Written Commentary
MORNING COMMENTS
Geopolitics:
Joe Biden announces a $567 million military defense assistance package for Taiwan. As far as the relationship between China and the US, Taiwan is by far the most delicate subject. In an official event held in Beijing today, Xi spoke about Taiwan. President Xi said, “Taiwan was China’s sacred territory and the people on both sides of the Taiwan Strait are connected by blood”. He is sending this message to warn “separatists” in Taiwan that he opposes their actions. If China were to invade Taiwan, this would go against the global order and many countries would respond by sanctioning China. This all while trading volume hit an all-time high in Hong Kong today, beating Friday’s record. The combined turnover in both Shanghai and Shenzhen exceeded 2.5 trillion yuan. Golden Week 2024 begins in China tomorrow and will be celebrated until Monday October 7th. Most factories and businesses in China will be closed and production halted for the majority of the week. Airports and seaports will have minimum staff but will continue operating. The market will have a lot to digest next week following this recent China rally right before the week long holiday.
Macroeconomics:
The US east coast port strike will begin tonight at midnight. This is due to disagreements on wages and automation between the International Longshoremen’s Association (ILA) and the US Maritime Alliance (USMX). A walkout of the ILA will cost up to $5 billions in daily international trade. Due to the distance between both parties’ desires the question is not ‘if” the strike will begin, but “how long” will it last. Top companies effected by this stoppage are: Walmart, IKEA, Samsung, Bob’s Discount Furniture, LG, Home Depot and more as 40,000 workers plan to walk out at midnight.
Ag Fundamentals:
Today’s USDA Stocks and Small Grains Report was neutral to slightly bullish for both corn and beans. The report took corn stocks down due to better than expected usage and exports. Bean exports also helped lower soybean stocks as well. The report remained neutral for wheat. Soybean harvest in the US outpaces corn harvest. This week’s weather is sure to boost harvest progress. As a result of drier than normal weather for the last 60 days, both corn and beans are hitting the elevators at low moisture levels.
Weather:
The US is expected to be very dry for the next 7 days. Farmers will not need to worry about getting stuck in the mud, but they will worry about the low moisture levels they are receiving at their destinations. Brazil is still fairly dry, and will remain so for the next 10 days aside from northern Mato Grasso and southern Brazil in Rio Grande do sul and parts of Parana.
South American 10-day Total Precip map is showing rain in southern Brazil and parts of northern Mato Grosso.
NASS Crop Conditions Ratings
Crop Conditions Good to Excellent Ratings were unchanged for Soybeans while corn slides -1%. The majority of the central growing regions were left unchanged. South Dakota took a -9% hit on soybean conditions and -7% on corn conditions week over week. Iowa is still leading the way for quality beans and Illinois, Iowa and Missouri are showing the best ratings for corn this year.
Harvest Progress
Soybean Harvest Progress 26%
South Dakota is falling behind most of the country on Soybean harvest pace compared to the 5-year average for the state. The mid-south region is way ahead of pace by about 20% compared to the 5-year avg. Wisconsin also in that +20% ahead of schedule boat.
Corn Harvest Progress 21%
The Northern Plains are reporting harvest progress that puts them behind the 5-year average pace. I am not sure I totally agree with that, but after this week’s weather they will no doubt catch back up.
Calendar Spreads
Spread | Last | Chg | Full | % of FC |
CZ24/CH25 | -16 1/2 | +1/2 | -30 1/2 | 54% |
SX24/SF25 | -18 1/4 | -1 | -26 3/4 | 68% |
SX24/SN25 | -53 3/4 | -3 1/2 | -106 1/2 | 50% |
MWZ24/MWH25 | -21 1/2 | +1/2 | -30 1/4 | 71% |
WZ24/WH25 | -20 1/4 | 0 | -23 3/4 | 85% |
KWZ24/KWH25 | -14 1/2 | +1/2 | -23 3/4 | 61% |
Cost of Carry
Plan on the SX/SN5 spread to be active between now and the end of October when most of the Brazilian bean crop is planted. Corn and wheat spreads are a hair firmer today with news of lowered corn stocks in today’s report.
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