9/30/21

Morning Commentary 9/30/21

CBT Markets Stay Firm Ahead of Stocks Data; US Government Stays Funded into December

6:30 CT CBT Prices: Nov soybeans are up 1.0 cent at $12.8475, Dec corn is up 2.0 cents at $5.41 with December Chi wheat up 3.75 cents at $7.15.

AgResource Morning Grain/Soy Comment & Analysis: Good Morning! It’s USDA report day and CBT ag futures are firm on continued support from international markets. Paris milling wheat futures are up €1.00 euro per ton at €257 per ton ($8.09 per bushel), while EU rapeseed and corn markets also score new contract highs. Global oilseed and vegoil prices have been particularly strong this week, with rapeseed oil in Europe now quoted at $.75 per pound and Malaysian palm oil overnight ending 147 ringgits higher. Canadian canola, too, is stronger as odds are high additional cuts to production lie ahead.

Overnight strength in US/world occurred despite additional strength in the US dollar, which as of this writing is trading at a new 12-month high. Reportedly, Democrats in the US Senate have reportedly reached a deal to avoid a government shutdown in the near-term, with funding to be available through December. This legislation must still approve the legislation but there’s been some measure of calm spread across US financial markets. Yet, Congress has to deal with raising the US debt ceiling separately, and so ARC expects additional macro market volatility into late year.

Russian winter wheat seeding has been temporarily halted in Central regions due to recent excessive rainfall. A drier pattern lies ahead, but wheat seeding at this latitude is typically complete by early/mid-October. A boost in seeding there is needed to validate current government targets, and ARC’s sources for weeks have hinted that Russian wheat acres would be down slightly from last year’s record. Additionally, Russian wheat exports in Sep are likely to be down 1.2-1.3 million tons from last year – and still food prices in Russia are at or near record levels. Forward Russian grain sales are slowing amid rapidly rising export taxes, which looks to reach $60 per ton (vs. $30-32 in Aug) by early October.

There’s not much other fresh input available this AM. NASS at midday releases final US corn and soy ending stocks. ARC notes that Sep 1 stocks data has leaned bullish in recent year, and in the case of corn there’s strong evidence to suggest that production in 2020 and 2021 has been overstated. Any trimming of carryover supplies further raises the burden on yield performance. Soy yield data is improving, with results in IA deemed mostly better than expected. Corn yield data in IL remains disappointing.

Ag’s long-term narrative stays bullish amid the lack of global yield growth, rising per-capita incomes, record low old crop exporter corn and soy stocks/use and record low new crop wheat stocks/use. The world’s grain cupboards are bare, and even trend US soy yield will not materially build global oilseed inventories in crop year 21/22. La Nina is a big concern for Argentine row crop production. ARC maintains that any post-USDA weakness provides the opportunity to extend supply coverage.

North American Weather Pattern Discussion: Radar maps show moderate rain currently working across KS, E NE and IA, and a pattern of lite but steady precip will linger across the Southern and Central Plains into late Sunday. Additional precip of .50-1.50” is offered to TX, OK and KS.

This system expands into the Delta region and eastern Midwest early next week. Temporary halts to harvest/fieldwork are anticipated. But longer-term climate guidance maintains abnormal warmth into late October, while widespread Central US dryness resumes Oct 5-10. The chief concern heading into winter is the lack of projected drought improvement across the Northern Plains and PNW. Above normal winter/spring precip will be desired there.

South American Weather Forecast: The South American forecast is consistent with prior runs. The issue in the near-term is that the EU & GFS models continue to keep meaningful Central Brazilian rainfall isolated to the 11-15 day period, while 10-day forecasts remain arid there and across Argentina. It’s still early in Brazil’s soy seeding season but historic dryness will remain intact across Mato Grosso do Sul, Goias and Minas Gerais into Oct 10.

10-Day US Precip: 

10-Day South American Precip: 

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