9/22/21

Morning Commentary 9/22/21

CBOT Rebounds on China's Soft Equity Market Landing Following 4 Day Weekend; Oats Trades to Limit Gain; LDC Talks Commodity Volatility

6:30 CT CBT Prices: Nov soybeans are up 1.25 cents at $12.7525, Dec corn is up 3.00 cents at $5.20 with December Chi wheat up 6.00 cents at $6.9625.

AgResource Morning Grain/Soy Comment & Analysis: Good Morning! World equity markets are firm following China’s reopening to a mixed close. The Shanghai Composite and the Shenzhen both opened 1% lower following China’s 2-day holiday but settled mixed. Shanghai closed .4% higher with Shenzhen losing .6% which was seen as a victory following prior sharp losses in the US/EU share trade. The Chinese equity stability helped sooth world raw material values.

China’s embattled Evergrande announced that through private negotiations, it had made a coupon payment on its Hengda debt, but questions remain as to its dollar denominated payment that is due tomorrow. Moreover, the Bank of China injected substantial liquidity into its banking system to make sure that commercial lenders have adequate capital on hand. Like many other nations, the flood of liquidity offers a longer-term risk of rising inflation.

US Dow futures are up 225 points while WTI crude oil gained more than $1.00 per barrel on the report of a big draw on US supplies. The value of the US dollar is mixed awaiting the statement from the US Central Bank as their 2-day meeting concludes around 1 PM CT. Key will be the future dot-plot chart and how quickly the FED signals that it will tapering US bond purchase program.

LDC’s CEO Gelchie indicated that commodity markets face and intense period of volatility in a phone interview with Reuters. Gelchie stated that oilseed crush margins are strong and that a move to a low carbon economy will require additional vegoil supplies. The period ahead is unlike 2010-11 in that it will take years to resolve shipping snafus, the pandemic and how world Central Banks react to growing inflationary trends.

Pakistan launched another tender for the purchase of 640,000 MTs of wheat for January/February. This is on top of the tender for 500,000 MTs for late 2021. Pakistan has been fighting rising domestic food costs and a wheat shortage. WASDE/FAS has Pakistan importing 2.5 MMTs of all origin wheat in 2021/22, which ARC finds as being too low by at least 1.5-2.0 MMTs.

In world ag futures trade overnight, November Malaysian palmoil futures rose a sharp 133 ringgits to 4,436 RM/MT on declining production and strong export demand. Paris December wheat futures are up €2.50 at €246.75/MT on tightening hi quality protein supplies. China’s Dalian Grain futures market reopened. Dalian January corn rose 5.5 cents to $9.81/Bu while December soymeal fell $5.90/MT to $575.40.

CBT oat futures are up the $.25/Bu limit at $5.5775 basis December. Oats are now trading at a $.38 premium to spot corn, the largest since the record peak in the oat/corn spread was set in 2014 at a 53-cent oat premium.

CBOT Spot Oats vs Corn Spread Since 1980:

Ukraine corn yields are disappointing in a world feed-grain market that is facing tightening supplies. US Gulf export loadings are returning with farmers less willing to part with newly cut corn. This is no place for new sales!

North American Weather Pattern Discussion: The primary US weather models agree on the 2-week forecast. The forecast models offer 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 in the next 3 days with some localized heavy totals of 2-4.00”. The rain and wind will cause some crop damage, but harvest should resume during the weekend. An above normal temperature pattern holds across the Central US into October 10th.

 The 10-day rainfall map is from the GFS model which shows rainfall chances for the E Midwest. The rains target MI/IN/OH with totals of .5-2.50” with locally heavier amounts over the next 72 hours.  The remainder of the Central US is dry with high temps holding in the 70’s to the lower 90’s. The warmth/dryness will persist into October allowing for a rapid harvest. 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 meaningful rain into October. Producers may have to wait until mid-October for widespread spring soy seeding as the pattern slowly shifts.

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