• Chicago ag markets are soaring at midday with funds covering net short corn and wheat positions. Soybean futures are not reacting with as much upside vigour with last week’s high offering resistance at $9.195 basis November fuyures. Chicago has a firm tone at midday and a higher close is expected.

• A top in the corn market will likely be formed when funds have covered their net short position estimated at 88,000 contracts at the start of today’s trading. Funds are adding to an already large net long in soybeans. Traders assume that the high yield print from NASS was seen in August. The big question is how far will yields decline in the September WASDE report. IA’s straight-line winds and the dry finish to the growing season complicates the yield/harvest outlook. Early cutting across the Gulf States and NE/KS has produced better than expected corn yields. But this early corn was not impacted by the late season dryness. We look for corn/wheat volume to stay strong into the close.

• FAS/USDA reported sales of 408,000 mt of US corn to China and 100,000 mt to Japan. China also booked another 204,000 mt of soybeans with 145,000 mt to an unknown destination. The China corn purchase had been rumoured since late last week and was finally announced this morning.

• Chicago brokers estimate that funds have bought 30-32,000 contracts of corn, 9,600 contracts of soybeans, and 7,200 contacts of Chicago wheat. In the products, funds have bought 2,800 contracts of soyoil and 4,000 contracts of soymeal. US farmers are selling the rally with old crop corn sales. Already more than 220,000 contracts of December corn have changed hands.

• Hurricane Laura looks to take a slightly more westerly track and make landfall in Eastern Texas. Each model run has the storm being slightly further west than the prior run. Louisiana farmers reported that 68% of their corn was harvested through Sunday with reports that they will rush to cut the remaining crop before Laura makes landfall Thursday. The loss of downed LA corn will be modest, but heavy rain will slow soybean maturation.

• The lowest offer in the GASC wheat tender was $213/mt for 55,000 mt of Russian wheat. GASC secured wheat at $206.73/mt on August which makes today’s offer just over $6/mt higher. Traders are waiting to see how much tonnage is secured. Black Sea offers for September are holding at $203/mt.

• CONAB estimated that based on record high prices/profits, Brazil would produce a 2021 soybean crop of 133.5 million mt and corn crop of 112.9 million mt. The 2021 soybean harvest would be up a whopping 13 million mt with corn up 10 million from the current crop year. With normal weather, Brazil should harvest record large crops and add to the existing world grain/oilseed supply. Brazil looks to be seeding wall to wall with the Real at $5.60:1 US$.

• Traders are already discussing/factoring in a further decline in US crop condition ratings next week. Most are looking for another 2-3% fall in US corn good/excellent ratings on Monday due to this week’s heat/dryness.

• The midday GFS weather forecast is wetter across the W Midwest than what was offered overnight starting on the weekend. Hurricane Laura makes landfall slightly further west across far E TX with the system hooking E/NE into OH. A cold front is dragged southward that produces 0.5-2.00″ of rain across MN/IA/WI early next week. This rain is desperately needed. A cool with near to above normal rainfall pattern follows. There is no evidence of a frost into September 10. The coming rain and cooler temperatures will aid soybeans more than corn.

• Fund buying has been massive in corn with the next upside price target at $3.60 December. The bulls have a free “yield” pass to run values higher until the rain starts to fall later this week and weekend. Yet, it is still a big 2020 US corn and soybean crop, but the top end of yields has been taken off.

• Chicago ag markets are mixed at midday on Monday. Wheat futures traded lower following the forecast for rain across Argentina and reports that frost did not produce much damage to developing E Australian or S Brazilian wheat crops.

• The weakness in US wheat futures pulled corn off its high, but few traders want to be short fearing a sharp fall in weekly good/excellent condition ratings following the pure lack of rain since August 8.

• Late July and August was wet across most Midwest areas (excluding W IA), but the rains have since missed the Midwest causing acute net drying. 90% of the US corn crop should be in dough with 40% reaching dent which will help limit its yield loss, but the adverse yield impact on soybeans could be greater without rain late this week. The need for rain is immediate.

• We look for a mixed Chicago close with crop condition ratings expected to fall sharply. Then, it is the amount/location of rainfall which will then direct Chicago prices into the end of the week.

• The midday GFS forecast has the rains further south and west than was indicated in the overnight run leaving IA/WC IL with limited totals. This would be harmful to US corn/soybean yield potential into early September.

• Chicago brokers estimate that funds have sold 4,300 contracts of wheat, while being flat in soybeans (overnight buyers and morning sellers), while securing 7,400 contracts of corn. In the products, funds have bought 3,200 contracts of soyoil while selling 1,200 contracts of soymeal. Funds are exiting net corn short.

• US export inspections for the week ending August 20 were; 35.1 million bu of US corn, 42.2 million bu of soybeans, and 20.9 million bu of wheat. The soybean and wheat inspection totals were better than expected and considered supportive.

• Wheat weather forecasts have improved with some needed rain for Argentina this week while weekend cold weather threats for Brazil/E Australian produced limited damage on the weekend. The world has a supply abundance of wheat which has pressured the spot Chicago wheat/corn spread to a $1.87/bu wheat premium. The KC wheat/corn spread has narrowed to $1.02/bu which amid discounted cash basis, could cause Plains wheat feeding. Stats Canada will be out early next week with their August crop forecasts.

• It is being rumoured that China booked 4-6 cargoes of US soybeans this morning shortly after the Chicago opening for November shipment. No new sales of US corn, wheat or soybeans were announced this morning.

• The midday GFS forecast is wetter across the E Midwest but drier across the E Plains and W Midwest. The areas that really need the rain would have to wait until early September for moisture to fall.

• Note that soon to be Hurricane Laura looks to make landfall slightly farther east, but this all depends on the forward movement of the storm after it exits Cuba with warm Gulf waters to promote rapid intensification. If the storm is slower, it will be stronger and further west. The afternoon run of the EU model should help in the landfall determination. Until Thursday, mostly hot/ dry weather will prevail across the Midwest that is rushing crop maturity.

• Traders are looking for a 2-4% fall in US corn/soybean good/excellent ratings as crops just run out of soil moisture in IA, W IL and portions of OH. Talk that China booked another 4-6 cargoes of US soybeans this morning is helping underpin the complex, but a Chicago corn/soy break will not be sustained until some needed rain falls. This is not the finish that farmers desired as dry weather steals bushels and enhances S American soybean seeding that starts in mid-September. Rain is needed immediately.

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

Weekend summary 21 August 2020

• Chicago ag markets are mostly lower at midday. A rising probability that wetter weather impacts the E Plains and Midwest in late August and weak outside markets are noted. Spot WTI crude is down $0.50/barrel at $42.40, with gasoline in tow. Spot RBOB gas futures still have been unable to exceed $1.30/gallon as weekly use remains plateaued at levels well below last year. Commodity indexes have had a solid bullish run since mid-May, but rallies moving forward will be more laboured as autumn approaches.

• The Brazilian Real at midday is down 1% and testing new 3-month lows. Political chaos in Brazil continues and it is unlikely that major government finance reform is passed in 2020. The Argentine Peso has made its habitual new all-time low. Currencies in Russia and Australia are also weak.

• Also recall that Brazil in late August will decide whether to extend its policy on allowing upward of 750 million litres of US ethanol free of tariffs. Sources suggest that there is a growing possibility that this policy is left to expire and will take full effect in November.

• The surge in Brazilian ethanol exports in recent months is another reminder of the rise in global competition for world market share of all products.

• China has also started to secure Brazilian soybeans for 2022, a long way out, but at attractive basis levels the Chinese see value in securing supply from Brazil way out in the future. Brazilian farmers can lock down handsome margins exceeding 50% over variable costs with the Brazilian Real trading at 5.65:1 US$ this morning. The profitable margins that Brazilian farmers are seeing will cause them to plant spring crops fencerow to fencerow starting on Sept 15.

• US export sales for the week ending August 13 were; 19.2 million bu of wheat, 30.9 million bu of corn (both crop years combined), and 94.0 million bu of soybeans. The soybean sales were right at trade expectations, while corn sales were less than expected.

• For their respective crop years to date, the US has sold 1,740 million bu of corn (down 231 million or 12%), 1,745 million bu of soybeans (down 41 million or 2.2%), and 408 million bu of wheat (up 25 million or 6%). China has bought a known 12 million mt of 2020/21 soybeans (1.5 million likely to be carried forward from new crop and 4.5 of unknown sales in 2020/21) likely to raise that total to 18.0 million mt. This is a record large purchase pace by China for US soybeans into January. We believe that China has the need for another 9-10 million mt to meet the WASDE forecast in the balance sheet.

• The midday GFS weather forecast is wetter in SD and IA late next week as the model brings back the chance of regionally heavy showers across the Western Corn Belt. The 11-15 day forecast is outright wet as a pattern of lingering moderate precipitation will impact a vast majority of the US Ag Belt. Totals of1.50-1.75″ Sep 1-5 will be favour MO, IL, IN and OH. It remains that the extended forecast needs to verify. The market will have a solid handle on the late Aug/early Sep by late in the coming weekend.

• Pro Farmer did not find a crop disaster and a big 2020 harvest still looms. On a national basis pod counts were higher than expected with rain in the forecast after another warm/dry 7 days. Once needed rain falls, the corn and soy harvest should pressure prices lower into late September or early October. Research looks for another 1-2% drop in corn and soybean crop ratings on Monday via this week’s total lack of rain. Condition ratings seasonally decline into mid-September.

• Chicago futures are mixed at midday in thin volume as traders await the yield results from IL/IA and try to gauge the extent of the current dry spell. The forecast has rain starting August 28 and nearly all the models are on board for a wetter pattern than recent weeks. Yet, the details of rain location/ amounts have yet to be worked out by each model. The rain must be pulled forward in the forecast for traders/producers to have any confidence and with 3 tropical systems in the Atlantic, uncertainty persists. The trade will continue to closely monitor weather forecasts and the results of the Pro Farmer Tour. The yield impact on soybeans will be greater than corn amid maturity.

• We look for a mixed close without much fanfare with the weather forecast for next week keying price direction into the weekend.

• Chicago brokers report that funds have sold 2,400 contracts of corn, while buying 600 contracts of soybeans and 2,700 contracts of Chicago wheat. In soy products, funds have bought 2,600 contracts of soymeal and 1,900 contracts of soyoil.

• FAS reported that 192,000 mt of US soybeans were sold to China in the 2020/21 crop year. We estimate that China has now taken 17.5-18.0 million mt of US soybeans.

• Contrary to cash rumours, FAS did not report that several cargoes of US hard wheat were sold to China. It is possible that the sales were done individually through differing exporters so that they will be covered in the weekly (not daily sales report), with the buyer said to be Hong Kong Mills. Wheat futures initially fell on the lack of confirmation but have bounced into midday. Black Sea wheat fob values are stable today at $202/mt.

• The 2020 Ukraine 2020 grain crop was estimated at 70 million mt according to the economy minister. This would be down 5 million from 2019 which likely includes a 35-37 million mt corn crop. This compares to a USDA corn crop estimate of 39 million mt. The Ukraine Government and market participants agreed to export 17.5 million mt of wheat in the 2020/21 crop year. The export estimate was in line with USDA and industry expectations.

• Rumours abound in Argentina that the Government is considering cutting export taxes for processed soybean products to make the country more competitive in world soy product trade. Rumours have the cuts at 3-5% compared to whole soybeans. The timing of any new tax changes is said to be in December/January.

• The August Cattle on Feed report is expected to show on feed supplies at 101% of last year, placements of 106% and marketings at 100%. The report will be released Friday and is expected to start a trend of rising US feeder cattle placements in coming months. Kansas wheat pasture is expected to be in high demand this winter as a cheap feed source.

• The midday GFS weather forecast is wetter in IA/IL late next week but is otherwise unchanged. Mostly dry/warming conditions are projected throughout the next 10 days, with a much wetter pattern likely thereafter. Soaking rainfall of 1-3″ is forecast across SD, NE and a bulk of the Midwest Aug 28-31. We have previously mentioned that this wetter shift is probable, but confidence in forecast details is low. Note that the GFS forecast brings a tropical storm into FL and the Southeast Aug 30-31. Exact Midwest precipitation totals in late Aug/early Sep hinge upon the placement of Gulf storm activity, which exacerbates forecast uncertainty.

• Rallies or breaks will not carry through until Pro Farmer offers you a final 2020 US corn yield for Iowa on Thursday. The Tour is in the western end of IA and eastern end of IL today. On Friday, Pro Farmer will release its Final Tour corn yield. US farmers are using this rally to part with additional old crop corn (on basis contracts vs September futures and cash corn in the bin). Few want to aggressively buy the market with the harvest weeks away. Yet, dry weather is limiting selling based on the worry over yield declines. The market is likely to keep rising until there a more definite chance of rain in the 7-day forecast.

• Chicago futures are mixed at midday with the grains weaker while soybean futures mixed with bear spreading noted. Chicago has a weak tone with easing world wheat fob values noted in the Black Sea which is pulling Chicago futures lower. The wheat market has been the market leader of the past several days. Chicago corn/soybeans continue to find support by drier than normal weather forecasts and the decline in Iowa crop conditions. Until it is clear that rain will be falling across the Midwest, the market will be unable to sustain any lasting weakness. Crops need a stabilising/finishing rain. We look for a lower Chicago close with wheat the downside leader. The drier GFS midday weather model will offer some late day support.

• Chicago brokers report that funds have sold 4,400 contracts of corn, 1,500 contracts of soybeans and 4,300 contracts of Chicago wheat. In soy products, funds have sold 2,200 contracts of soymeal and bought 3,100 contracts of soyoil.

• FAS reported that 325,000 mt of US corn was sold to China for 2020/21 delivery. This would take 2020/21 US corn sales to China to 6.0 million mt. Traders are understanding that a large 2020 US corn/soybean crop loom based on favourable weather conditions this spring and summer. A good soaking finishing rain is needed to assure 2020 above trend corn/soybean yields, but a crop disaster is not looming outside of the unfortunate wind torn areas of IA.

• Soil moisture anomaly data as of August 16 shows that acute dryness is centred on W IA and parts of OH. However, other Midwest crop areas can likely get by for now based on the coolish temperatures and existing soil moisture levels. Existing soil moisture and near to below normal temperatures will help preserve yield potential until late August rainfall arrives. The odds for rainfall in the next 5-7 days are poor.

• The well followed and respected Pro Farm Tour will survey IA on Wednesday and uncover highly variable and difficult crop assessment conditions. In fact, NASS will resurvey farmers to gauge how many will go ahead and harvest wind downed corn in their September report. We expect that some 300-600,000 acres of IA corn on the ground will be abandoned as straight-line winds reached in excess of 85 mph. The 10% drop in IA crop conditions accounts for the loss of 9-10 bushels/acre and 1.5 bushels/acre, nationally.

• The midday 10-day weather forecast is drier than the overnight run with rainfall of 0.1-0.5″ for the Midwest compared to the 0.4-1.50″ that was forecast overnight. We see the midday changes as being too dry as the models are struggling with the Gulf storminess. The extended range still has rains of 0.5-2.00″ in the 11-15 day period but confidence this far out is low. We maintain that a wetter profile is in the offing, it is just that amid a big increase in tropical storm activity, the models are going to struggle on the timing and exact rainfall details.

• Big US com/soybean harvests lie ahead in a world that is awash with wheat. Latest Russian wheat yield data projects a 2020 crop as large as 84 million mt. This big crop along with impressive yield trends in neighbouring regionswill cap Chicago rallies on limited US wheat export demand. Yet, a soaking Midwest rain is needed and the chance for such a rain are not indicated until late next week. We maintain a view of a secondary seasonal high forming this week with a decline into late September. Gulf state corn yields are running better than expected.

• Chicago futures are higher at midday as funds continue with their buying ways as the market adds back weather premium into price. After weeks of weather premium extraction, the uncertainty surrounding wind damage to the IA crop and now dry weather is causing a supply discussion of “how big is the yield drop?”

• Chicago brokers report that funds have bought 16,400 contracts of corn, 9,500 contracts of soybeans and 4,200 contracts of Chicago wheat.

• FAS announced that 130,000 mt of US HRW wheat was sold to an unknown buyer. Everyone assumes that it is China, but Brazil is another name to comes up in US exporter circles. No US corn nor soybeans were announced in the daily reporting service. For US soybeans to China, it breaks a string of eight days of buying.

• Research forecasts a 2-4% decline in US corn good/excellent ratings and a 1-2% drop in soybeans this afternoon. Traders are far from certain on how to gauge corn wind losses in Iowa with greenness maps not offering much help. The Pro Farmer Crop Tour will best assess damage later this week with most commercial estimates ranging from 100-350 million bu. The losses will amount to 1-2 bushels/acre of US corn yield. NASS Crop condition reports this afternoon will help in that decision along with crop maturation, but this is not the finish to the 2020 US corn/soybean growing season that was hoped for. Funds are sizeable buyers with US farmers sellers of cash corn and modest amounts of cash beans on the rally. Few want to sell the rally until there is rain in the forecast and more is known about IA crop assessments from Pro Farmer.

• Weekly Export Inspections for the week ending August 13 were; 40.8 million bu of corn, 28.8 million bu of soybeans, and 16.9 million bu of wheat. All weekly export totals were in line with trade expectations. For their respective crop years to date, the US has sold 1,587 million bu of corn (down 230 million or 14.4%), 1,504 million bu of soybeans (down 94 million or 5.9%) and 207 million bu of wheat (up 5 million or 2%). The US wheat export pace looks to be following last year.

• A supply side Chicago rally is underway amid a dry 2 week forecast and uncertainty regarding 2020 IA corn production. Few IA farmers see any big concern with soybean losses as the plants withstood the winds much better than corn. The soybean problem is an immediate need for rainfall to support podding.

• The weather forecast is slightly wetter than the overnight run with better totals for IL/IN/OH and MN. IA/NE and KS remains parched while other areas see rain totals 0.5-1.25″. The GFS weather forecast has needed 1-2″ rains in the 11-15 day period but it is a long ways out for any confidence. Until then, this is a cool/drier than normal weather pattern that looks to take off the top end of US corn/soybean yield potential. However, cool temperatures will limit crop stress with highs in the 70′s and lower 80′s. Warmer readings return during the last week of August.

• Wheat futures are leading the Chicago rally on the hope of Chinese demand for US wheat (based on the sale to an unknown destination). Algeria will likely book Baltic wheat in its tender while Pakistan takes Russian wheat. Algeria would have to change their specs to allow an exporter to sell Black Sea wheat. Algerian quality specs won’t allow Black Sea wheat to work. Midwest corn/soybeans only need a few good finishing rains to preserve yield. The midday model offered better hope for IL and the E Midwest.

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

Weekend summary 14 August 2020

• Chicago futures are sharply higher at midday with corn/soybeans leading the advance as traders accept the FSA Program Participation data as correct.

• The August FSA data would suggest a rather sizeable decline in 2020 US corn seeding of 3-5 million acres of corn and 2-3 million acres of soybeans. This has spurred bullish talk of smaller 2020 US corn/soybean crops thereby spurring fund buying and sharp rally in midday prices.

• We note that the FSA data comes on top of the crop losses due to Monday’s straight-line winds that toppled millions of acres of corn across EC Iowa. Although IA crop loss estimates vary widely, the point is that speculation is growing that the US 2020 corn crop will NOT be larger in September. This has pulled December corn futures near an open chart gap at $3.42 while November soybean futures rise above $9.00 to check out the July highs.

• The August FSA data as incomplete and impossible to correlate with past years due to processing delays created by Covid-19. Many Midwest FSA offices are still certifying acres amid limited staffing and the inability to have more than one group of producers in their offices at a time. This caused the FSA August data to potentially undercount US corn/soybean program acres.

• Chicago volume has been massive with December corn trading more than 320,000 contracts and November soybeans more than 140,000 contracts at midday. US farm cash selling has substantially stepped up on the rally.

• Chicago brokers estimate that funds have bought 38,000 contracts of corn, 14,000 contracts of soybeans, and 2,600 contracts of wheat. In soy products, funds have bought 9,000 contracts of soymeal while selling 3,000 contracts of soyoil.

• FAS announced that 110,000 my of US corn and 202,000 mt of US soybeans were sold to an unknown destination for 2020/21, while 197,000 my of US soybeans were sold to China. We calculate that China has now secured 17.6-18.0 million mt of US 2020/21 soybeans (including 1.50 million mt carried forward from old crop).  Research (and the WASDE balance sheet) has China taking some 27-28 million mt of US soybeans in 2020/21.

• US weekly export sales for the week ending August 5th were; 13.5 million bu of soybeans, 36.2 million bu of corn (14.8 million in old and 21.8 million new crop), and 125.2 million bu of soybeans (20.9 million of old crop and whopping 104.3 million of new crop). The soybean sales to China were huge as they secure large amounts of US soybeans heading into the US/China weekend 6-month review. We (and many others) doubt that much will come out of the weekend teleconference with China’s active purchase pace since July helping to solidify the agreement. China wants to be a “good actor” ahead of the November 3 US election to make sure they can assess their trading risks under either President Trump or VP Biden.

• The weather forecast is slightly wetter across the Upper Midwest under a broad Western US ridge and Eastern US trough pattern holding. The mean position of the northern branch of the jet stream will be sinking southward thereby slowly return rain chances across the northern 2/3′s of the Midwest during the 9-15 day timeframe. Next week, the flow of Gulf humidity will be reduced by a NW flowing upper air pattern. However, as warmer temperatures return, so will upper air humidity allowing for thunderstorms during the last week of August. The rains are forecast to target; IA, IL, IN and OH.

• Cool temperatures will limit crop stress with highs in the 70′s and mid 80′s. Warmer readings return during the last week of August.

• FSA has tens of thousands of farmers and millions of acres that have yet to certify their 2020 program acres. It just takes time under Covid-19. We see the August FSA acres as vastly incomplete. History shows that NASS is very rarely wrong by more than 1.0 million acres from June into the final on combined US corn/soybean acres. The Chicago rally should run into strong resistance above $3.42 Dec corn and $9.05 November soybeans. This is no place to turn bullish.

• The August USDA crop report was slightly bearish as US corn/soybean yields surpassed trade expectations. NASS estimated the 2020 US soybean yield at a record 53.3 bushels/acre with corn at 181.8 bushels/acre. The yield estimates did not come as a big surprise relative to what traders had been discussing.

• The reaction of the market was a bounce in corn/soybeans while the wheat market slides. Traders will try to buy the slightly bearish USDA August report, but with harvest ahead, we doubt that a Chicago rally can be sustained. It is the September report that holds more market weight. NASS enumerators make their measurements in early September.

• NASS estimated the US corn crop at 15,278 million bu, a record with the 2020 US corn yield forecast at a record large 181.8 bushels/acre. The IL corn yield was pegged at 207 bushels/acre with IA at 202 bushels/acre. Record corn yields were forecast for; WI, Ml, MN, SD, PA, KY, TN, GA and SC. The surprise was that the IA corn yield was only up 2 bushels/acre from last year at 202 bushels/acre.

US End Stocks (Mil Bu):

July                 August

2019/20           2020/21           2020/21

Corn                            2,248               2,648               2,756

Soybeans                   620                  425                  610

Wheat                         1,044               942                  925

• NASS estimated 2020 US soybean production at 4,420 million bu, just below the record of 2018 at 4,430 million bu. With another bump in the US soybean yield, the US could produce a record soybean crop in 2020 with 6 million acres less than 2018.

• Record large soybean yields were reported in; SD, Ml, IL, IN, OH, MO, KY, and LA. The IA soybean yield was estimated at 58 bushels/acre compared to IL at 64 bushels/acre which seems to be too low. With another few finishing rains, it appears that the US would have a chance of producing a 54-55 bushels/acre soybean yield.

• US spring wheat production was increased to 577.5 million bu with US 2020 all wheat production estimated at 1,838 million bu with a yield of 50.1 bushels/acre.

• WASDE raised their 2020/21 end stock forecast to 2,756 million bu, the largest in 33 years. WASDE raised feed/residual use by 75 million to 5,925 million bu with exports bumped 75 million to 2,225 million bu. WASDE held China’s corn imports from all origins at 7 million mt. The WASDE increase in 2020/21 demand helped offset some of the 278 million bu gain in the crop. The net result was a decline in the farmgate price average to $3.10/bu which forecasts that December corn futures will decline below $3.00 during the coming harvest.

• WASDE estimated 2020/21 US soybean end stocks at 610 million bu, up 185 million from July as the 2020 US soybean crop grew a hefty 290 million bu. The new crop supply was the second largest on record. 2020/21 US soybean stocks are not much different from the current crop year which calls for a range trade of $8.20-9.20.

World End Stocks (MMTs):

July                 August

2019/20           2020/21           2020/21

Corn                            311.9               315.0               317.5

Soybeans                   99.7                 95.1                 95.4

Wheat                         297.1               314.8               316.8

• USDA forecast an average US farm gate soybean price of $8.35/bu, down $0.15 from the current year. Unless China books more than 30 million mt of US soybeans in 2020/21, there is no lasting bull story for soy without a dire S American drought.

• 2020/21 world soybean stocks at 95.4 million mt was only slightly higher than July as WASDE raised China’s soybean import estimate to 99 million mt, up 3 million. The 2021 Brazilian soybean harvest was estimated at a record large 131 million mt with Argentina at 53.50 million mt. Non-Chinese soybean trade was raised 4 million to 165.4 million mt. We. would argue that this increase is too robust in a Covid-19 world. WASDE cut their forecast for 2020/21 US wheat stocks to 925 million bu based on a 25 million bu hike in export demand to 975 million bu. This increase helped slow the decline in the US farmgate wheat price to $4.50/bu.

• In world wheat supplies/trade, WASDE raised their estimate of 2020/21 Russian wheat production to 78.0 million mt and increased their exports to 37.5 million mt. The European wheat harvest was cut by 4.0 million to 135.5 million mt with their exports cut by 1.5 million to 25.5 million mt. WASDE held their estimate of China’s wheat crop at 136 million mt with imports of 6.00 million mt. We would argue that WASDE is too low with their crop views of Canada, Australia and Russia with further upside adjustments likely in coming monthly reports. 317 million mt of world wheat is a record stocks total. There is no evidence of a lasting world wheat rally.

• Research sees the USDA August report as slightly bearish. Our bet is a further increase in US corn/soy yields in coming monthly reports. Rallies will be capped and Chicago prices should grind lower into mid-September to mid-October. We doubt that seasonal lows are being scored in mid-August.