9/3/21

Morning Commentary 9/3/21

CBT Mixed Ahead of Long US Holiday Weekend; China Pricing in Soybean Futures?; Some Hope Emerges in Troubling Week for US Gulf

6:30 CT CBT Prices: Nov soybeans are up 3.75 cents at $12.87, Dec corn is down 4.25 cents at $5.2125 with December Chi wheat up 2.50 cents at $7.195.

AgResource Morning Grain/Soy Comment & Analysis: Good Morning! CBT futures are mixed with soybeans firmer while the grains edge lower in thin overnight volume. It’s Friday and a long US weekend is ahead with the Labor Day holiday.

CBT trading resumes in the overnight trade on Monday and all eyes will be on the US Gulf and the progress in restoring electricity and assessment of when the Mississippi River channel can be reopened. Parts of the French Quarter saw their lights go on Thursday which was a beacon of hope with Entergy finishing their damage assessment and offering a plan for electrical restoration.

LDC Port Allen facility is reporting that it has power and is waiting for the lower Mississippi River to reopen so that vessels to return to start loading grain. Other exporters (besides Cargill Reserve which suffered structural damage) are making facility assessments and awaiting power. Visually these facilities look like they suffered only minor damage. Yet, engineers are combing through the plants looking for any structural faults. It’s hoped that by later today or early next week that these assessments will be completed. Yet, CHS Myrtle Grove is without power, but the flooding is now subsiding.

It is hoped that in the next week that Gulf traders will return to offering FOB/CIF offers once again to world importers as they better understand the damage to facilities and when power might be restored. Like Katrina in 2005, it will take 2-3 weeks to get back to some sort of normal operations, with pent up demand then stepping forward. ARC maintains that loss of US export demand for 2021/22 will be modest.

ERS/USDA estimated that 2021 US net farm income would rise to an 8 year high of $113 Billion. The sharp rally in corn/soybean values bolstered the farm income outlook with expenses rising 7.3%. It was back in February at the USDA Outlook Conference that USDA forecast a decline in farm income due to rising costs and an ending of Gov’t payments. The USDA forecast of rising farm income should be ongoing amid strong grain and meat demand.

China announced that it will add futures contracts including futures in freight to encourage more international investors to trade in its raw materials market. And China’s State Cabinet also indicated that it would offer up more free trade zones. The move is likely related to China’s desire to bolster its raw material reserves including grain and oilseeds.

 Malaysian November palmoil futures rose 69 ringgits at 4,371 RM/MT. Paris December wheat is unchanged at €244.25/MT. Dalian January corn rose $.05 to $9.84/Bu while December soymeal rose $5.40/MT to $558.95.

The hard punch of Hurricane Ida knocked CBT grain futures lower amid the uncertainty of when 60% of US ag trade that flows through the Gulf would return. A better assessment will be offered early next week, but the hope is returning for some normalcy. End users should use the break for purchases.

North American Weather Pattern Discussion: The primary US weather models agree and our confidence in the forecast is high.

A progressive weather pattern is indicated for the US with a high pressure Ridge to hold across the Western US for a few days before pushing eastward and expanding into the Central US. This will produce an above normal Plains and Western US temperature pattern with more limited rainfall chances next week. 

The 10-day rainfall map is from the GFS model which offers diminished rainfall for the Central US into mid-September. A storm system is pushing across the W Midwest with rainfall south into Kansas and across E Iowa. There is no indication of any tropical systems that would strain the recovery effort of NOLA.

There is no evidence of any frost risk for Central US crops into September 15th, with the S Midwest corn/soybean harvest to get underway in a few weeks. The warm/ dry flow will push crop maturity, while enough rain falls for wheat seed germination. The best chance for Kansas rain occurs in the next 36 hours. The extended range forecast is forecast warm with mostly dry weather to aid the early harvest effort.

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