Morning Commentary 9/21/21

CBOT Mixed in Low Volume Overnight Trade; World Macro Financial Markets Stabilize with Dow in Recovery; Crop Ratings vs Yield being Debated

6:30 CT CBT Prices: Nov soybeans are 1.50 cents at $12.64, Dec corn is down 4.00 cents at $5.1775 with December Chi wheat down 2.00 cents at $6.9875.

AgResource Morning Grain/Soy Comment & Analysis: Good Morning! It has been a mixed overnight of CBT trade in thinning volume. The grains were pressured by the 1% rise in US corn GD/EX ratings while rising world vegoil values have underpinned soyoil/soybean futures.

Stock markets in the EU/US have rallied as traders reassess the risk and economic contagion from China’s Evergrande. Most do not see Evergrande as syste impacting China’s or the world banking system. China’s Central Bank is expected to add additional liquidity. In Hong Kong trade, Evergrande finished down .01 at 2.27 Hong Kong dollars. China’s stock market will reopen this evening as their Autumn Festival holiday ends. And US Central Bank governors will start meeting today with their policy decisions due Wednesday. The next interest rate payment for Evergrande is due Thursday.

US Dow futures are up 317 points with October WTI crude oil gaining $.83 to $71.12, while the US dollar is slightly weaker. The US DOW has now made back 2/3’s of Monday’s decline. The Hong Kong property sector closed mixed with a much steadier tone.

NASS indicated a 1% gain in US corn/soybean GD/EX ratings on Monday. The US corn/soybean ratings gain came from the state of Illinois, a surprise amid all of the disease and disappointing early yield talk from producers. Illinois had 11% of its corn and just 1% of its soybean crop harvested, so relating condition gains to yield is a statistical stretch. And Illinois crop ratings have been volatile for unknown reasons for most of the summer. ARC finds disappointing yield trends and sees no reason to back away from our estimate of a 173 BPA US corn and 49.5 BPA yield for the October NASS report. Corn disease pressure/premature death is producing diminished corn test weights.

In world ag futures trade overnight, November Malaysian palmoil futures rose 26 ringgits to 4,303 RM/MT on declining production and rising export demand.  Paris December wheat futures are up €.25 at €246.00/MT. China’s Dalian futures market is closed for a holiday and will reopen overnight.

USDA Chief economist Seth Meyer stated at the Ag Outlook Forum in Kansas City that renewable diesel is changing the US soybean market. Major oil company investment in renewable diesel is “politically dynamic” when it comes to the US’s Renewable Fuel Standard, stated Meyer. The state of California is seeking 7 Bil gallons of renewable diesel which nearly 3 times the biodiesel which is being produced today. The US simply does not have enough acres to produce all the soybeans that will be needed for crush/soyoil in the coming years.

Turkey has secured 260,000 MTs of feed barley while results are awaited on Algerian/Pakistani wheat tenders. ARC expects that China will be active securing US soybeans with crush margins profitable amid the CBT price fall.

ARC looks for a turnaround Tuesday with soy/corn values forming harvest lows - its a process not an event, but a rally in wheat/corn into the September Stocks report is expected with seasonal price trends turning upwards in early October.

North American Weather Pattern Discussion: The primary US weather models agree on the 2-week forecast. The forecast models are back looking at a continuation of the current weather pattern – a Central US high pressure Ridge that produces limited rainfall for the Western 2/3’s of the US. The E Midwest has the best chance of rain with temps holding at summerlike 70’s to low 90’s.

The 10-day rainfall map is from the EU model which shows rainfall chances for the E Midwest. The rains target MI/IN/OH with rain totals of .5-2.00”. The remainder of the Central US is dry with high temps holding in the 70’s to the lower 90’s across the C Plains. The warmth/dryness is likely to persist for the Plains into October. Amid a rapidly strengthening La Nina in the Central Pacific, the dry Plain’s weather trend is likely persist even longer deepening the drought worry for the Western US. The heat/dryness will impact US HRW wheat germination across the Plains.

South American Weather Forecast: A few lite showers are forecast for N and C Brazil early next week, but otherwise the forecast is barren of rain for other areas of Brazil and Argentina into October. Producers may have to wait until mid-October for widespread spring soy seeding.

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