It would appear that the grain markets have popped the shifter into neutral while soy is trying to maintain a little forward momentum. Harvest delays are cited as the primary supportive factor at this point, but unless we are poised for a Noah and the great flood type scenario, one has to suspect that concern will be short-lived. Of course, this week on Thursday we have the October production and supply/demand estimates which could provide a round of excitement, but the question is, in which direction?
Farmers in Brazil may have taken off time to vote but continue to make solid planting progress. According to AgRural 10% of the intended acreage in now planted, which is double last year and the historical average. They have also been good forward sellers of this new crop. Safras estimates that 27.3% of the crop has already been priced, compared with around 14% last year at this time. This is actually quite close to the historical average of 30.2% sold at this time of year.
Managed money continues to come away from the short side of the corn and bean markets, which undoubtedly helped keep prices propped up last week. In corn, they remain short 58,000 contracts but this was reduced by 55,000 last week, and in beans, they covered 14,000 contracts and now hold around 44,000 short. Obviously, they are less enthusiastic about wheat as they sold around 11,000 contracts taking them short 12,000. Something needs to be the short leg of spreads.
Over in Russia, it appears that the government has decided to sell 1.5 MMT of wheat inventory from the 3.4 MMT stocks held to “reduce budget spending on servicing stockpiles.” While we all know storing grain costs money, but the move has led to some speculation that this was more about keeping an adequate supply in the export pipeline than cost savings measures.
There should be no question that the trade war with China has been impacting their economy and over the weekend, the People’s Bank of China made additional moves to try and “perk” things up a bit. They reduced the amount of cash that banks must maintain in reserve by one percent. That may not sound like a big deal but equates to freeing up around $109 billion for the Chinese economy. The move not only suggests they plan to move forward with many planned infrastructure projects but also would signal, they are not ready to begin making nice with the U.S. just yet. You have to suspect they will not be ready to return to the negotiating table at least until after the November U.S. elections, which of course is something Chinese officials do not need to contend with.
There will be no updates from Washington today as it is on holiday, but we are beginning to see trade estimates for the Thursday report. According to a survey conducted by Reuters, average trade estimates break down as follows; Corn production of 14.872 billion from a yield of 181.8. Harvested acreage is expected to be trimmed by 80,000 acres. The bean crop is expected to tally 4.733 billion with a whooping yield of 53.3. Harvested acreage is expected to drop 180,000 acres. Carryout for corn is projected to increase by 145 million from last month to 1.919 billion, beans up 53 million to 898 million and wheat 15 million to 950 million. World ending stocks are estimated to come in at 159.3 MMT for corn, 109.53 MMT beans, and 261.41 MMT wheat.
Last but not least, President Trump is headed for Iowa tomorrow, and it is expected he will make a favorable ethanol announcement beforehand.