Outside Markets as of 6:10am: Dollar Index up 0.1180 at 86.0450; Euro down 0.00320 at 1.26010; Brazilian Real down 1.89% at 2.4482; S&P’s are down 7.25 at 1948.75; Dow futures are down 61.00 at 16,842.00; 10-yr futures are up 0.10%; The Nikkei closed down 0.67% at 15,783.83; The DAX is down 0.82% at 9,133.80; The IBEX-35 is down 1.53% at 10,483.30; Gold is down $2.60 at $1204.70; Copper is down $0.55 at $303.00; Crude Oil is down $0.34 at $90.00; Heating Oil is down $0.0098 at $2.6115; Paris Milling Wheat is down €1.25/MT at €159.00/MT.
European equity markets are getting hit pretty hard this morning with most major indices down close to 1.0% as German industrial production plunged 4% in August, more than the 1.5% reduction most economists had predicted and the biggest decline since 2009. Fears are escalating Germany might be inching towards another recession after a string of poor economic reports. In Russia, the Ruble is attempting to stabilize as the nation’s central bank stepped in and spent $980 million on October 3rd to stem the Ruble’s decline. In the US, August consumer credit is expected to show another big increase of $20.0 billion, well above the 5-year monthly average increase of $9.3 billion, but off from July’s +26.006 billion. The majority of the credit increase has been due to vehicle and student loans with installment loans up 8.5%.
Scattered showers across the ECB this morning, but mainly dry across the central and west. Another windy day across the central and northern corn belt which should keep combines moving on soybeans. Moisture the next 3-days will be confined to KS/MO/IL/IN/KY with heaviest totals falling in MO to the tune of 2.0”. Moisture will continue falling there and south the rest of the week with Hurricane Simon pushing moisture inland from the Pacific side of Mexico and California. 7-day forecasted rainfall is below with heavy rains expected in OK/AR/MO, but even surrounding areas to receive above normal rainfall which should impede harvest efforts. NOAA’s extended maps have temps gradually warming to above normal for the majority of the Midwest, while precip looks to push above normal for the entire region during the 6-10. The 8-14 has similar trends.
Modest setback in prices following yesterday’s sharp rally in the soy complex on wet forecasts, solid CIF premiums in the face of declining barge freight, the big fund short paring exposure and technical buying after several long-term Fibonacci retracement levels held on the recent selloff. Hard to read too much into price action from here forward going into the October WASDE as trade is likely to become especially choppy with traders paring exposure and moving to the sidelines. Frost/freeze over the weekend in Northern growing regions could have hurt more corn and soybean acres after yesterday’s crop progress reports showed a bit slower harvest activity than expected. In other news, a group of US farmers became the latest group to sue Syngenta over sales of genetically modified corn seed, not approved by China, disrupted export activity. Most of the farmers didn’t actually plant AG Vipterra.
Crop conditions held steady on corn last week with 74% of the crop rated G/E and 7% rated P/VP. Harvest was estimated at 17%, a bit slower than the 20% expected, and well behind the 5-yr average of 32%. Last year, the government was shut down for 3-weeks during October due to the budget impasse, making direct comparisons difficult. Northern states obviously remain the largest behind with IA at 5% vs. 26% average, SD at 5% vs. 23%, ND at 1% vs. 14%, MN at 5% vs. 20% average, and WI at 3% vs. 15%. In my opinion, we should likely see harvest remain well behind average the entire harvest as farmers opt to let the corn dry in the field as much as possible before harvesting to avoid drying the corn at home or at the elevator. Any expense which can be cut from this crop will be. 77% of the crop was mature vs. 81% average with only 57% of ND and 63% of MN mature vs. 69% and 76% average, respectively.
Soybean conditions improved one point to 73% G/E from 72% last week. Soybean harvest was estimated at 20% vs. 26% last year and 35% average. Biggest laggards included IA at just 9% harvested vs. 42% average, IL at 18% vs. 32% average, IN at 18% vs. 30% average, WI at 7% vs. 27% average, SD at 25% vs. 45% average and NE at 16% vs. 41% average. Mid-south and Dixie states are at or above average. Dropping leaves estimated at 83% vs. 84% average. Winter wheat planting was seen at 56% complete vs. 53% average with KS at 51% vs. 54% average. Emergence was pegged at 28% nationally vs. 24% average. Spring wheat harvest was estimated at 96% complete vs. 99% average, although talking with one elevator manager in SW-ND would suggest a fair amount of HRS remains left to be harvested with quality an absolute disaster.
In spread activity, the KWZ/H finally pushed to an inverse last night, trading at +0.50c at the high, which is the highest since May 6th, 2014 when December KC wheat was trading at $8.55 a bushel. KCBT protein scales firmed another 2-5c yesterday for 11.60-13.80% protein levels with 12.0% pro now +150/160Z and 13.0% pro at +152/162Z. The KWK/KWN continues to weaken, however, trading down to +3.25c, the lowest since February. Minneapolis basis also weakened yesterday for 13’s and 15’s, off 20-50c with 15.0% protein wheat still commanding +565/600Z. Corn and soybean premiums were a mixed bag Monday as PNW premiums saw weaker soybean basis, but unchanged corn bids. The Gulf was firmer for soybean bids, now commanding +110/120/120X for OND. Still hard to believe the 900-925% barge freight which is paying elevators along the river 27-29c/bu to store soybeans until FH-November. Interestingly, soybeans in Zone 3 have nudged up to gross DVE for LH-Nov and January with barge freight out there 650-700%. Not a lot of reason to be bearish soybean spreads with basis trading at delivery equivalence. Incentive to store corn until December along the river is now 40c/bu.
A quick note on soybean technicals, several long-term Fibonacci progressions have come into play the last several sessions. For starters, prices held the 100% progression of the $17.89-11.62 selloff from the $15.36 corrective high at $9.10. In addition, the 100% progression of the $16.36-7.76 selloff from 2008 from the $17.89 all-time high comes across at $9.28/bu. In looking at possible retracement levels, the 38.2% retracement of the 11.16-9.05 selloff hits at $9.85 which is also a fairly heavy level of congestions. Would seem this is a reasonable upside objective.
Bottom Line: A little set back in row crop prices this morning, but still within recent ranges. Outside markets appear benign today, so we’ll resort to trading weather and yield reports in the ramp up to Friday. Storage is becoming tighter by the day, and will command a premium this fall. Old crop seems to be coming out of the woodwork, and is being reflected in premiums across the WCB. It all really comes down to what the yield is Friday and if we see acreage changes. Demand is doing enough to hold its own right now.
Good Luck Today.
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