• The USDA September Crop Report was neutral to slightly bearish. Chicago has rallied following the release of the report on momentum and ongoing large fund buying. We have seen nothing in the report that alters our opinions, but we would argue that WASDE keeping 2020/21 Chinese corn imports at 7.0 million mt is difficult to understand with nearly 9.0 million of sales on the books. We guess that USDA wants to make sure that the corn ships. We would strongly advise against buying into the post report Chicago rally.

• WASDE reduced 2020/21 US corn end stocks by 253 million bu to 2,503 million to account for the derecho winds across IA which cut harvested acres by nearly 500,000 and a fall in yield of 2.8 bushels/acre to 178.5 bushels/acre. US 2020/21 corn end stocks are the largest in 33 years at just over 2,500 million bu with an average farmgate price of $3.50. WASDE cut 19/20 US ethanol use to 4,855 and exports to 1,770 million bu.

US End Stocks (million bu)

Aug                             Sep

2019/20                       2020/21                       2020/21

Corn                            2,228                           2,756                           2,503

Soybeans                   615                              610                              460

Wheat                         1,044                           925                              925

• Research notes that the derecho IA wind and Midwest flash drought reduced total US corn/soybean production by a combined 403 million bu with a 150 million cut from soybeans and a 253 million cut in corn. This was less than expected in both summer row crops.

• World major crop end stocks were lowered 9.9 million mt to 719.8 million, with wheat up to a new record high of 319.4 million mt, while corn was trimmed 10 million and soybeans by 1.8 million. 2020/21 world corn stocks are forecast to rise 6 million mt above last year, even with expanded world corn trade to 186 million mt.

• US 2020/21 soybean end stocks fell by 150 million bu to 460 million. Such stocks assume an annual export estimate of 2,125 million bu (445 million bu or 12.1 million mt above the prior crop year). China took nearly 17 million mt of US soybeans in 2019/20. Assuming non-China demand stays similar, this suggests that China will take 28-29 million mt from the US in 2020/21. Currently, research estimates that China has booked 22-23 million mt of US soybeans.

• US 2020/21 wheat end stocks were left steady at 925 million bu with 975 million bu of exports. The 2020/21 Russian wheat crop was left at 78 million mt with exports of 37.5 million. The Russian wheat total is too low in our opinion as Russia has already harvested more than 80 million mt. Canada’s 2020 wheat crop was raised to 36 million mt and Australia to 28.50 million. China’s 2020/21 wheat imports were raised 1 million mt to 7.0 million. The USDA wheat data leans bearish.

World End Stocks (million mt)

Aug                             Sep

2019/20                                   2020/21                       2020/21

Corn                            311.3                                       317.5                           319.4

Soybeans                   95.9                                         95.4                             93.6

Wheat                         300.9                                       316.8                           306.8

• We calculate the September 2020 10-State US corn ear weight at 0.355lbs per ear or close to 2018, 2017, and 2016 averages. Our guess is that in the end, US corn ear weight could exceed 0.36lbs which would raise the US yield back above 180 bushels/acre. Traders will be looking at actual combine yield data for direction in coming weeks. The IL corn yield fell 1.9 bushels/acre to 203 bushels/acre, while the IA yield was off 5.4 bushels/acre to 191. Record corn yields were reported in 9 states (MN, SD, WI, Ml, NC, KY, SC, GA and NY). This is the first year that the MN corn yield surpassed 200 bushels/acre and Iowa by 9 bushels/acre (191 bushels/acre).

• NASS suggested in their commentary that they have included FSA program data into their September acreage calculations, but historically, NASS does not adjust US harvested/planted acres until October. Our bet is that FSA offices are still behind in their reporting which may require October or November data for confirmation.

• We see the September USDA Crop report as slightly bearish. The market has placed considerable risk premium in price based on the $1.10/bu rally in soybeans and $0.50/bu rally in corn and wheat. This is not a report to be buying. Our view remains, and that is that a seasonal top is being formed in Chicago.

• Chicago ag markets are higher at midday with wheat/corn pacing the rally. Corn has pushed to new rally highs with December reaching $3.6675 while a sharp rise in Black Sea wheat values lifts US wheat futures back against $5.60-5.70 resistance basis December Chicago. The soybean rally has stalled as funds take profits on a large net long position and unwind soybean/corn and soybean/wheat spreads. There are rumours that China may have bought US corn this morning, but amounts or an actual purchase cannot be confirmed.

• We suspect that the rumours of China corn demand come from a story on Bloomberg News wire which mentions an unnamed trader at Louis Dreyfus commenting that China could import 30 million mt next year to ease domestic tightness. The speculation of how much corn China might secure is just that as it depends on China’s Government import policy. A corn importer into China needs to secure a GMO import certificate to allow the transaction. Any commercial trader knows that this is a policy decision of China, not a trade based on supply and demand or price. USDA is estimating that China will hold a massive 194 million mt of corn at the end of the 2020/21 crop year, undeniably a massive amount.

• We look for a mixed close heading into the key September USDA crop report. Traders/funds are bullish and heavily long heading into the report.

• FAS announced that China purchased another 195,000 mt of US soybeans. There are rumours that future China soybean purchases could slow from the brisk pace of recent weeks. This week, China has booked an estimated 1.2 million mt of US soybeans. The rising Gulf basis costs has some in China arguing that it is worth waiting for cheaper Brazilian soybean offers in late January/February.

• Chicago brokers estimate that funds have bought 11,000 contracts of corn and 5,000 contracts of wheat, while selling 1,000 contracts of soybeans. In the products, funds are flat both in meal and soyoil.

• US ethanol production for the first week of the new crop year is 277 million gallons, up 6 million gallons from the prior week, but down 8.4% from last year. The US needs to average weekly ethanol production of 290-295 million gallons to reach the USDA’s annual target of 5,200 million gallons. US ethanol stocks fell to 839 million gallons, down 11% from last year. Amid the uncertainty of Covid-19, blenders and producers do not want to be caught with excessive stocks amid a second wave of Covid-19.

• A corridor of rain is falling across the E Plains and Iowa. The midday forecast calls for additional rain here of 0.5-1.50″ before a period of warm/dry weather returns on Friday and through next week. This week’s cool/wet weather has helped stabilise soybean yield potential, but it comes too late for corn. High temperatures return to the 70′s/80′s to produce a favourable end of the 2020 growing season. Increasingly, US farmers desire warm/dry weather to start their corn harvest operations and seed winter wheat. The forecast maintains seasonal temperatures and near to below normal rainfall into September 25.

• Good luck guessing China’s corn import policy from the US or the world. We are sure that China is not telling what their plans are. Most sources estimate that China will import 12-20 million mt with some putting the total at 16 million mt. Corn does not become bullish with imports of 20 million mt from the world. It is ear weight and pod numbers that will key US yield totals on Friday. Research leans to bearish yield estimates based on surveys. Ahead of the US harvest, a top could be forming.

• Chicago ag markets are mixed at midday with soybean/wheat futures stronger while corn values sag. China continued its daily purchase program in taking another 238,000 mt of US soybeans while 132,000 mt was sold to an unknown destination. US weekly export sales totals on (Friday morning due to the Monday US holiday) will be huge for US corn/soybeans once again. China has stolen the show on US corn/soybean purchases since mid-July and Gulf export elevations through yearend are mostly filled.

• China’s State trader, SinoGrain, have been the primary buyer over the past week as they take soybeans for their reserve and parcel out supplies to crushers for a later date. Recent Chinese corn demand has been for loading in February forward suggesting that China does not have an immediate need for US corn. Chicago futures might weaken into the close with funds banking profits on long futures as soy has rallied for 11 consecutive days with an RSI that is extremely overbought. Fund managers desire to take some money off the table ahead of Friday’s USDA September Crop Report. It is a question of timing.

• Chicago brokers estimate that funds have sold 2,200 contracts of corn while buying 3,100 contracts of soybeans and 4,100 contracts of wheat. In soy products, funds have bought 1,900 contracts of soymeal while being flat in soyoil.

• Funds continue to add to a net long soybean position which is estimated to be 188,000 contracts as of today. Funds are nearing their longest net soybean position looking backwards to June of 2016 and February 2018 when fund length peaked above 200,000 contracts. Heading into a new harvest, the fund length must be monitored if NASS finds a US soybean yield that is larger than expected. It is yield that will determine if China’s ongoing purchase program needs to be rationed.

• Weather forecasts are improving for rainfall across Australia, Argentina and Western Europe for winter grain seeding. The forecast remains arid for Ukraine and SW Russia. However, the 16-30 day forecast offers improved rain chances for the Black Sea during the last 10 days of September. There remains time for moisture to seed European and Black Sea winter grain crops ahead of winter.

• A corridor of rain is falling across the S and C Plains into the W Midwest currently. The midday forecast calls for additional rain in this corridor of 0.5-1.50″ before a period of warm/dry weather returns on Friday and through next week. Blazing sunshine will warm temperatures into the 70′s/80′s and produce a favourable end of the 2020 growing season. Increasingly, US farmers desire warm/dry weather to start their corn harvest operations and seed winter wheat. The forecast maintains seasonal temperatures and near to below normal rainfall into September 24.

• US soybean futures are a function of ongoing Chinese demand. We hear that China has booked another 3-5 cargoes of US soybeans today, keeping their daily purchase program alive. Corn/wheat values cannot sustain a decline amid the ongoing soy rally. Cash basis pushes for C IL old crop soybeans has $10.00 being paid for quick shipment as a bridge to the new crop. $3.60 Dec corn futures digest a 174-176 bushels/acre US corn yield while $9.75 November pegs the soybean yield at 50-50.5 bushels/acre. NASS will determine if these estimates are correct. It is hard to be overly long ahead of harvest.

• Midday Chicago ag markets are slightly lower with corn, soybeans and wheat futures easier following the USDA Weekly Export sales report. Traders did not want to sell into the potential for another week of large US soy/corn sales based on recent Chinese buying. We note that soybean traders continue to secure breaks as they are uncertain as to when Chinese demand will subside.

• China is now booking US soybeans for December/January arrival. China already has a huge purchase book on from Brazil from mid-January onward, so discussions are underway as to how much open demand does China still possess. We see a deepening sag in corn/wheat values, with every trader watching to see if Chicago soybeans can close higher for 10 consecutive days.

• Chicago brokers estimate that funds have sold 3,400 contracts of soybeans, 2,600 contracts of wheat and 2,900 contracts of corn. In soy products, funds have bought sold 1,900 contracts of soyoil while being flat in soymeal. The macro buying in the Chicago markets is slowing as US and world energy prices decline. You can’t have inflation without a dramatic rise in crude oil prices.

• Rumours have surfaced that Brazil could be looking to import US soybeans based on their fob premiums relative to the US Gulf. We doubt any Brazilian purchases based on negative import margins of $0.20/bu excluding the 8% import tax. We believe the freight to move US soybeans to Brazilian ports at $23-25/mt excluding discharge and storage costs. The rumours of Brazilian imports were also noted back in the summer of 2018 as the Trump Administration entered a trade war with China. However, the premiums then reached nearly $3.00/bu and imports were modest. It is important to monitor fob vs fob price relationships, but we are doubtful today of Brazil taking US soybeans.

• US weekly export sales were big as expected. For the week ending August 27, the US sold 21.5 million bu of wheat, 97.9 million bu of corn, and 68 million bu of soybeans. The corn and soybean sales included modest sales of old crop.

• For their respective crop years to date, the US has sold 458 million bu of wheat (up 39 million or 8%), 621 million bu of new crop corn and 888.7 million bu of soybeans. US soybean sales at the end of August are record large. China has booked an estimated 20.0 million mt of US soybean including old crop carry forward and at least 60% of sales to unknown buyers. In fact, this week’s sales were largely to China. In corn, sales to China were 49 million bu (50% of total) while in soybeans they were 40 million bu or 59% of the total. Research has excluded unknown destinations, which some are likely destined for China. The point being is that China is carrying the US export outlook, it would be grim export landscape without Chinese buyers.

• Russia sold 55,000 mt of wheat to Egypt’s GASC in their snap tender. The wheat was sold at $225/mt with freight booked at $15.50. The landed price was a season high $240.50/mt. From the last tender, the price of Russian wheat had rallied $18.50/mt. GASC received 11 offers with prices ranging from $224-235/mt basis fob.

• The midday GFS weather forecast is like the overnight run and brings a low-pressure trough through the Central US on Sunday producing showers/storms across IA and the northern half of IL. A cold front sinks slowly south which maintains a wet 5 day period for the N Plains and the W Midwest. This front looks to produce 0.5-2.50″ of rain with isolated heavier. The rains include the drought areas of W IA. Cool to cold temperatures will push south with a frost likely for the Canadian Prairies and the eastern flank of the Rockies. No N Midwest frost/freeze is indicated through September 14.

• Market bulls will want to get smaller in their positions heading into the weekend and next week’s Sept USDA crop report. Corn is the bearish anchor with harvest dead ahead amid less certain Chinese demand. An open gap at $3.45 basis Dec futures is the next downside target. Soybeans are underpinned as China extends their forward coverage. US wheat futures lean bearish on slowing US export interest.

• Chicago ag markets are mixed at midday with soybeans recovering from a lower opening while corn/wheat futures leak lower in a correction. The volume of trade has been less than prior days with end users looking forward to the coming new crop corn/soybean harvest. Corn cutting is underway in NE, KS, and the Delta States with yield reported as better than expected. However, it is far too early to decipher any US corn yield trend. We would caution that dryland corn yields of 170-200 bushels/acre in SE NE are not a precursor of W IA yields. Nonetheless, traders have become cautious in chasing rallies. Some cite China soybean pricing on Tuesday as the rational for the morning Chicago recovery.

• Chicago brokers estimate that funds have bought 6,400 contracts of corn and 6,700 contracts of soybeans while selling 3,000 contracts of wheat. In soybean products, funds have bought 4,600 contracts of soyoil and 800 contracts of soymeal. Fund managers are on the buy side of the marketplace with some additional macro investment heading into Chicago on the second day of September.

• FAS did not report any new sales with China absent as a corn/soybean buyer. Thursday’s FAS weekly export sales report is expected to offer sizeable US corn and soybean sales along with a few cargoes of wheat as China was active last week.

• There is a cargo of French wheat that has been nominated to the US which is likely to be feed wheat heading to a US poultry producer that needs GMO free grain. The tight supplies of Ukraine corn will make it difficult on the EU to source wheat/non GMO corn for feed going forward. US corn cannot work into the EU, which limits its availability from others. Ukraine has sold corn to China (estimated at 3-4 million mt) for early 2021 shipment. EU feed supplies will be tight this winter and next spring.

• The EIA reported another modest decline in US weekly ethanol production of 922 thousand barrels/day which would produce 268 million gallons of ethanol. This corn consumption rate is 10% below last year. The US appears to be locked into a weekly pattern of the corn grind being down 9-11% which is likely to call for a downward adjustment in US corn ethanol in both an old and new crop position. We estimate 2020/21 US corn use for ethanol at 5,050 million bu, down 150 million from the August WASDE forecast of 5,200 million bu.

• Midwest producers should be aware that spot cash basis bids are historically high heading into a new harvest. If producers have any old crop supplies remaining, this would be a prime opportunity to sweep clean the bins. Once the new crop supply arrives, cash basis levels will start a seasonal decline.

• The midday GFS weather forecast is like the overnight run brings a deep low-pressure trough through the Central US from late Monday into next week Friday. This low will produce showers/storms for the E and C Midwest with heavy rain totals being further west into N IL and E IA. However, W IA, NE and the Plains will stay largely dry. Temperatures will be cool with highs ranging from the 60′s to low 80′s. No frost/freeze is indicated into mid-September.

• Chicago will struggle on rallies as the Midwest harvest looms. US weekly sales will be large again which have been announced by the FAS daily. Profit taking on longs are expected heading into next Friday’s USDA Crop Report. With funds holding a huge long in soybeans, we view the Chicago risk to the downside.

• Chicago ag markets are mixed at midday with corn values slightly lower, while wheat futures push to fresh late summer highs. Soybean futures are trying to hold early gains. The volume in wheat has been heavy, but corn/soybean trade has sagged on the rally. The overnight summer row crop volume was active, but wheat volume in the day session has been huge on fund interest. We look for a mixed Chicago close.

• Chicago brokers estimate that funds have bought 8,400 contracts of corn, 7,600 contracts of wheat and 5,300 contracts of soybeans. In soybean products, funds have bought 3,200 contracts of meal while being flat in soyoil.

• FAS/USDA confirmed the sale of another 596,000 mt of US corn to China. The sale follows on top of China’s purchase of a like amount of corn yesterday. It is interesting that the volume totals of the past 2 days are the same, suggesting that this is Sinograin/COFCO demand rather than individual buyers.

• Exporters report that the US corn to China is being sold for February/March shipment out of the Gulf. Most exporters are estimating that China will import 20 million mt of corn from all sources in calendar year 2021. This could be broken down by best estimates to; 12 million from the US, 4 million from Ukraine and 4 million from Brazil. We hear that China has already secured 3-3.5 million mt of corn from the Ukraine, 4 million from Brazil and 12 million from the US with 10 million mt from the 2020/21 US corn crop year. This could raise the 2020/21 US corn export estimates to 2,275-2,300 million bu, from USDA’s 2,250 million bu August forecast.

• USDA also announced that 132,000 mt of US soybeans was sold to an unknown destination. The buyer is said to be the EU or Mexico. US exporters report that China has slowed its US soybean purchase pace this week, while they are picking up their soybean buying from Brazil for February/March.

• Rumours abound that China has booked a couple of cargoes of US HRW wheat late last week that could be witnessed in Thursday’s weekly export sales report. However, large scale buying of US wheat is not underway which leaves many to doubt that the current rally will be sustained. Wheat bulls argue if China is securing US corn, that wheat cannot be far behind.

• Macro flows into raw material markets have increased in the new month. There is no evidence of inflation, but fund managers are pointing to the big rally in US building supply commodities like lumber/copper for a renaissance for the US housing market as exurbanites flee the cities for suburban and rural areas.

• Finally, needed rain is dropping across IL and even IA at midday. The rain will stabilise the US soybean crop yield outlook. Amid the moisture, crop ratings are expected to hold more stable or even improve slightly next week. The midday run has added 1-1.50″ of rain for MO, IL and IN over the next 10 days. This rain would have helped crops more 10 days ago, but late seeded corn/soybean pod filling will be helped. The GFS forecast follows other models that are progressively wetter in the next 10 days. Short-changed in rain will be W IA/NE. The rest of the Midwest will see 0.75-3.00″ of rain into September 10.

• With rain to fall across much of the Midwest, a correction of the recent rally is ahead with the bulls likely to take profits on net long positions heading into the USDA Sept 11 crop report. History argues against a big drop in the US corn yield from August (in dry years) with high pod counts likely meaning the same for beans.

• Chicago ag markets are mixed at midday on Monday. Summer row crop and wheat futures have struggled to hold onto overnight gains, as US farm selling has increased on the rally while funds take profits on the push to new highs. Corn futures have slipped below unchanged through the morning trade, with only the soon expiring September contract holding positive. Soybeans have clung to gains but are well under the overnight highs and are trying to close the gap left at the Sunday night open. Wheat futures are also showing mostly green, but December is just a couple cents higher after scoring a 3-month high in the overnight market, on a larger Canadian harvest.

• The midday tone in Chicago is heavy. Funds who were large buyers overnight have turned sellers during the day. Chicago brokers estimate that since the start of the morning trade funds have sold 10-12,000 contracts of corn, 5-7,000 contacts of wheat, and have sold 7-10,000 contracts of soybeans. In the soy product markets, funds have been estimated sellers of 2,000 contracts of soybean meal and sellers of 3-5,000 contracts in soybean oil.

• We look for a mixed close. Crop condition ratings are expected to decline 2-3% in corn and 3-4% in soybeans, while the radar shows rains across E Nebraska and W Iowa.

• The USDA announced corn export sales to China, totaling 23.5 million bu. Last week’s export sales report showed new crop sales totaled 251 million bu. After today’s sale, the USDA has announced sales of 71 million bu to China/unknown in the last 3 days. Including announcements and outstanding old crop sales, new crop commitments to China are now above 300 million bu.

• Weekly Export Inspections for the week ending Aug 27 were: 15.8 million bu of corn, 29.6 million bu of soybeans, and 19 million bu of wheat. The soybean and wheat inspections totals were within expectations, while the corn figure was down more than 50% from last week and below the range of expectations. For their respective crop years to date, the US has exported 1,640 million bu of corn (down 217 million or 12% from last year), 1,585 million bu of soybeans (down 96 million or 6%), and 248 million bu of wheat (up 5 million or 2%).

• Russian farmers have been slow sellers of new crop winter wheat, knowing that they have the cheapest wheat in the world. Farmers are selling other commodities, in hopes that delaying wheat sales could result in better prices.

• At the same time, Stats Canada released their old crop stocks and initial new crop production estimates this morning. StatsCan estimated a total wheat crop of 35.7 million mt, up from 32.3 million last year on a big jump in Durum wheat. Canola production was pegged at 19.4 million mt, just under last year’s 19.5 million. Expectations had been for a 35 million mt wheat crop and a 20 million mt canola crop.

• The midday GFS weather update has maintained good rainfall accumulation of 1-2″ over the next 10 days for the driest parts of the Eastern Corn belt, adding some additional rain for the dry parts of NW IL. However, the model at midday has also turned drier in the outlook for much of Western Cornbelt, extracting much of the rain for most of the state of IA, MN, and WI. It is the IA crop that most needs the rain.

• Commercial sources have noted increased farmer selling over the last 3 weeks as prices have risen, with even better farm selling noted this morning. Funds on the other hand, are booking profits on the early week rally ahead of the 3-day weekend. The last 3 weeks have been a supply-driven rally as much of the Midwest has missed out on needed finishing rains. However, yields are far from a catastrophe and traders await NASS’s first field surveys due in the Sep Crop report next Friday.

• Soybean futures pushed to new rally highs on Friday amid a drier forecast for IA and the northern half of IL. Early this week, the forecasts had suggested 2-3″ of rain starting this weekend. Nearly all that rain has now been removed from the forecast.

• Soybean meal led Friday’s rally, with December pushing through the 200-day moving average and closing at a 5-month high.

• The CoT report showed that funds were buyers last week of 2,230 contracts of soybeans, taking their net long position to 109,288 or the most since March 2018. Funds covered their net short soybean meal position and were net long 2 weeks ago. Last week funds sold 7,419 contracts and were long just 3,560. In soybean oil, funds have been net-long since early July, and spot futures traded at the highest price since January. Funds bought 10,166 contacts last week and are now long 67,690 contracts, the most since February.

• Late season heat/dryness is driving Chicago soy prices higher. Crop condition ratings are expected to slide another 2-2% on Monday but will still be above the long-term average of 56%.

• Chicago corn futures ended slightly higher amid another tranche of export sales and as crop good/excellent ratings on Monday are expected to fall another 2-3%. US exporters sold 324,000 mt to unknown destinations, likely Japan or Mexico. The market continues to be dominated by supply and the risk of lower yields in NASS’s Sep report.

• In the last two weeks, managed funds have bought/covered an estimated 123,000 contracts. On Tuesday managed funds were short a net 61,000 contracts, vs. 110,000 the previous week. We estimate funds’ short today at just 49,000 contracts. This the smallest net short in late August since 2016.

• Amid this rare late Aug yield threat, the market has lost its natural seller in the producer. Yet, Dec corn is now just $0.10/bu below this day in 2019, and is overvalued amid projected end stocks of 2.5-2.7 billion bu. The big picture theme is of production expansion in S America and the Black Sea. Enough rain looks to fall in Argentina to allow planting to begin in the weeks ahead.

• US and world wheat futures ended weaker. Market-specific news is lacking. Stats Can and ABARES in Australia will release updated production estimates in the next 10 days. Both are expected to offer larger crop estimates. Stats Can’s release is due on Monday. ABARES’ release is due on September 5.

• Managed funds on Tuesday had established a net long position in Chicago worth 1,500 contracts. Fund length in Chicago today is estimated at 16,000 contracts, the highest since mid-April.

• Slow farmer selling in Europe and the Black Sea has kept cash fob prices there elevated. But eventually this supply will enter the global pipeline, likely when the Southern Hemisphere begins.

• Australia’s return to the world market is a big deal and will act to prevent a repeat of last year’s dramatic Nov-Feb rally in world cash trade. Like corn and beans, this rally is based on the loss of (European) supply. Supply-driven rallies will continue to be rewarded. Chicago July ’21 futures are overvalued above $5.60 in our opinion.

• Chicago ag markets are mixed at midday with old crop soybean futures higher while corn prices sag, with wheat futures caught in between. Funds are buyers across Chicago with their demand underpinning the summer row crops. The marketplace feels like a bullish tailwind exists, but that funds will have their corn short largely covered by $3.60, while November soybeans hold risk to $9.40- 9.50 as funds expand their upside risk profile. Chicago December wheat futures start having resistance above $4.40 as the spread to Black Sea fob values widen. US Gulf wheat is losing its export competitiveness on a further rally.

• We see Chicago closing mixed today with S American farmers hedging more aggressively on the rally. US farmers are selling old crop corn supplies but are not aggressively selling new crop amid yield weather/yield concerns.

• Chicago brokers estimate that funds have bought 4,600 contracts of corn, 4,100 contracts of soybeans, and 3,100 contacts of Chicago wheat. In the products, funds have bought 2,900 contracts of soyoil and 1,100 contracts of soymeal.

• Weekly US ethanol production was 274 million gallons vs 272 million last week. The production gain was modest and reflects that US ethanol production has stagnated since the end of June. Forecasts indicate that WASDE will cut its 2019/20 corn ethanol grind by 25-36 million bu. The 2 month US ethanol production pace is averaging 10-11% below last year which models out to a 2020/21 production estimate of 4,900 million bu in these Covid-19 times, which is down from the existing WASDE forecast of 5,200 million bu. It is hoped that by QI 2021 a Covid-19 vaccine can be found, and that normality in US economic activity will be found in the last half of the 2020/21 crop year. This why we carry a 2020/21 US corn ethanol grind estimate that is 150 million bu below the USDA at 5,050 million bu. We expect that WASDE will cut their 2020/21 US corn ethanol demand in several stages. WASDE’s 2020/21 domestic demand (feeding/ethanol) are too high by a combined 300-400 million bu.

• Fund demand is helping underpin Chicago, but traders are looking to use rallies to bank profits ahead of better Central US rain chances that start Thursday. US corn/soy conditions are likely to drop again on Monday, but any further fall in yield will depend on actual combine harvest data. The top end of 2020 US corn/soy yield has been cut, but the US will still harvest a sizeable crop with rain helping soybean yield potential more than corn into harvest.