Grains closed mostly higher on Tuesday:
Dec Corn + 7 cents/bu (5.20 ¼ )
Nov Soybeans – 2 ¼ cents/bu (12.82 ½ )
Dec Chi Wheat + 13 ¾ cents/bu (7.00 ¾ )
Cdn $ -0.00100 (78.82 cents)
WTI Crude Oil +0.01/barrel (70.46)
Not a lot of news coming out of the USA today with respect to grain markets. We had expected to see a bit of a bounce in grains following Monday’s initial sell off, as grains actually had a decent close yesterday. There were no announced USDA Flash Sales this morning, but grain futures initially built on their overnight strength after the release of the Statistics Canada September Crop Production Report this morning. Our government assessment of the Canadian crop was far smaller than what had been projected in early August, and as a result was quite a bit smaller than the average trade guesses as well. Total Canadian wheat production was 1.23 million tonnes smaller than August’s forecast, and Canadian canola production was a MASSIVE 1.97 million tonnes smaller than the August estimate. The actual Statistics Canada data is listed below:
The StatCan data allowed canola futures to initially scream $38.30/tonne (87 cents/bu) higher, but over the course of the trading session, canola weakened to end the day up $10.60/mt. The strength in canola helped the soyoil market, as it traded 2 cents/pound higher at it’s peak, before closing the day up just slightly less than a cent/lb. Beans could not hold onto their early strength, as concerns over oil demand chipped away at values. There was a sense circulating today that poorer countries are rationing vegoil consumption as COVID concerns build, and such rationing could impact overall annual demand.
Wheat markets were the strongest grain today, fuelled by the production reductions in Canada, and by news that the French wheat crop was also reduced by 600,000 tonnes to 36.06 million tonnes due to adverse wet weather. US FOB wheat values are reported to be the same as Russian prices today, so that does provide some optimism that wheat export demand could pick up, although Russia does have a freight cost advantage to many destinations.
Corn benefitted from the strength in wheat, and also from a combination of lower USDA Crop Condition ratings for corn yesterday and from news that more Gulf terminals are set to re-open. Those re-openings should allow for the resumption of export shipping. While harvest pressure may still weigh on corn prices in the short term, the market is also very cognizant that 2022 new crop corn acres need to be at least as big as the 2021 corn acreage was, and any significant reduction in prices could threaten those acres.
On the day, funds were thought to have bought 5,000 corn contracts (long 207,000), while selling 2,000 soybean contracts (long 58,000), and buying 6,000 Chicago wheat contracts (still short 11,000 overall). Given the fund short position in wheat, on days with bullish wheat news, the market rally is a little overstated due to the fund short covering.