-to-month 5-year changes in adding 1 million acres to US corn and 1.5 million acres to sorghum, and 200-400,000 acres to soybeans. We do not believe that using the 5-year average gain from September to October is worthwhile in 2021 on record enrolment. We argue that NASS (June Report) has it close to right.

• CONAB dropped their 2021 estimate of total corn to 85.7 million mt and wheat to 8.1 million mt which is down 1.0 million, and nearly 500,000 mt, respectively.

• The midday GFS weather forecast is like the overnight run with dry/warm temperatures into next Wednesday with showers then falling across the Lake States. The E Midwest holds in a drier flow with seasonal 70′s/80′s.

• The trade leans bearish for the September USDA crop report based on the prior Pro Farmer Crop Tour results and expectation that the East will make up for the losses in the West. Yet, NOAA just released that the summer of 2021 was the warmest on record across the US. Heat is that one yield thief that is often missed. Our bet is for a smaller crop that will shrink further into January.

8 September 2021

Posted on September 8, 2021 by simon

• HEADLINES: Row crops stabilise; Wheat trades lower on Stats Can stocks data.

• Chicago values are mixed at midday, with row crops steady and wheat down on liquidation following larger than expected Canadian crop stocks. Selling momentum has eased as the return of power is slowly expanding across the greater New Orleans area. Current Gulf logistical issues are no doubt concerning, as evidenced by FGIS shipment data Tuesday, but we would remind that the hurricane’s impact on the movement of grain will be limited to 2-3 weeks. The timing of the return to normal is still unknown, but we doubts Ida’s impact will alter annual US corn, soy and even wheat exports.

• There are rumours that FSA inadvertently released its Sep acreage enrolment data this morning, two days ahead of schedule, but we cannot confirm the validity of any new numbers. FAS’s daily reporting system featured 106,000 tons of US soy sold to China. The US$ is higher, having traded through a short-term downtrend line, but energy markets are firm.

• Stats Canada pegged final 2020/21 Canadian wheat ending stocks at 5.7 million tons, vs. USDA’s 3.8 million. Using Stats Can’s production estimate of 22.9 million, Canadian wheat exports in 2021/22 will be 17.0-17.5 million tons, broadly in line with USDA’s forecast.

• Final 2021/22 canola stocks were pegged at 1.8 million tons, vs USDA’s 1.1 million. Larger beginning stocks will partially offset production loss, but work indicates Canadian canola exports this year will be capped at 6 million tons, vs. USDA’s 6.9 and vs. a massive 10.5 million in 2020/21.

• Stats Can data was far less bearish of feedgrains, with final barley end stocks placed at 700,000 tons. vs. USDA’s 900,000. Canada’s net feedgrain exports in 2021/22 will fall to 1.9 million tons, vs. 3.2 last year and the lowest since 2014. Canada will be a sizeable buyer of US corn late autumn onward.

• Importantly, rapeseed/canola futures in Canada and Europe are higher this morning and found strength prior to soybean’s late morning recovery. Note that price trends in global vegoil markets are positive into the very end of the calendar year. Spot Malaysian palm oil today is priced at just a $0.06/lb discount to spot Chicago soyoil. Palm oil’s discount to soyoil was $0.15/lb just 30 days ago.

• Egypt’s GASC secured 60,000 tons of Russian wheat and 240,00 tons of Ukrainian origin for late Oct/early Nov shipment at an average fob price of $313 per ton. This compares to GASC’s purchase price last week of $307 and reflects a new multi-year high.

• Today, Egypt’s GASC purchased 300,000 mt of wheat from Russia and Ukraine for shipment in Oct 25-Nov 03. The average FOB price paid was $313.09/mt. That is up $4.59 mt from the average price paid at the tender held last week. The average CIF price paid in today’s tender was $345.02/mt. That is up $3.15/mt from last week’s price. Ocean freight declined $1.44/mt to $31.93/mt. The CIF price was $97/mt more than was paid a year ago and the highest in over 6 years. GASC will pay for the grain within 180 days. Payment in 180 days is estimated to add $4-5/mt to the cost of the wheat. This is the 8th tender in a row that non-Russian origins captured most or all of the business.

• There has been no material evidence that wheat importer demand is slowing despite elevated wheat and freight prices. We calculate July-Aug world wheat trade at record 29.9 million tons, vs. 27.7 million a year ago.

• The midday GFS weather forecast is wetter in parts of the Southern Plains and Missouri but is otherwise consistent with prior runs. Near complete dryness and normal/above normal temperatures are scheduled into late next week. Max temperatures this weekend reach into the 90s across the Southern and Central Plains. The jet stream moves slightly southward beginning Sep 15, which allows a pattern of light/scattered showers to return to the Great Lakes Region thereafter. However, heavy harvest delaying rainfall is not indicated.

• It is difficult to be bearish Chicago ag markets at current prices and in early September. Yet, the cash market must push back against recent selling. A bulk of US corn will be gathered over the next 30-45 days, progress has started in KS, MO and KY, and cash market activity will be dull until harvest reaches 40-50% nationwide. Our strategy remains to use recent weakness to add to/extend coverage.