9/23/21

Morning Commentary 9/23/21

Palmoil Futures Score Fresh Contract High; Oat Market Volatility Stays High in $.285 Overnight Range; China Sets Sow Herd Target at 41 Mil

6:30 CT CBT Prices: Nov soybeans are up 4.25 cents at $12.87, Dec corn is down 2.00 cents at $5.235 with December Chi wheat up 5.00 cents at $7.1075.

AgResource Morning Grain/Soy Comment & Analysis: Good Morning! CBOT values are higher as world equity markets recover as China’s Central Bank pumped $17 billion of cash into its economy as a financial backstop to embattled property developer Evergrande. China’s injection of fresh liquidity is the largest in 8 months. The share price of Evergrande soared 17% while China’s Hang Seng Index closed 1.2% while Shanghai was up .4%. News is awaited as to whether Evergrande paid dollar denominated debt on Thursday or defaulted. ARC notes that there is a 30-day grace period for Evergrande to remedy the payment.

The US dollar is weaker after posting a fresh 3 month high, while WTI crude oil futures are down $.15/barrel in thinning volume trade. Dow futures are up over 200 points following the gains in Asia and Europe. For now, financial contagion brought on by Evergrande appears to have waned.

Traders are discussing Wednesday’s leaked EPA proposals of 2020-2022 US biofuel mandates and their implications for future US corn/soyoil demand. Rumors that an official EPA mandate announcement could come before the end of the month, but most DC watchers suggest that OMB has yet to score the proposed EPA mandate proposal which could delay an announcement until October.

 Unknown is how the Biden Administration will approach small refinery exemptions on ethanol which allows struggling blenders to avoid economic harm. There are more questions than answers as big oil and the US biofuel industry continue to square off and battle over the 2007 US Energy Legislation.

China’s ag ministry in a new 5-year plan pegged China’s sow herd at 41 Mil head with numbers not to fall below 37 Mil head. The prior target was 40-43 Mil head, but as China finishes hogs to heavier weights, the excessive sow numbers produced too much pork. China said that it would keep records on farms that send more than 500 hogs to market per year to comply in different sow production zones–green, red, and yellow to help stabilize China’s pork supply.

In world ag futures trade overnight, November Malaysian palmoil futures rose to a new contract high up 117 ringgits to 4,553 RM/MT. Paris December wheat futures are up €1.75 at €251.75/MT. Dalian January corn rose 6.00 cents to $9.87/Bu while December soymeal rose $3.90/MT to $579.30.

** November Palmoil Futures Scores New Contract High:

Weekly Malaysian Palmoil Futures Chart: Flag Pattern Forming

CBT oat futures traded in a wide 28.5 cent range overnight with spot December posting a new contract high at $5.90/Bu following Wednesday’s limit gain. The all-time price high in oats was set in March of 2014 at $6.00. The spot CBT oat/corn spread has pushed out to a record 60 cent premium at one point. What is so unusual about the oat rally is that the harvest was just completed with the next North American crop at least 10-11 months off!

E Midwest producer clients continue to report of disappointing combine corn yields due to acute disease pressure. Soy yields are also disappointing, but less so than corn.  ARC’s CBOT view is bullish with corn/wheat the favorites to rally during the 4th quarter of 2021.

North American Weather Pattern Discussion: The primary US weather models agree on the 2-week forecast. A much warmer temperature profile is offered in the overnight forecast with above too much above 70’s to lower 90’s prevailing. The warmth will extend the 2021 growing season.

 A Ridge of high pressure maintains its position across the Plains and pulses north and east from time to time. A fetch of Gulf moisture allows showers across Texas and the far Western Plains into the closing days of September. Any rain for the Plains is desperately needed amid deepening drought conditions.  The E Midwest has the best chance of rain in the next 2 days with totals of .5-1.50”. The rain and wind will cause some crop damage, but harvest should resume during the weekend. Otherwise, the forecast is open for a rapid harvest with virtually no rainfall into October 3rd.

 South American Weather Forecast: There are hints that the rainy season is set to slowly build southward across N Brazil.  The best rains may hold off until mid-October, but rain chances will start in regularity across Mato Grosso and then push east and south. The next 5-6 days are dry with hot 80’s to mid 90’s. Limited rainfall is forecast for Argentina.

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