** Like clockwork, CBOT grain/soybean markets have posted a strong recovery overnight as producer liquidation of cash stocks and September futures ended .A push to new lows in December corn triggered fund short covering, and new buying. Through midday, December corn has traded more than a 9 cent range, with more than 190,000 contracts changing hands. November soybeans have also caught support and marked gains of more than 10 cents with volume exceeding 85,000 contracts. Our bet is just like last year that seasonal lows are being set. However, the veracity of a rally will depend on future harvest yield data and Chinese demand for US soybeans.
** Stat Canada’s August crop report did not hold any bearish surprises, and was viewed as supportive. The ‘17 Canadian wheat crop was estimated at 25.5 MMTs, 20% under the 2016 crop and also slightly under trade expectations, while canola production of 18.2 MMTs was down 7% from a year ago and was just under expectations of 18.6 MMTs. Stocks estimates will be released next week, but the Canadian canola market appears to be a “spicy meatball” going forward.Tight old crop stocks & reduced new crop production demands a “rationing ” rally.
** The weekly FAS Export Sales Report reflected net old crop soybean sales of 4.5 Mil Bu and new crop sales of 57.3 MMTs. In corn, old crop sales were 7.4 MMTs with new crop sales of 31.7 MMTs. US wheat sales were a solid 19.7 Mil Bu
** For their respective crop years to date, the US has sold 444.0 Mil Bu of wheat, (up 9 Mil Bu or .2%), 2,235 Mil Bu of corn (up 263 Mil Bu or 13%) and 2,236 Mil Bu of old crop soybeans (up 294 Mil Bu or 15%). ARC estimates that 82-87 Mil Bu of old crop soybean sales will be carried forward with 2017/18 soybean sales rising to 540-550 Mil Bu as of September 1st.
** Australian reports of frost/freeze damage are growing as another hard freeze impacted New South Wales and Victoria overnight. There have been 4 hard freezes that is catching a wheat crop in the boot and late boot phase. It will take time to make a better assessment of the crop impact, but the forecast remains cool to cold with limited rain for another 2 weeks. This late winter weather pattern does not appear to be changing.
** CBOT brokers report that funds have bought 9,000 contracts of corn, 4,500 contracts of wheat, and 6,000 contracts of soybeans. Key resistance rests at $9.50 November and $3.59 on December corn. In soy products, funds have bought 2,300 contracts of soymeal and 4,000 contracts of soyoil. December soyoil appears to be breaking out of a bull flag on the charts.
** Midday GFS Weather Model Update: The forecast is little changed at midday with the model solutions being consistent from run to run. Additional heavy rains worth 1-4” will impact; AR, TN and KY. Mostly dry and cool weather conditions prevails across the Plains and the Midwest. The GFS offers virtually no rainfall for Plains and the fat areas of the Midwest for the next 12 days. The model no longer expects another system to form in the western Gulf, but all eyes are on Irma as its expected to become a cat 4-5 storm next week. The EU model takes this system across Cuba while the US model maintains a pass along the Eastern US shoreline. Our hope is that the GFS model is correct in that Irma does not make US landfall.
** AgResource Market Comment: The CBOT had become technically oversold and have bounced from what we expect to be seasonal lows. Corn/soybeans are pacing the rally while spot month liquidation in MGEX wheat futures is holding back Chi and KC wheat values. The Midwest dryness will trim yield potential, and our bet is that a bullish surprsie could be offered in the Sept report.
** GFS Rainfall Forecast into September 15th: