** CBOT grain and soy futures are firmer in morning trade with Tuesday’s big jump in open interest suggested “selling caution” from the bears. CBOT final open interest data offered a 8,794 contract rise in corn, a 13,580 jump in soybeans, and a 1,916 contract gain in wheat. US nor world farmers are willing sellers, so lower CBOT prices all hinges on black box traders and their willingness to add to existing net short positions.
ARC’s bet is that CBOT values are sloppily higher into the close with South American weather gaining in importance heading into the weekend. It’s been far too dry across Brazilian soy areas and too wet across Argentina, and this weather pattern does not appear to be ending.
** CBOT floor brokers report that funds have bought 2,400 contracts of wheat, 4,600 contracts of corn, and 4,100 contracts of soybeans. In soy products, funds have bought 3,000 contracts of soymeal and 1,100 contracts of soyoil.
** FAS reported the sale of 167,300 MTs of US soybeans. There was trade talk overnight that China booked at least 5-6 cargoes of US soybeans for late October or November that could be announced on Thursday. China appears willing to step up its forward purchase of US soybeans on CBOT weakness.
** There are few farmers in Central IL that are starting harvest with better activity starting in MO, TN and KY. It’s going to be another 10-15 days before strong harvest activity occurs in the Central Midwest. The N Midwest will have to wait for October before combines really start to roll. Remember, it’s the harvest results/comparing this year to last year in yields that will be key. The yield debate continues with ARC and a host of others unwilling to raise our estimates based on field surveys.
** China’s corn ethanol use target of a blend rate of 10% by 2020 would raise China’s annual corn use by 45 MMTs! Based on estimates from CNPC this would require 15 MMTs of ethanol each year. Currently, China produces 2.1 MMTs of ethanol and is well behind the US. Such a large jump in Chinese ethanol demand would call into question WASDE corn end stock estimates that are seen as far too low by many private analysts.
** Producer groups and Argentine traders in Buenos Aires estimate that ongoing rainfall in the last half of September may cut their seeding in corn and soybeans by upwards of 50%. Such estimates appear to be robust, but flooding and saturated soils mandate drier weather conditions occur soon and continue into the main planting month of October. In the case of N Brazil, farmers there are waiting for rains to start planting in Mato Grosso where dryness has reached acute levels. South American weather needs to be more closely monitored heading into the end of September.
** Midday GFS Weather Model Forecast Update: The forecast was farther south and east with heavy rainfall for next week, than what was offered overnight. The shifting of the rain appears to be tied to a more easterly track from Hurricane Jose. Notice that a stalled front could drop 2-4.50” of rain across NE, IA and MN next week. Such rain comes as too late as to help in yield determination, but it would re-saturate soils just before harvest.
The E Midwest and Delta hold in a mostly dry trend with temps averaging near to above normal. There is no indication of any frost/freeze looking into late September. As an aside, rainfall will be limited across N and C Brazil, which will delay early soybean seeding for another 2 weeks.
** AgResource Market Comment: Harvest data will become more available in coming weeks, and the market will paying close attention to yield deviations from 2016. Early soy yields in C IL are down 11-19 BPA from last year with corn off 20-30 BPA, but its on limited activity. FAS will release its weekly export sales report in the AM. Its Midwest harvest data and South American weather that will direct CBOT prices into October.
