9/27/21

Morning Commentary 9/27/21

Mixed Start of the Week With Rising World Energy Values to Offer CBT Support; Russian Wheat Values Rise for the 11th Week in a Row

6:30 CT CBT Prices: Nov soybeans are up 2.50 cents at $12.8725, Dec corn is down 1.50 cents at $5.2525 with December Chi wheat down 1.00 cent at $7.2275.

AgResource Morning Grain/Soy Comment & Analysis: Good Morning! It is a mixed start to the week with corn, soybean, and wheat futures trading either side of unchanged ahead of Thursday’s USDA September Stocks report. The volume of overnight trade was sparse with fresh news lacking.

The weekend featured strong harvest activity with producers generally reporting disappointing yield trends in the E Midwest. Disease pressures are blamed for the great variability of yields within corn fields while regional dryness prevented late forming soybean pods to fully develop. NASS/WASDE will be out with their October Crop report on the 12th, which should help to better define US 2021 yield trends.

It’s a big week for US politics. Funding the US government, raising of the debt limit, the Infrastructure Bill (passed by the Senate) and the Democrats $3.5 trillion Reconciliation Bill are on the table which adds to this week’s political complexity. Most important will be avoiding a US Gov’t shut down which could potentially derail or delay the USDA October Crop Report. The US dollar is little changed with crude oil futures up more than $1.00/barrel at $75.06. The 3-year price high for spot WTI crude rests at $76.90.

The shortage of energy in Europe/China looks to spread to the rest of the world with Goldman Sachs raising their crude price target to $90/barrel based on a faster than expected economic recovery from the Delta Covid variant amid tight global supplies. Energy supplies for power generation are going to be extremely tight as Northern Hemisphere temperatures cool. The ongoing rise in crude should spell improving valuations for the bioenergy crops of corn/soyoil

Russian wheat values rose for the 11th consecutive week with farmers seeking higher prices to compensate for the rising export tax. ARC maintains that the floating Russian wheat export tax will surpass $70/MT ($1.90/Bu) sometime in October. The rising tax has Russian farmers seeking higher prices in ruble terms for compensation. And new wheat tenders keep popping up with Algeria back seeking wheat for November from the EU/Russia. Russian fob wheat is the cheapest in the world and there is no good reason for a lasting decline.

In world ag futures trade overnight, November Malaysian palmoil futures fell 40 ringgits to 4,504 RM/MT. Paris December wheat futures are down €.25 at €253.00/MT. Dalian January corn fell 3.00 cents to $9.895/Bu while December soymeal fell $5.25/MT to $569.65.

ARC Research looks for a stable to 1% decline in US corn/soybean GD/EX ratings based on disappointing combine yield data. Last week’s big rise in Illinois crop ratings was a surprise and traders are expecting a reversal.

There just is not much fresh news around over the weekend. The US harvest is making fast progress. Seasonal price trends turn upwards for corn/soy in early October and CBT open interest rests at a 4-year low. Equatorial ocean temps in the Pacific indicates that La Nina has formed. This is no place for new sales.

North American Weather Pattern Discussion: The US/Canadian temperature pattern remains extremely warm for the next 2 weeks. A Ridge of high pressure maintains its position across the Plains and pulses north and east into the end of the week. A fetch of Gulf moisture allows showers across Texas and the far Western Plains into the closing days of September. This is a favorable set up for rain in the Plains, but the models have the heavier totals being farther east than prior runs. Plain’s rainfall totals are estimated in a range of .4-1.50” with locally heavier amounts. This looks to be the best Plains rain event in months.

The Midwest will be dry with high temps ranging from the 70’s to the upper 80’s. The summerlike warmth and the dry weather will maintain a fast harvest pace. Some rain leaks into the E Midwest this weekend causing a slowdown in activity with totals of .25-1.25”. Dry weather follows in the week 2 forecast.

South American Weather Forecast: Although the forecast is never truly wet, improved rain chances will build southward across N Brazil. The best rain holds off until mid-October, but regular rain chances start across Mato Grosso and then push east and south during early October. High temps hold in the 80’s to mid 90’s.

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