Outside Markets as of 6:15am: Dollar Index down 0.158% at 91.6960; Euro up 0.054% at 1.20615; Aussie Dollar is up 0.462% at 0.80400; S&P’s are up 0.50 at 2505.25; Dow futures are unchanged at 22,336.00; 10-yr futures are up 0.09%; Crude Oil is up $0.60 at $50.08; Heating Oil is up $0.0127 at $1.7853; Paris Milling Wheat is up €0.50 at €162.50/MT; Paris Rapeseed is unchanged at €368.00/MT; Dalian corn closed up 0.29%, Dalian soybeans finished down 0.60%, Dalian meal closed down 0.55% and Dalian oil closed down 0.28%.
Quiet Midwest radar this morning, although decent rainfall fell overnight across E-SD/E-ND/NW-MN with many areas receiving 0.50-1.00” and localized totals as high as 3.00” in E-ND. Light chances of rain around the next couple of days before the next round of rainfall rolls in Friday through early next week. NE/E-SD/MN are still expected to see the best rainfall totals, although this morning models have the beginning of the band stretching down into W-KS/E-CO/OK/N-TX as well which could delay WW planting but bolster soil profiles. Totals as of this morning along the band look to be 1.50-5.00” depending on which state one looks. Not a lot of change in the extended models although temperatures do still look to slip below normal in the 8-14 day. Precip models are above normal before slipping to normal later in the period. Doesn’t look like any notable harvest delays just yet.
Better markets this morning, much the way yesterday started out before price gave back everything before the close. The path of least resistance at the moment in corn and wheat is definitely lower, while soybeans have been a bit more resilient and can make the argument the intermediate term trend is still higher. Open interest made another surge yesterday in corn, up 9,404 contracts, and bringing the total for September to an increase of 81,321 contracts. Odds are good the increase in open interest is managed funds selling and commercial end users buying given the reluctance so far to trade meaningfully below $3.50 until more harvest progress is made. The yield reports received so far have been better than expected on both corn and soybeans which seems to be weighing on trader sentiment. It is always difficult to quantify “better than expected,” but the more yield reports which come in that way, the more difficult it will be to justify lower national yield ideas. Wheat markets received larger StatsCan production estimates yesterday which the markets somewhat expected, but should also offset the drop in US-HRS production.
Starting with Canada, StatsCan released their updated all-wheat production figure of 27.1MMT which compared with 25.54MMT last month and 31.72MMT last year. These also compare with the USDA’s last estimate of 26.5MMT. The important thing to focus on in the data is almost all of the decline in all-wheat production came from durum and winter wheat as spring wheat is pegged at 20.075MMT vs. 20.453MMT a year ago. The North American durum balance sheet is going to be especially tight this year, and should see price supported throughout. What Canada has added in production, they have lost in protein as the reports from the north continue to be solid yields and declining protein. Based on export quotes, protein scales are widening out in Canada, and are likely to get worse. At current, scales are 10c per 1/5th from 12.5-13.5% with another 25c premium from 13.5-13.8%. Conversely, MGEX spot floor quotes show 5c per 1/5th from 13.0% to 14.0%, but 16c per 1/5th from 14.0% to 15.0% as 15.0% pro spring wheat traded up 45c on the bid side yesterday to +145Z. Back to Canada, plugging in StatsCan numbers against USDA demand gives us carryout of 5.715MMT and a stocks/use ratio of 19.91% which compares with 16/17 at 6.865MMT and 22.51%, respectively. Both the carryout and stocks/use ratios are a little below the 5-yr averages, but manageable and certainly more workable than the 25.5MMT type numbers being used previously.
In the other hemisphere, however, things seem to get worse by the day as mentioned earlier this week. Australian weather looks dismal with little for rainfall chances, continued frosts at night and searing heat expected for much of NSW this week and weekend. Would appear most crop estimates are grouping right at 20MMT, although some front-runners slipping below. If we use 20MMT against USDA demand, carryout falls to 1.196MMT, which would be the lowest on record and completely untenable. Boots on the ground think top end exports are closer to 14MMT vs. USDA’s current 18.5MMT, which improves carryout to 5.696MMT which would be about 1MMT above the 5-yr average. Still, 4.5MMT of export demand which needs to be pushed elsewhere. We will continue updating our combined Australia/Canada/US-Hard Wheat balance sheet as the year progresses as this supply of high quality wheat is going to be tightened drastically vs. a year ago. A much better picture will be available after next week’s Small Grains Production report on the 29th. Russia will be there to help fill the void, but export capacity will not allow them to make up for everyone.
GASC tendered for wheat yesterday, buying 175,000MT of wheat for October 21-31 delivery, which brings YTD total to 3.085MMT. The 175,000MT consisted of three cargoes of Russian wheat at an average price of $196.67/MT FOB with an average landed price of $211.98/MT. The cheapest FOB price was up around $9/MT from their last tender. The number or origins has decreased from three each month July-September to just two in October, and just one in the last tender. Will be difficult for anyone to compete with Russia going forward given the trepidation about being rejected over quality or contamination issues.
Bottom Line: Firmer to start, but that hasn’t meant much lately. Yield reports continue to roll in “better than expected,” even in areas which saw little to no measureable rainfall during the month of August and early September. While early, it almost seems as though we need to adjust our crop condition and rainfall assumptions for these corn and soybean crops given what has to be improving genetics. If national soy yield isn’t 1.0-2.0bpa lower than current USDA ideas, SX soybeans could have a difficult time of being near $10.00 without threatening weather in Brazil.
Good Luck Today.
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