7 September 2021

Posted on September 7, 2021 by simon

• HEADLINES: Gulf export woes and steep cash basis fall drop Chicago futures; Corn scores new lows with December at $5.1075; USDA report could cause change.

• If we were writing this earlier today, this morning, the headline might well have read “Chicago recovers on strong Chinese trade data; Hope that several US Gulf exporters get back to business this week”. However, the day moves on as do markets and our earlier headline has been superseded with something less bullish.

• Chicago values are lower at midday as the fund selling pace quickens on Ida related US Gulf export delays and the acute weakness that is being felt in cash basis bids. The Delta harvest is accelerating with test cuttings underway in the Southern and Central Midwest. December corn fell to a fresh low at $5.1075 while wheat/soybean futures followed. Chart trends are down, and fund managers are paring risk ahead of Friday’s USDA September Crop Report. End users are scaling into new purchases on the break, but the Gulf export bids/offers are difficult to come by as damage assessments are ongoing.

• Cash basis bids have fallen sharply as the Gulf stays largely closed. LDC is loading a boat and the waterways are open, but many Gulf exporters are awaiting power to review their own load out status. The Gulf is far from normal in terms of loadout capacity and running normally. That requires time with electricity to return to several US exporters in the next few days. Once the power is restored, a better damage assessment can be completed and there should be some visibility on when export trade can resume.

• Chicago brokers estimate that managed money has sold 16,000 contracts of corn futures, 4,900 contracts of soybeans, and 1,900 contracts of wheat. In the soy products, funds have sold 2,500 contracts of soyoil and 2,800 contracts of soymeal. The fund selling in corn has been active since the morning reopening.

• US exports for the week ending September 2 were 10.8 million bu, soybeans 2.5 million bu and wheat 14.0 million bu for a combined 27.3 million bu, the lowest in years. The closure of the Gulf following Ida had a massive impact on US exports and we expect that next week’s inspections will be similar. This will place the US well below a year ago when export facilities were operating normally.

• It is the production estimate that will determine whether Friday’s USDA report is bullish or bearish to corn/soy. FSA data will be incorporated by NASS, but historically, the changes are often very modest, although the industry makes a big deal about the change beforehand. Based on the record large numbers of US farmers that have responded to FSA on their program acres in August, it is likely that NASS will add 400-700,000 acres to US corn seeding taking it up to 93.1-93.4 million acres. However, we also expect that NASS will find additional abandoned acres in the N Plains due to the dire drought with final US corn harvested acre being in a range of 84.5-84.9 million acres. The point is that unless the 2021 US corn yield is above the 2018 record of 176.6 bushels/acre, it will be difficult for the report to be overly bearish. We do not expect the USDA to adjust US corn/soy exports lower due to Hurricane Ida.

• Corn/soybean cash basis levels have fallen sharply on the Ida Gulf export halt. Delta soy/corn basis has fallen $0.60-0.80/bu while interior Midwest corn basis has dropped by $0.15-0.40/bu. Cash traders are telling the farmer to store as much of their early harvest as possible. And Chinese buyers are anxious to advance their purchases once Gulf cash trade resumes.

• The midday forecast is drier for the Lake States and the Upper Midwest. A high-pressure ridge holds across the West Central US which will produce a warm/dry weather pattern. US corn and soybean crop maturity is being pushed by the warmth. The Midwest harvest will start in earnest sometime next week.

• Argentina has been exporting record tonnages of corn this summer while Russian wheat is being moved offshore due to ever rising export taxes. China’s soybean imports in August argue that the USDA is 2-3 million mt too low on China’s 2020/21 soybean import estimate. World corn, wheat and soybean export trade is record large, it is just not yet being felt in the US. When the Gulf get back on its feet, that demand should be reflected in price.

3 September 2021

Posted on September 3, 2021 by simon

• HEADLINES: Soybeans charge higher on China pricing in futures; Russian spring wheat yield disappoints; China to switch out barley for corn via price?

• Chicago values are mixed at midday with corn mixed, while soybean/wheat futures are slightly higher. The volume of trade is thinning out as traders head out for a long weekend. We look for short covering rally into the weekend as hope continues to build that the Gulf mess produced by Ida will slowly be resolved in the next few weeks. We are uncertain when normality will return, but as the Mississippi River channel is reopened in the next 3-4 days, modest amounts of cash trade could resume next week. We hear that China is anxious to secure US cash soybeans at these prices which has end users securing futures, and then coming back to set cash basis once Gulf trade resumes.

• FAS/USDA announced that China booked 126,000 mt of US soybeans for 2021/22. The export program from the Gulf/PNW during October/November/December is going to be massive. A demand pull on the cash market will develop during harvest.

• Chicago brokers report that funds have sold 4,600 contracts of corn but bought 2,900 contracts of soybeans and 2,200 contracts of wheat. In the soy products, funds have bought 2,300 soyoil and 900 contracts of soymeal.

• Brazilian Sept/October soybeans are bid at 220 over vs offers at 240. The massive rise in basis with just a few cargoes sold for export in recent days suggests that Brazil is nearly sold out of old crop beans. Basis bids are above last year. Either Brazilian farmers are sitting on cash supply or somehow last year’s crop is overestimated. It would appear that Mato Grosso farmers have some modest old crop soybean tonnages that have yet to move. The point is that Chinese crushers are not going to pay such high premiums for old crop soybeans when one US Gulf exporter could be returning to loading next week. They will wait for soybeans off the PNW or in the Gulf.

• Russian spring wheat yields continue to disappoint which has some discussing the potential that the final crop could be 1-2 million mt smaller than the USDA/WASDE estimate of 72 million mt. A crop of just 70-71 million mt would put pressure on the Putin Administration to limit Russian exports (quota) which is called for under the current tax program. Next week, the Russian export tax will rise $7/mt ($46/mt) which is prohibitive on Russian wheat exports. The July/August export programs were larger than expected as commercials moved Russian wheat offshore to fulfil existing sales contracts. We are starting to wonder if 2021/22 Russian wheat exports will surpass 30 million mt, which is 5 million below the August USDA forecast of 35 million mt. The Russian export tax will exceed $70/mt by early October based on current prices.

• China maybe washing out of 5 cargoes of feed barley purchase contracts as the premium of feed barley/wheat rise to $10-20/mt more than US corn. And corn offers a greater feeding value than barley. A rotation from barley to corn is underway via price and feeding values not only in China but across the world. China’s expected record large corn harvest will help refill their cash pipeline, but feed imports are needed to satisfy domestic feed demand. China does not allow the feeding of food waste to help control the spread of ASF. The loss of 30-34 million mt of food waste use must be  replaced with corn imports. We estimate that China will take 55-60 million mt of world feed grain in 2021/22.

• IHS Markit estimated the 2021 US corn yield at 175.4 bushels/acre and soybeans at so bushels/acre while sharply reducing spring wheat harvested acres on abandonment.

• The wrath of Hurricane Ida has produced a rough week for Chicago futures. It is hoped that there will be improvement in Gulf operations next week. And ongoing is the industry discussion on whether FSA data from August should produce a 1 million acre plus gain in US corn acres. Our response is no. NASS is willing to incorporate the FSA data in the September report amid the record farm program participation rate. This fact limits corn/soy seeded acre gains. The US demand outlook for corn/soy is massive.

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

Weekend summary 3 September 2021

2 September 2021

Posted on September 2, 2021 by simon

• HEADLINES: Markets begin recovery process; New crop demand responds to competitive US prices in late August.

• Chicago’s emotional correction has paused, with wheat and soy oil leading today’s recovery as expected. We have previously mentioned that wheat and soy price determination are far less cantered on the movement of supply across the Southern US. International wheat markets are also stronger at midday, with Paris milling wheat futures up €0.75-1.00 per tonne ($0.02-.03 per bushel). EU rapeseed futures are trading sharply higher as concern there mounts over strong Canadian prices, and the need for EU rapeseed imports beginning in late autumn. Cash rapeseed oil in Europe this week is testing June’s all-time high of $0.75 per pound. Recall global vegoil seasonal price trends are positive into Nov/Dec. The vegoil bull market remains intact. Spot WTI crude is up $1.60 per barrel and has breached $70 for the first time in 4 weeks. Ongoing draws in US crude stocks implies record consumption.

• We hear that a portion of the Gulf’s export capacity will resume operations within the next 10 days. Otherwise, the timing of normal operations there is unknown. Terminals will no doubt be mended, but whether this occurs in mid, or late September will be monitored closely.

• The lack of current grain movement along with surging barge freight levels has begun to weigh on interior cash bids, though this will be short-term phenomenon.

• Importantly, the pace of new crop export sales continues to respond by rising alternative supplies. New crop corn export sales through the week ending Aug 26 totalled 43 million bushels, the largest total since China’s buying spree in mid-May. The pace of new crop corn sales has closely followed corn’s discount to Black Sea feed wheat. We note that US corn sales over the next 52 weeks must average only 30 million bushels to hit the USDA’s projected 2,400-million-bushel target. Additionally, Argentine fob corn basis has surged in recent days as exports there peak. Brazilian corn is not offered beyond November, leaving the US and Ukraine to battle over world market share thereafter into mid-summer 2022.

• New crop US soybean sales were 78 million bushels, vs. 64 million the previous week. Brazil soybean offers have disappeared completely. Daily soy sales announcements will be a feature of the marketplace once Gulf elevator activity is restored. There is no doubting structural demand for US corn and soybeans.

• This week’s Saskatchewan crop report highlights damage caused by recent rainfall and hail. Recent rainfall will work to improve pasture conditions but have caused challenges to harvest progress. Additional heavy precipitation will impact SE Saskatchewan over the next 48 hours. Ccontacts in Canada suggest that yields will be lowered further once harvest data is available. Spring wheat and canola harvests in Saskatchewan are 36% and 11% complete, respectively.

• The midday GFS weather  forecast is drier across the Northern Plains and Western US in the 6-10 day period but is otherwise completely unchanged. Needed rainfall of 0.25-1.00″ will impact the Central Plains over the next 2-3 days. Locally heavier totals are possible in portions of central KS, NE and eastern SD. High pressure ridging expands across the Southern and Central Plains beginning Sep 6. Warmth and dryness then blankets the Central US into Sep 17. The risk of frost remains very low across the Northern Plains and Upper Midwest.

• US markets have taken a breather ahead of a long weekend. Technical healing is needed, but we would reiterate that annual bottoms are very often scored in late Aug/early Sep. Cash sales remain on hold as a lasting period of massive US corn and soy export demand lies in the offing.

1 September 2021

Posted on September 1, 2021 by simon

• HEADLINES: Chicago selling on Gulf closure and uncertainty on electrical power restoration; China buying PNW soybeans and sorghum; NASS Sept crop report

• Chicago futures are sharply lower at midday on fund selling amid the continued worry over when US Gulf export facilities will come back online. FOB and CIF offers are lacking which is frustrating importers while the futures market endures chart-based selling. Exporters that would normally buy futures to buffer the decline are lacking or non-existent, there simply is no cash export market in the Gulf. For now, it is not about the S&D of US or world grain, it is about when will the Gulf come back to some normality of US grain trade.

• Assessments of Gulf loadout facilities are ongoing. We hear that Zennoh and Bunge are both making their damage assessment today. CHS has flooding issues while ADM reports that all they need is electrical power to return to operation. Cargill has structural damage that will require months to fix. Cargill is shifting its exports to other facilities including the PNW.

• Since there has not been any pictures of structural damage to Zennoh or Bunge, traders are hopeful that it will not take much for them to restart operations. Yet, to turn on the lights takes electrical power from Entergy, and the tangles of lines to get NOLA back up is staggering. Recent day Chicago weakness is all about NOLA export uncertainty.

• Traders will await the Zennoh/Bunge damage assessments. However, the big worry is when will power be restored. Entergy is expected to produce a damage report and when electrical power can be restored on Thursday or Friday. Then some 20,000 workers will be utilised to bring the power back up, but it is getting the power to New Orleans that will be prioritised. The damage to the grid is the big worry and why all the failsafe systems simply failed.

• There is also a fire at the Marquis Ethanol plant in Hennepin, IL It is a 7-alarm blaze with more than dozen departments sending equipment to battle the fire. No word on any injuries or how long the plant will be down. Marquis Energy is a 365 million gallon plant that produces ethanol, DDGs and corn oil.

• NASS indicated that it will not wait until the October report to utilize FSA/RMA, satellite, and any new data sets for the September crop report. Normally, NASS incorporates the FSA/RMA data in the October report. We noted that US corn and sorghum seeded acres could increase following the FSA report of August. However, the degree of increase would depend on the September data. NASS wants to be proactive in utilising as much data as possible in September.

• US ethanol production slumped to 266 million gallons vs 274 million gallons last week. The slide is based on plant maintenance and high cash basis of old crop corn. US gasoline consumption held strong at 9.6 million gallons for the week, which is above 2019, the prior record. We calculate that 2020/21 US ethanol use is forecast at 5,035 million bu or some 40 million less than the USDA forecast.

• The GFS weather forecast is close to the overnight run via rainfall locations and amounts. A system produces showers for the N Plains on Friday with chance of rain for KS/NE on Saturday. A broad Ridge/Trough pattern follows with mostly dry and warm weather for the Central US next week. A very weak tropical system (not a hurricane) is noted in the Gulf on Sept 11-13 which produces heavy rain for W and C Louisiana.

• NOLA damage and the uncertainty when electrical power will be restored has pressured Chicago futures for the past 3 days. The Chicago break is on fund liquidation and the lack of export bids from importers that source from the Gulf. No one knows for sure when SE Louisiana power will be coming back on, or when employees can safely return to their homes and work. December corn has fallen to support at $5.10-5.20 with November soybean support noted under $12.50. US wheat is less dependent on export demand and has held much better. China is buying US soybeans off the PNW with rumours that it is also booking sorghum for Nov-January. We see the corn/meal market as nearing a low with our advice to cover needs into 2022. This is no place to make new cash sales.

31 August 2021

Posted on August 31, 2021 by simon

• HEADLINES: Chicago sinks on US Gulf exporter uncertainty, both on structural damage and the return of electricity; USDA July soybean crush due today.

• Chicago futures are lower at midday on the concern of damage to Gulf export facilities amid the uncertainty of when electrical power will return. The damage unknowns from Hurricane Ida, and its negative short-term impact on exports, pushed December corn to fresh lows at $5.2525. The next level of support rests at $5.20 December corn and $12.50-12.75 basis November soybean futures. The market never likes uncertainty and there is plenty of that this morning including when export employees will be able to return to work, and when electrical power will be restored. It is a risk off morning in Chicago.

• Yet, end users should be using the break to add to forward coverage in futures. Like 2005 when Katrina struck NOLA, the export demand returned, and the initial export loss averaged out over time. Nearby, it is the uncertainty when employees/electrical services are restored. The assessments are underway.

• Chicago brokers estimate that funds have sold 4,600 contracts of wheat, 14,400 contracts of corn, and 7,600 contracts of soybeans. In soy products, funds have sold 4,200 contracts of soyoil and 2,900 contracts of soymeal. The funds have been pushing values lower on liquidation.

• There are limited FOB/CIF offers from the Gulf as export firms assess their damage and the uncertainty on when electrical power will be restored. China (like many importers) would like to secure soybeans (or grain) if there were offers on the break. China (others) can book US soybeans/corn off the PNW, but few Gulf exporters are back to making markets. And exporters that have wheat/corn/soybeans heading to the Gulf via rail, barge or truck are trying to divert the supply to other US ports including Houston, Galveston, Longview (PNW) and the Lakes. The scramble to find bulk export capacity away from the Gulf is underway.

• Gulf export availability is concerning Chinese crushers. They are extremely short bought on future soybean import needs and desire additional coverage. Most are trying to shift September loadouts to the PNW. They are hopeful that Gulf operations are restored thereafter. The stock of old crop corn/soybeans is thin at the PNW which requires a basis push for early harvested Dakota crops. Each day that the Gulf is down creates new up and downstream issues. Understanding when the SE LA electrical grid comes back up will be key to deciding when Gulf export offers are available again in a nearby position. We expect that November forward offers will be available in the coming days.

• The July soybean crush rate is estimated in range of 165-165.7 million bu in the USDA Fats and Oil report this afternoon with soyoil stocks pegged at 2,100 million pounds. The report will be a step closer to closing out the 2020/21 crop year on crush data.

• The GFS weather forecast is slightly drier for the Lake States and wetter for the SW portion of Iowa in the next 8 days. Otherwise, the forecast is similar with near to above normal temperatures and limited rainfall for the S and C Plains. There are no new tropical storms indicated for the Gulf while temperatures will be seasonal with there being no indication of a frost/freeze. In 10 days, the only weather concern remaining for the 2021 US corn/soybean crop is a frost before September 20.

• NOLA damage and the uncertainty when electrical power will be restored has pressured Chicago futures in the past 2 days. Ida produced considerable damage with CHS’s export elevator under water, Cargill lost elevator legs and others are assessing their damage. No one knows for sure when SE Louisiana power will be coming back on, or employees can safely return to their homes. Gulf exporters are not offering any grain or soy until they know their damage and have some visibility on power.

• What is known is that there will be a market snap back when Gulf export confidence is restored and cash market trade returns to normal. US wheat is holding on the future prospect of tightening world supplies. This is not a place to be making new sales.

27 August 2021

Posted on August 27, 2021 by simon

• HEADLINES: Cash market soars as old crop supplies run thin and Ida to slow early Delta corn harvest; September options to expire/Stats Canada Monday.

• Midday Chicago is dull/slightly lower with any volume attributed to September forward spreading, September option expiration, and first notice day positioning. Someone offered 800 contracts of the November/September soybean spread in a 4-minute period that pummelled the spread/flat price. Only when the US$ declined following Fed Chairman’s Powell speech did Chicago recover. We suspect that someone needed to roll a long hedge forward out of September soybean futures into new crop, but the speed and size of their actions hit the entire Chicago complex. We look for a mixed close into the weekend.

• Stats Canada is out Monday morning (drought losses) and traders want to see if weekly US good/excellent corn/soybean crop condition ratings increase following this week’s rain across the Northern Plains and the NW Midwest. Traders are expecting that US NASS weekly good/excellent ratings will increase 1-2%.

• We believe that the heat/dryness in the east will more than offset the gains in the NW Midwest, but NASS will be arbiter of this week’s weather on the crop. Getting past Monday’s crop data and first notice day will set the market to engage in yield and new crop demand discussions more actively. September 1 marks the end of the 2020/21 crop year for summer row crops.

• Spot cash corn/soybean markets are on fire. Cash corn is said to have traded as high as $1.90-2.20 over to East Coast Feed compounders while Central Illinois corn is bid $1.00-1.20 over. The strength of the spot cash corn/ soybean market is incredible with the S Midwest harvest to start in a few weeks. The extreme cash basis bids suggest that US minimum pipeline stocks are larger than the 1,100 million bu of corn or 155 million bu of soybeans that the USDA has plugged in for the 2020/21 crop year on September 1 (Wednesday). It is rare that old crop cash basis bids rally into the September Chicago expiration. Fort Dodge, Iowa is bidding $1.20 over for September delivery corn with Marshall, Minnesota bidding 70 cents over. New crop basis bids are firm as short bought end users and importers can no longer wait for supply.

• The restocking of the cash corn/soybean pipeline will take at least 2 weeks of active Central US harvest. The pipeline restocking will diminish harvest pressure and the impact on Chicago. US farmers advise that they will not make the same mistake as last year in selling their crop too cheaply at harvest. Most are planning to store as much corn/soybeans as their on-farm storage system allows. A 2021 corn/soy harvest glut is not expected.

• Chicago brokers estimate that managed money has sold 3,400 contracts of corn, 7,200 contracts of soybeans, and 3,500 contracts of wheat. In the products, funds have sold 3,000 contracts of soyoil and 1,200 contracts of soymeal. Funds have been on the sell side of Chicago for most of the morning.

• The GFS weather forecast is slightly further east with Ida’s landfall occurring to the west of NOLA (New Orleans and Louisiana). This means that the strong tropical winds and the storm surge will impact the port. Ida will make landfall late Sunday or early Monday. Flooding rains and 100 MPH wind is the risk to unharvested crops in LA/MS/AL. The storm slowly pushes NE across the Tennessee Valley and exits via New York late next week. In the wake of Ida, rainfall totals of 2-6.00″ are expected. Temperatures are warm to hot through the weekend with highs in the mid 80′s to the mid 90′s with cooling next week. Ida is likely to come ashore as a category 3 or 4 hurricane.

• There are a lot of balls in the air including Sept option expiration, first notice day against September futures, US crop conditions following this week’s rain, Stats Canada and the coming Sept NASS crop report. Fed Chairman Powell said that its bond buying taper could start in 2021 and that there is no rush to raise interest rates. The US$ declined on the news which placed a bid under commodities. As the importance of summer weather fades, it is back to demand and actual corn/soybean yield trends.

26 August 2021

Posted on August 26, 2021 by simon

• HEADLINES: China secures US soybeans for October/November on the morning break; World wheat prices resume rally on demand; Hurricane into LA/MS/AL.

• It has been slow morning of trade with corn, soybean and wheat futures mixed at midday. Price action has been a reversal of yesterday with meal gaining on oil while wheat gains on soybeans. However, we want to highlight that the volume of trade is extremely slow as few want to extend their risk profile heading into the weekend or next Monday’s Stats Canada report.

• We look for a mixed close with old crop September corn/soy futures supported by extremely tight cash markets. Cash corn bids are holding at $1.00 plus premium over for spot delivery while crushers are paying up for remaining old crop soybeans. The historically tight September spreads highlights the lack of supply which will be important at the end of September when NASS releases September 1 Stocks in All Position estimates.

• US exporters report that China has been active securing US soybeans this morning. We hear that as many as 10-14 cargoes of US soybeans have been sold to China for October/November in some of the biggest buying since the start of the year. Exporters report that China has booked at least 25-30 cargoes of US soybeans this week or estimated tonnages of 1.5-1.7 million mt. In total, we expect that weekly US soybean sales will easily exceed 2.0 million mt. Noteworthy is that Chinese crushers are being discreet in their purchases, not wanting to look like they are bulling the market (and adding to price speculation). However, Chinese crushers are extremely short bought on forward crush needs and will use breaks like today to add to forward coverage.

• The USDA/FAS reported that for the week ending August 19 the US sold 4.3 million bu of wheat (marketing year low), 67.1 million bu of soybeans (2.8 million old and 64.3 million bu of new crop), and 27.2 million bu of corn (300,000 bu of old and 26.9 million bu of new). The weekly wheat sales were disappointing, but the corn and soybean sales were in line with trade expectations.

• China has now shipped out a record 21.2 million mt (833 million bu) of US old crop corn, 1.5 million mt less than sales with net cancellations of 135,200 mt. If China ships out 500-700,000 mt by August 31, some 1 million mt of old crop corn sales will likely be rolled forward. China added 90,800 mt of old crop soybean sales with just 700,000 mt (25.7 million bu) left to be shipped. We look for 16-19 million bu of old sales to be rolled forward to new crop. China has done well shipping out its promised US corn and soybean purchases.

• EPA confirmed that is forwarding its recommendation for a cut in the 2021 US biofuel mandates due to the pandemic. The mandate will rise again in 2022. The news was debated by traders last week. With the 2021 calendar year 8 months complete, we see the impact on 2021 US biofuel demand as “modest”.

• The midday GFS weather forecast is slightly further east with hurricane coming in across E Louisiana/Mississippi. The storm would make landfall late Sunday or early Monday. Flooding rains and strong winds are a risk to unharvested crops in LA/MS/AL. The storm slowly shifts NE into the SE US leaving behind flooding rains. Temperatures are warm to hot through the weekend with highs in the mid 80′s to the mid 90′s with cooling next week.

• China has been active securing US cash soybeans for export on the break this morning. A sales announcement is expected Friday. Ag Canada estimated the Canadian wheat crop at 20.2M million mt, down nearly another 4 million mt from the August USDA estimate. A further drop in Canadian, Brazilian, and Russian crop sizes lie in the offing which we expect will produce a demand led rally into year end. Seasonal lows are forming.

25 August 2021

Posted on August 25, 2021 by simon

• HEADLINES: Chicago corn charges higher and tests 50/ 100 day moving average; Wind damage to crops important in NE IA; US ethanol production slows.

• It has been a mixed Chicago trade with corn the upside leader while wheat holds chart support on improving world tenders/demand. Soy has traded either side of unchanged with traders agreeing that the overnight/morning rains helped the crop. The rain comes too late to produce much benefit to corn.

• We look for a mixed close with fund managers closely watching to see if December corn can climb back above its 50/100 day moving averages at $5.52 and $5.53, respectively. Corn futures broke key support last week and the market is now coming back to test the breakdown. A close above $5.54 December will force out some of the faster moving managers that went short on the break late last week. In November soybeans, the 50-day moving average crosses at $13.4075, another key area to monitor. Wheat is well above all support levels with an uptrend in place after a $1.00/bu rally.

• Producers report that there has been significant straight line wind damage to crops in Fayette/Black Hawk counties in Iowa. Wind damaged crops are reported from west of Waterloo northeast into Decorah. Damage assessments are ongoing but downed corn appears to the biggest yield concern with stalks broken off or toppled over.

• It does not take much of a break to return world wheat demand. Iran is bidding for Russian/E European wheat with mentioned tonnages said to be upwards of 1.0 million mt. World wheat traders are raising their estimates of Iran wheat imports to 3.5-4.5 million mt amid the constant buying. The big question for Iran is payment and financing. FAS/USDA has Iran taking 2.1 million mt of world wheat in 2021/22 or 100,000 mt less than last year. The trade sees this estimate as low with drought producing an acute shortage of Iran flour/bread within the country. We estimate Iran taking at least 4.0 million mt of world wheat, double the USDA estimate.

• Turkey returned with a wheat tender for 300,000 mt which will likely be sourced from Russia. And Tunisia/Jordan are tendering for 100,000 mt of wheat. World wheat demand stays strong with importers uncovered on future demand beyond October.

• Russia’s Ag Ministry reported that 63.2 million mt of wheat has been harvested vs 68.4 million in the same week last year. Russia has cut wheat on 20.5 million ha of land, up 1.3 million ha from last year. The average yield is 3.09 mt/ha down nearly 14% from last year. The yield data argues for a final 2021 Russian wheat crop of 71.5-72.5 million mt.

• US ethanol production continues to slide on the high cost of feedstock, corn. Although plant margins are highly profitable, US ethanol producers are awaiting the new crop with heady premiums being paid for old crop corn. We see the slowing US August ethanol corn grind causing USDA to drop its 2020/21 US corn ethanol corn grind estimate by 25-35 million bu in September.

• The midday GFS weather forecast is wetter across Louisiana/Mississippi with a hurricane mid next week. The hurricane is forecast to make landfall around NOLA and slowly push north producing copious amounts of rain with totals exceeding 8-12.00″. The flooding rain and strong wind are a risk to unharvested crops in LA/MS. The storm slowly shifts NE into the SE US. The storm is not expected to replenish soil moisture in the Eastern Midwest, but some rains are forecast for early next week. Temperatures are warm to hot through the weekend and then cool late next week.

• It feels like new hedge fund money is coming into the grain space based on a developing bearish view of the US$ and a waning of the summer weather market. We see US corn/soy yields sliding on the less than favourable August weather. A US corn yield of 172-174 bushels/acre corn and 49-50 bushels/acre soybean is realistic in our opinion. Seasonal lows are forming, again our opinion.

24 August 2021

Posted on August 24, 2021 by simon

• HEADLINES: Markets find bullish enthusiasm; Crude boosts global oilseed markets.

• Chicago ag markets have extended their overnight rallies in decent volume. Last week’s lack of meaningful crop improvement in the Dakotas despite weekend rainfall has kept the US row crop yield debate alive, while updated model guidance features an acceleration in soil moisture loss across the eastern Midwest. Max high temperatures into the weekend east of the MS River will reach into the upper 80s and low/mid-90s. Our primary concern over US supply is that of rapidly declining water availability during the tail end of the growing season, with pod and ear weights to be capped as plants are rushed toward maturity.

• Spot WTI crude oil this morning is up another $2.00 per barrel, and crude’s $6 rally from Monday’s low has given life to vegoil-based oilseed markets and their longer-term use as biofuel feedstock. November canola is up $14 per ton, with European rapeseed and rapeseed oil markets following. In fact, EU rapeseed oil is nearing all-time highs scored in early June.

• Stats Can next Monday will confirm that Canada’s exportable surplus will be cut in half year on year, and equally important is Stats Can’s July 31 stocks report due on Sep 6. Stats Can canola stocks data all year has confirmed that USDA is understating disappearance. Final Canadian canola stocks are likely to fall to 500-750,000 tons, vs. USDA’s projected 1.1 million tons. This will quicken the need to ration supplies there. The bullish global veg oil story remains intact.

• FAS’s daily reporting system featured additional US corn sales to Mexico worth 125,000 tons. China bought 132,000 tons of US soybeans. Importers have been only willing to pick at supply needs amid elevated prices, but our US export thesis remains cantered on rising international markets and a lack of alternatives to US origin supply.

• Brazilian corn prices have held support at $7.55 per bushel, basis November. S American soyoil basis continues its rally, while the US becomes the only supplier of soybeans October onward. Even US HRW wheat’s premium to comparable German origin has fallen to just $4 per ton on a fob basis. This compares to $30 per ton three weeks ago. There is no doubt US crop demand will be large, but until crop size is known, we expect broadly neutral seasonal trends to hold into mid-September.

• Corn yield data out of the Delta region has largely matched expectation but results there are down noticeably from last year. Yield data will be available from the mid-South on or just after Labor Day. And Plains and Midwest yields will be known some two weeks earlier than normal due to early seeding in the east and heat/dryness in the west.

• General consensus on US corn and soy yields should be available prior to the release of NASS’s October report.

• The midday GFS weather forecast is wetter in TX compared to its morning solution but slightly drier elsewhere into Sep 3. Yet, confidence in forecast details beyond early next week is low as the major forecasting models are forced to handle elevated tropical activity. The GFS forecast features a rather strong storm impacting TX/LA next Tuesday and hints at another Gulf storm Sep 3-5. In the near-term, heavy rainfall stays isolated to SD, MN and WI. A lack of precipitation and abnormal warmth persist across the Central Plains and principal Midwest.

• The size and volatility of these markets will not relax until current stocks and stocks/use issues are solved. Chicago corn and soy bottoming in second half of August was routine prior to 2020. We continue to maintain that nearby weakness provides the opportunity to extend forward supply coverage.

23 August 2021

Posted on August 23, 2021 by simon

• HEADLINES: Chicago mixed as corn sags on fund selling; Rumours that China secured US corn cannot be confirmed by cash traders; Stats Canada out Aug 30.

• Chicago futures are mixed at midday following a liquidating break in December corn futures below $5.30. Soybean/wheat futures followed corn to easier levels, but never reached into the red. Soyoil is posting strong gains on the expectation that the Biden Administration won’t break its promise to US farmers on steady to expanding biofuel use made during the 2020 campaign. Traders are expecting steady to a 1% increase in US good/excellent corn/soybean ratings this afternoon. We are leaning to a firmer close, but it is a day where both the bulls and the bears do not want to be very vocal in their market stance.

• Chicago brokers estimate that funds have bought 1,900 contracts of wheat, while being flat in soybeans and selling 7,500 contracts of corn. In the products, the funds have sold 4,400 contacts of soymeal and bought 6,400 contracts of soyoil. Active oil/meal spreading is noted this morning.

• There is cash talk that China was bidding and may have bought US corn as December fell under $5.30. We cannot confirm the cash rumours but hear that China has a bid under corn on fresh weakness. If China did secure US corn under $5.30 December, the tonnage involved is likely less than 250,000 mt.

• There is also talk that China booked 4-6 cargoes of US soybeans with at least 3 cargoes sold off the PNW for October. We note that in checking with Chinese importers that there does not appear to be any problem offloading soybean vessels in China, while there are some Covid related snags in barley and sorghum. China’s 0% tolerance on Covid means that the entire crew must be tested and cleared for a vessel to offload.

• Stats Canada will release their August crop report a week from today. The report will be extremely important for canola/world wheat futures. Early harvest data has been disappointing in terms of yield results with private estimates discussing a Canadian 2021 all wheat crop of 21 million mt or less and a canola crop of 12.5 million mt or less. Both are well below the USDA estimate of August 12. Cash durum prices continue to push higher on tightening supplies.

• Russia started releasing harvest data after hiatus since August 11. Russia has now harvested 62.2 million mt of wheat with an average yield as of August 24 of 3.13 mt/Ha (46.4 bushels/acre), down 12.6% from last year. The harvest data points to a 2021 Russian wheat crop of 73-75 million mt, which is just above the USDA August estimate. Russian export tax rates calculated on a 60-day average price are expected to start a steady march higher in the weeks ahead. Russian farmers are showing no interest in cash related sales due to the tax/cash bids.

• The US exported 28.5 million bu of corn, 24.2 million bu of wheat and 7.9 million bu of soybeans in the week ending Aug 19. China shipped out 2.45 million bu of beans. China has 1.6 million mt of old crop corn left to ship out with an estimated 600,000-900,000 mt of those purchases likely to be rolled forward to new crop. We estimate that China will take 28.5-29.5 million mt of world corn in the 2020/21 crop year that ends on September 30t, a record by a wide margin. China was the US’s biggest wheat shipper last week taking nearly 170,000 mt.

• The midday GFS weather forecast is wetter across lowa/E Midwest, while being drier across Minnesota/Wisconsin and Michigan. The forecast models are struggling with the exact position of a system this weekend and the storm’s convective outlay of rainfall. A few light showers are falling across NW Illinois today, but totals are less than 0.25″. Warm/humid weather will prevail this week with highs in the mid 80′s to the lower 90′s. Crop maturity will be pushed with corn harvest starting across the Central Midwest in mid-September. The Central and Southern Plains hold in an arid trend.

• Funds are liquidating corn market length while world wheat/oilseed values are pushing upwards. This is the wrong time of the year to be making cash sales with US corn export demand starting to show. Mexico purchased 458,600 mt of US corn. Brazilian corn exports are far below last year, and the US will benefit. A seasonal low is forecast to be forged in corn/soy by early September.