Written Commentary
AFTERNOON COMMENTS
Macroeconomics:
Relatively quiet week so far with the debate, CPI/PPI reports and the WASDE behind us. Now traders are deliberating on the AI trade, the housing market regarding 30-year rates, and the Fed’s decision next Wednesday. The Fed is still expected to cut rates by 25 basis points next week. The US government has spent more than $1 trillion THIS YEAR on interest payments for our $35.3 trillion national debt. Social Security and Medicaid/Medicare are the highest costs for the government budget. These are normally followed by National Defense, Income Security is is often 5th highest, and then Net Interest. Net interest has made its way up the list of costs now more costly than our national security and income security. In 2023, the net interest accounted for $658 billion of the federal budget; the government spent a total of 6.13 trillion last year (2023).
Ag Fundamentals:
Today’s USDA WASDE report offered some slightly bullish news for soybeans, slightly bearish corn, and neutral wheat data. The US is baking the largest bean production ever this year, coming in at 4.586 billion bushes. Although we are posting record corn yields, due to less acres, we are still projected to produce 156 million less bushels than last year’s record corn production. Our corn ending stocks are expected to be 245 million bushels higher because our beginning stocks starting 450M bushels higher than 23/24 and demand only improving 45M bushels year-over-year.
Weather:
Due to lack of water vapor in the air north of Louisiana, the rains from Francine will splash the mid-south with less than expected precipitation. Some may look at the radar and say, “Look! The lower Mississippi River problems are solved!” Wrong. We need it to rain in Ohio and parts of Indiana and northern Kentucky for the river levels to regain strength. In addition the Missouri River Valley could use a squirt in their waterways too, which they are expected to see in the next 7 days, but that water takes much longer to reach the Mississippi River. Memphis river gauge is expected to maintain a low threshold level for the remainder of September. At full drafts 2 million bushels can fit in 25 barges, but at current reduced drafts it takes 33 barges to move that same 2 million bushels.
Record Average Corn and Bean Yields expected in the US this year. The American farmer continues to march forward, improving technology and practices, and posting impressive numbers.
Calendar Spreads
The SX4/SN5 bean spread firmed with expectations the Brazilian farmer will have to wait until October for the rains they need in order to begin planting. This widens the export window for US farmers next summer.
Cost of Carry
Spread | Last | Chg | Full | % of FC |
CZ24/CH25 | -18 1/2 | +1/4 | -30 1/4 | 61% |
SX24/SF25 | -18 3/4 | – 1/4 | -26 1/2 | 71% |
SX24/SN25 | -57 1/2 | +1 3/4 | -105 1/4 | 55% |
MWZ24/MWH25 | -21 1/4 | – 1/4 | -30 1/2 | 70% |
WZ24/WH25 | -19 | 0 | -23 3/4 | 80% |
KWZ24/KWH25 | -13 1/2 | – 1/2 | -24 | 56% |
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