Morning Commentary 9/28/21

ARC Morning Commentary; CBT Mixed as Traders Debate Rising Energy Values vs Advancing US Harvest; China Demand for US Soybeans?

6:30 CT CBT Prices: Nov soybeans are down 4.50 cents at $12.83, Dec corn is down 1.00 cent at $5.39 with December Chi wheat up 3.00 cents at $7.2525.

AgResource Morning Grain/Soy Comment & Analysis: Good Morning! CBT values are mixed this morning with wheat values firmer while corn/soybeans trudge lower in a reversal of yesterday’s action. The volume of trade has improved with traders focused on Thursday’s USDA reports, energy markets, and China demand.

The 10-year US Treasury yield rose above 1.5% overnight which is pressuring US equity valuations. DOW futures are trading down 160 points with the tech heavy NASDAQ dropping 1.5%. Crude oil futures are rallying for the 6th day and up another $.80/barrel at $76.25. The next upside target is $76.90 – its 3 year high with Brent crude surpassing its 3 year top above $80.00. The rise in US interest rates has pushed the USD higher.

Fiscal brinkmanship in Congress gets closer to the brink with Republicans in the Senate blocking a bill that would have kept the US Gov’t going into December while also raising the debt limit. The block puts democrats under pressure to ensure that US federal funding continues. The political landscape of Washington stays deeply divided which could produce a US Gov’t shutdown on Friday. The Congress has much to do and little time remaining.

US producers have harvested 18% of their corn and 16% of their soybean crop. Harvest progress is active across the Midwest, but farmers are not showing much interest in across the scales sales. Rather, most farmers are delivering against existing sales or heading newly cut corn and soybeans into on farm storage. Farmers are not going to make the same mistake as a year ago in selling too much crop at harvest.

ARC Research looks for additional US soybean sales to China. Cash talk had China booking another 5-7 cargoes of US soybeans for November/December yesterday. China’s Golden Week Holiday is ahead, and short bought crushers are trying to lay in additional supply.

China’s National Grain and Oilseed Information Center said that China’s domestic corn price is set to fall on its big harvest and imports. The Center forecast that China would import 20 MMTs of corn (vs 29 MMTs this year), 10 MMTs of sorghum (vs 8.5 MMTs), and 12 MMTs of barley (vs 11.4 MMTs). Chinas corn harvest is record large and looks to maintain an abundance of supply.

In world ag futures trade overnight, November Malaysian palmoil futures rose 57 ringgits to 4,557 RM/MT. Paris December wheat futures are up €2.25 at €255.50/MT. Dalian January corn rose 1.00 cents to $9.905/Bu while December soymeal fell $2.90/MT to $565.75.

There just is not much fresh news around. 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. The big question is will hedge funds return to the CBT grain markets amid rising inflationary fears and the ongoing shortage of fertilizers? Corn/wheat charts point upwards with the next upside target at $5.42 basis December corn - the 50-day moving average.

North American Weather Pattern Discussion: The 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.

Gulf moisture pushes northward late week and allows showers across the  Plains and W Midwest into October. 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. The rains are needed for wheat seed germination.

The Midwest will be dry with high temps ranging from the 70’s to the upper 80’s this week. The summerlike warmth and the dry weather will maintain a fast harvest pace. Rains and harvest slowdowns start on the weekend. Rainfall totals range from .25-1.25”. The forecast is wetter in the week 2 period.

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

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