AgResource Daily Farm Marketing Advice for Thursday: 1/ No new advice.
It’s been a more mixed morning in Chicago and elsewhere. Grain futures have extended losses at midday, while the soy complex and energy markets are slightly positive. Irma’s path, along with the midday GFS, are little changed, and so while the Gulf will be spared by tropical activity through the latter part of September, very little rainfall is projected into the end of the growing season.
Europe has confirmed that it will allow imports of biodiesel from Argentina, which will act to replace lost US demand. A major shuffling of biodiesel/soy oil trade flows is in the works, but ARC’s work suggest lofty soy oil prices are likely a longer term phenomenon. Argentine soy crush will be salvaged, Argentine meal exports will be sustained, and oil’s share of crush is expected to rally further.
The US dollar has fallen to a fresh 2.5-year low at 91.60. The euro, ruble and Brazilian real are stronger, and despite ongoing political chaos on Brazil – former president Dilma is now accused of having run what is essentially an organized crime operation. Assuming today’s change in Brazil’s currency, cash corn in Southern Brazil is now pegged at $2.55/Bu.
The European Central Bank has also again opted to leave interest rates unchanged. A rise in jobless claims in the US has tempered ideas of a further rate hike here in 2017.
Russia this week has indicated it’s planning some kind of rail subsidy, perhaps eliminating the current rail tariff altogether, aiming at accelerating grain exports. This of course will lower real transportation costs, which will help the farmer there, but won’t change Russia’s export capacity unless the subsidy is crop specific – namely if wheat shipments are favored, it will provide more incentive to export wheat at the cost of barley and corn. More will be known about this subsidy after this week’s Russian Grain Union meeting.
US ethanol production through the week ending Sep 1st was a near record large 312 Mil Bu, just marginally under the prior record posted in January and some 18 Mil higher than the same week a year ago. And ethanol stocks last week actually fell, and we suspect some combination of higher domestic blending and ongoing export demand. As expected following Hurricane Harvey, US crude inventories (less strategic reserves) increased 4.6 Bil Barrels to 462.4 Bil, though remain 3.8% below last year. Motor gas stocks fell 3.2 Bil to 229.7 Bil, unchanged from last year.
Australia’s forecast is still very dry through late Sep, and recall ABARES releases its Sep Aussie crop report next Tuesday. Trade estimates on Aussie wheat production range between 21-23 MMTs, vs. the USDA’s 23.5. A much wetter pattern in late Sep/early Oct is needed to prevent further losses.
Midday GFS Weather Model Update: The GFS is a bit wetter in the 11-15 day period, but is drier nearby. The next 9-10 days wil be completely void of moisture outside of the Southeast and mid-Atlantic. Temps warm to more seasonal levels beginning early next week, and there’s still no sign of a lasting hard freeze event. Slightly better rain chances are indicated Sep 19-20 as the jet stream enters a more zonal flow, but confidence so far out is low. The 2017 growing season will finish much drier than last year’s.
AgResource Market Comment: Back and forth trading is expected into next week’s USDA and ABARES crop releases. ARC cautions that only slightly more objective yield data will be available to NASS than what was available in August, and so major changes likely await the October report. And actual yield data in late Sep will take priority.
